By By Ben Charny

From zdnet.com.com

Major U.S. telephone companies have plans to pump video and TV services into homes via their lines, countering recent moves by cable providers to sell Net-based phone services over their systems, telephone executives said Friday.
"We know video's important, we want to have it," said Selim Bingol, a spokesman for telecommunications giant SBC Communications.

For months, SBC has been investigating offering a service--probably cablelike television subscriptions and movies on demand. The company also made an ill-fated attempt recently to buy satellite television company Hughes Electronics. According to sources, Qwest Communications International and BellSouth are now testing video services.

The move is necessary because of a new practice among cable and telephone companies to use bundles of steeply discounted services to attract and keep customers, telephone executives said. Cable companies sell TV and broadband access at discounted rates, but only when bought as part of a package of services. Telephone companies offer similar deals on telephone and broadband connections.

Until recently, telephone companies didn't worry about cable companies adding voice services to their bundles. But the growing sophistication of voice over IP, which turns voice calls into digital packets for dispatch over the Internet, lets cable companies sell telephone service, cable programming and broadband connections on one bill.

"There must be a video service in our bundle in (the) future," SBC Chief Executive William Daley told analysts earlier this week at a Banc of America Securities conference. "How we get there is the question."

But it could take up to 10 years before the major telephone companies have improved their networks enough to match the picture quality that cable now offers, a severe disadvantage that might make them rethink their current plans, said Rick Black, senior telecommunications analyst at Blaylock & Partners.

Also, major telephone companies have already tried, and failed, to offer video services. The most recent high-profile attempt involved AT&T's acquisition of the assets of cable provider TCI, which it sold in 2002 to cable provider Comcast.

Major phone companies are "not good in content," Black said. "They are more of a distribution arm."