Three Reasons Over-The-Top TV Apps Will Beat Big-Cable

With Apple bringing its second-generation living room box to market, it might be time for cable carriers to reconsider their decade-plus journey through the interactive TV desert. The Cupertino giant isn’t the only competition, after all; Google’s app-platforms are coming to an HDTV near you soon, the outlook for big cable’s own app efforts has never looked more dim.

A Short History of OCAP and Tru2Way

Before we go over the reasons why OTT apps will likely prevail, let’s take a quick look at cable industry’s efforts to develop its own interactive services and application framework:

The OpenCable Application Platform (OCAP) —  the specification for U.S. cable operators’ interactive TV efforts using a Java-based middleware platform — was first published in January 2002. The effort had been under development for many years before that, and since then had been re-cast under its own consumer-facing brand called Tru2Way.

Tru2Way got a coming out party at CES 2008, when Panasonic, Samsung, LG and others demoed new Tru2Way compatible HDTVs and renewed hopes for the moribund OpenCable efforts. Now, not only could you connect directly without a set-top box, but your TV would be able to perform interactive services (read apps).

So where are we now? Pretty much nowhere. While Verizon —  itself not a cable provider but an adoptee of OCAP and EBIF — pushed things forward by rolling out the industry’s first commercial app based on EBIF, the overall momentum OCAP and Tru2Way has stalled. Panasonic recently abandonded its Tru2Way efforts, while the carriers themselves don’t appear in too big a hurry either. While there are millions of OCAP enabled set-tops in the field, little progress has been made on actual apps or services.

The OTT App Era Begins

So why are over-the-top apps likely to win out over the cable industry’s efforts? Besides the lack of progress discussed above, here are three key reasons:

Carriers are too slow and cautious. Speed is perhaps the biggest reason carriers are being left in the OTT app dust. Cable MSOs have been cautiously developing their app-platform for over a decade. But they have been slowed down by a combination of factors: a large installed base of underpowered infrastructure, a fiscally conservative predisposition towards investing CAPEX, a lack of enthusiasm for the necessary market development needed for interactive services (at retail, developer and hardware partner levels) and  glacial testing and rollout process for their interactive services.

The mobile-market proved the OTT app model works. In a sense, over-the-top won in mobile as well, when Apple, and later Android, clearly beat out on-deck carrier app stores in the U.S. If that fact is any indicator, Apple, Google and others building on their platforms could conceivably move ahead of the MSOs in reaching consumers with app-platforms in just a few years.

Where developers go, consumers will follow. Anyone who knows someone working on an iPhone app, raise your hand. Now how many know someone developing a Java app for EBIF/OCAP? Thought so. Developer momentum is key; with an installed base of hundreds of thousands of hungry iPhone and Android developers now seeing a new market for TV apps, chances are high that these markets will see an explosion of innovation over the next few years.

The carriers had a decade to get this right, but I think it’s too late. Apple, Google, Boxee and a million-man army of developers is on the march, and in just a few years, we’ll likely see a serious new industry for OTT TV apps.

Related Research: TV Apps: Evolution from Novelty to Mainstream

Question of the week

What are the key reasons over-the-top apps will win out over the cable industry’s efforts?