In the telecommunications industry, as in any industry, there are some basic assumptions. The most basic one is revenue (although during the dot-com boom, profit was optional). So, what happens to the traditional facilities-based carriers--and this includes cable operators, not just telcos--if all of a sudden their subscribers had a way “out” of their network, to take, from someone else, the services that the carriers are trying to build into their networks? This is no longer an issue in the abstract; it’s happening right now.

Consider some specific examples. The telcos’ current vision of IPTV is to deliver media content over private switched digital video networks. Most telcos offer broadband Internet access as part of the overall IPTV service bundle (or conversely, offer IPTV as an upsell from broadband data). As TV programmers, portal providers like Google and Yahoo, and other creative, entrepreneurial content businesses experiment with delivery of TV and interactive video programming over the Internet, the facilities-based carrier will lose opportunities to upsell these subscribers to switched digital video and hence, lose its incremental revenue. Just as they are ramping up to prove wrong the IPTV naysayers in the investment community.

Meanwhile, in a seemingly unrelated (but in a way, very related) turn of events, Apple Computer recently launched the video iPod. Apple’s iTunes content model has been praised by the music industry as a way for consumers to pay for music while providing a easy-to-use alternative to downloading pirated copies from peer-to-peer networks, and Apple’s announcement is the first step in transferring that model to video. But what happens to the local TV station’s or cable operator’s advertising revenue when consumers are getting their TV fix without them?

Artists are joining the debate: When the video iPod was announced, unions representing actors, writers and directors teamed up to remind ABC (aka The Walt Disney Co.), the first of the TV programmers to cut a programming deal with Apple, that they are concerned about their slice of the revenue. After all, they are the creators.

The content owners may be happy because they are being paid by Apple, but is this the end of the story? Likely not! Although the amount of leverage the traditional distributors and the artists themselves have in the long run will remain subject to debate, the content-owners are intrigued by the possibilities through which they could realize more revenue.

In the end analysis, video is now officially among the contents of Pandora’s box. There’s a new awareness of middleman-cutting opportunities that exist either because a new distribution model succeeds (like Apple, through the iPod), or because someone was in a position to aggregate and deliver video over an open distribution medium (companies like Google and others; over the Internet). And the content owner can preside over them all, moving them like chess pieces.

A parallel can be found with VoIP. Our story so far goes something like this: A competing facilities-based carrier brings an alternative IP-capable communications channel to the subscriber and takes away the incumbent’s core business. But a new chapter is unfolding: What happens to the carrier that has embraced VoIP and is rolling it out through its own facilities-based network, only to be threatened by eBay--which just bought Skype, the “virtual” VoIP carrier?

Who could ever have envisioned that the local telephone company, a trusted member of the community for over a century, let alone the telco’s upstart competitor, the cable company, would both be competing for voice business against eBay--eBay, for Pete’s sake? Even Vonage is threatened: If your computer has a microphone and a sound capabilities (whose doesn’t anymore?), you can use Skype. No need for a special box; therefore less of a barrier to adoption for new users. And you can call other Skype users for free. Will telecom historians someday call Vonage a “first-generation non-facilities-based carrier?”

The Skype situation has some resonance with IPTV: what if an IPTV carrier suddenly didn’t need a set-top box for TV? Sure, delivering “Internet TV” would simplify the TV delivery infrastructure and eliminate box-rental to the subscriber. Just deliver the content over the Internet. Of course, the content would then have to be delivered to the PC and then routed to TVs. But why not? There are broadband CPE devices available in many consumer electronics outlets, which output Internet-based video to the TV.

For one reason, the Telco would technically no longer be a hands-on distributor of the content; as provider of just the broadband delivery pipe, it would lose important control over the content. No, this would contradict a basic premise of the IPTV model, that the content be delivered over a closed switched-digital video network; that the carrier participates actively in distribution, and therefore takes its share of the revenue. The Telco, after having invested so many millions in upgrades to deliver TV, would never consciously allow this to happen – but then, is it in their power to stop it?

Then there’s mobile: mobile carriers rely upon SMS messaging and mobile broadband usage for revenue. What would happen if suddenly a subscriber could exchange email using a standard mobile phone with broadband service that’s outside the carrier’s messaging infrastructure? Or, now that mobile video is here, what happens when the subscriber is able to receive video programming through a mobile broadband Internet access account? Again, the wireless carrier would lose a traditionally transaction-based revenue stream.

So the basic question: how do facilities-based carriers defend against this onslaught of threats from virtual companies? Apple, Skype and Google certainly provide food for thought. We’d better put on our thinking caps now because the world won’t wait.

We’ve all seen fancy terms for trends such as these, like “disintermediation.” And the inevitable response: “it’s the end of the world as we know it.” The larger question for the telcos, and one that surfaces every time there’s a major change in enabling technologies, is whether or not the telco (or for that matter, a mobile, cable or satellite operator) adds value (and whether it should add value) by building intelligence and applications into its network, or should it simply offer dumb but ever-faster pipes.

As a point of reference, do you remember that momentous day when Bob Metcalfe, inventor of Ethernet, made the Golden Splice on National ISDN One day? It was supposed to herald the arrival of the intelligent network. I didn’t think so. Consumers didn’t know about it even on the day it happened! Intelligent network? Applications? If we build it they will come? Did they?

We now live in a world where bandwidth is a certain commodity and broadband is only getting broader. Content and information will make its way to consumers, regardless of the constraints the carriers impose upon its access. Just remember that the only certainty is the certainty of change and that Darwin was right: we must adapt in order to survive. Keep your business models flexible and your powder dry. Or as Steve Jobs says: “Think Different.”

Steve Hawley is principal consulting analyst of Advanced Media Strategies. He may be reached via his Web site, www.tvstrategies.com.