What service providers must do is find the sustainable advantage in marrying Internet video and social networking into their IPTV services, in the same way that companies such as Amazon and eBay have built up sustainable advantage in their Internet services. The telecom industry is not alone in this quest — advertising companies and marketers are also trying to determine what revenue-generating business models exist for online social networks.

“It's a million-dollar question for service providers,” Cisco's Spagnola said. “We are seeing a variety of different approaches. If you look at SK Telecom and their CyWorld offer, it's a tightly coupled mobile service combined with a social network platform that integrates their value proposition so that users on their phones inhabit this cyber universe.”

To do this, SK Telecom bought CyWorld as a social network site, he said, and integrated it into its service, making money by selling the icons required to create a cyber world, similar to Second Life, Spagnola said.

“Therein lies a lot of the questions for the service provider in this space — how are we going to monetize the relationship. Can they monetize the relationship for social networking?” he asked. “I think that the business model is a significant barrier to overcome. It becomes a branding issue — who owns the customer, what brands are out there? Ultimately, the advertising dollar is the big one that carriers want a slice of, and coming up with the right share on that is important.”

One possibility, said Level 3's Taylor, is to integrate social networking seamlessly into the IPTV experience in such a way that consumers will want to pay for it. “If you can comment on movies, through chat, with friends who are watching, if you can create the sort of rich communications environment that people have had in front of their computers now with their TV set, consumers will be prepared to pay for it,” he said.

With video now a part of the social network proposition, service providers can't afford to sit back and see what happens, said Nortel's Carbone, because not only are their networks likely to be swamped with two-way video traffic, requiring greater investment, but there are also changing network characteristics to support social networking in a broader context.

“It will be tough to get started because the business models that we are familiar with, where you get a return on a particular investment, on a one-to-one basis, are going by the wayside,” he said. “But it's not like you can sit back and wait until it's a proven thing or you will have missed the market.”

However, if service providers can determine how to package social networking and a range of other capabilities in a way that makes it easier for consumers, there is a major opportunity at hand, Carbone said.

For service providers to participate, they must be able to support closed user groups and consider things such as identity management and more network intelligence to be more device aware, as social networks link different types of devices, from PCs and TVs to cell phones.

“There needs to be user profile awareness — enterprises are the lead adopters of that kind of capability, but it might be the social networking crowd that can take advantage of that, that makes it useful to everyone,” Carbone said. “I think it is a general direction for networking as a whole — people will come to expect to be able to deliver a message to whomever and wherever on whatever device, without some complicated mediation process.”

The danger in not knowing how to get started is that “over the top” service providers will co-opt the video social networking market as they did with voice over IP, Level 3's Taylor said. Already, Skype founders Niklas Zennstrom and Janus Friis are taking on Internet TV with Joost, he points out.

“Combining an ad model with video over the Internet — that doesn't fix the ISP's issue,” he said. “They aren't going to be part of that value chain. At the end of the day, broadband access users are going to have to charge people for the use of their network. Of course, there is a tremendous first-mover disadvantage to doing that, but it is almost inevitable that that is going to have to happen in some shape or form. Then ISPs can embrace these new applications because it's a win-win situation.”