For two industries with a love/hate relationship for more than three decades, it seemed only appropriate that Las Vegas should serve as the locale where consumer electronics and telecom finally admitted they need each other more than ever.

During the International Consumer Electronics Show in Las Vegas at the beginning of January, carriers turned out in greater force than ever before and embraced the seemingly endless array of new consumer devices that require — or are greatly enhanced by — broadband and/or high-speed wireless connections. And while consumer electronics products vendors seem to have treated carriers as necessary evils in the past, many now see the much-discussed “battle for the living room” as a perfect opportunity to push more boxes — and through new channels. In fact, prior to this year, carrier executives generally ignored the annual mid-winter extravaganza in Vegas, a fact that SBC Communications Chairman and CEO Ed Whitacre admitted during a keynote speech.

“Amazing, isn't it? I mean, when you think of Las Vegas, you think…dazzling floor shows…high stakes, high-risk gambling…fast-talking pitchmen. In other words, when you think of Vegas…you naturally think…Ed Whitacre…right?”

Bad jokes aside, telcos are quickly reversing course on their distaste or agnostic view of consumer electronics, in large part because of the key role it plays in the fight to get consumers to adopt bundled services that include video.

Case in point: SBC used the show as a launching pad for its Home Entertainment Service (HES) that comes via a joint venture with 2Wire. The service, which uses 2Wire's MediaPortal, blends high-speed Internet access and satellite-based video from Dish Network in an entertainment package that also allows users to centralize their entertainment content around the TV. Also included is the capability for customers to download music from Yahoo Launch or Music Match and collate their existing MP3 files on the MediaPortal.

“We think this is a really nice service to complement the HD element that everyone wants to deliver,” said Brian Sugar, vice president of marketing for 2Wire.

Just as striking as the service is the business arrangemet. Instead of acting just as a box supplier, 2Wire also will get additional revenues by providing support and back office services for HES.

While unusual, such arrangements may become more common given the lack of experience telcos have in providing entertainment service. Besides a few previous false starts in the mid-1990s, most carriers simply don't have the internal personnel with experience in the area and will be looking to consumer electronics vendors for help.

The more pressing question larger telcos now face is whether a business case can be built for the market they expect to capture. Consulting group Adventis has done an analysis of the telco business case and found that timetables for expanding into entertainment service are becoming even more compressed. According to Jonathan Hurd, vice president of Adventis, telcos will have lost $14 billion in revenue from declining access lines by 2010. Recapturing that through video is one of the strongest options, but certainly not a slam-dunk.

“On average, if you're a second entrant, you can expect about 15% market share,” he said. “Telcos need to think like new entrants.”

Luckily for telcos, the emergence of high-definition (HD) TVs, and the subsequent push to get consumers to re-evaluate their entertainment options, is coming at just the right time.

The push for telco-delivered HD, in fact, got a significant push forward last month with the announcement that Tandberg Television had demonstrated support for high-definition MPEG-4 part 10 (H.264/AVC) (Telephony, Jan. 17, page 20). The demonstration was done in conjunction with chip vendor Broadcom. Originally aimed at the direct broadcast satellite market, the new technology could be even more significant to telcos because it can compress HD signals into a 10 Mp/s channel or less.

“Before, MPEG2 and DSL simply weren't good enough to do HD,” said Eric Cooney, president and CEO of Tandberg.

However, with the advance of fiber-to-the-premises and fiber-to-the-neighborhood (FTTN) plans, as well as more deployment of higher-speed ADSL2+ gear, it's clear that carriers are planning for HD. SBC, for instance, said its goal with its Project Lightspeed FTTN architecture is to get at least 20 Mb/s to 25 Mb/s delivered to every home.

“That's more than enough to provide HD IPTV,” Whitacre said.

Just as important as HD, many carriers appear to be taking a “whole-house” approach to their early entertainment offerings. Recognizing that the path to the living room TV for telcos may actually start at the PC, some of the consumer electronics vendors' more targeted products (a la 2Wire's MediaPortal) seek to combine content from both environments in a home network.

“We're talking about a digital life-style,” Whitacre said. “[SBC's service] is going to change the way people watch and listen to entertainment.”

Like every new plan, though, working out the details may get a little complicated. Which is where many consumer electronics players are ready to step in. One of the more complex problems is connecting the PC and TV with a medium robust enough to stream video, yet easy enough for the average consumer to install and understand.

For some, the answer lies in wireless technology. D-Link, which has become one of the larger home router vendors, for instance, recently announced a deal with Internet radio network Live365 under which it will offer Live365's Internet radio stations on a D-Link Media Player designed to sit in the home entertainment center. The player connects to a broadband connection wirelessly.

However, moving video over a wireless link is something many carriers won't accept, according to many consumer electronics vendors. Beyond the question of whether a Wi-Fi link has enough capacity to carry video, many believe Hollywood studios would balk at such a solution because of the fear that it isn't secure enough.

That leads many to use existing in-home coax.

“In North America, there is a consensus developed that coax is the way to go,” said Keith Wehmeyer, general manager of Thomson's IP Video Solutions. “The key criteria is how do you co-exist with everything that's already in place.”