Internet Protocol Television (IPTV) is set to grow tenfold by 2010, but according to industry reports the leader won't be the United States. Instead, countries such as China, France, and Italy are forecast to lead. It's possible, however, that recent changes in Texas and at the Federal Communications Commission will give the U.S. a boost.

Just this week, Texas governor Rick Perry signed legislation to make it easier for telephone companies to provide IPTV to Texas consumers. The legislation was needed because telecommunications firms SBC and Verizon were having trouble entering the video market due to cable franchising regulations.

Prices Up, Quality Down

Before the Internet came along and before satellite TV took off, cable companies used to be the only game in town for video services. Since cable companies were near-monopolies, the reasoning was that they needed to be regulated by local officials to ensure they didn't abuse their market power. This so-called solution ushered in something worse: government failure.

Cable companies were subjected to outrageous demands and competitors found it difficult to enter the market when they arrived. For instance, as part of their franchise agreements, cable companies have been forced to give away movies and plant trees in public parks. This market distortion has raised prices and lowered quality for consumers. Now that new competition from IPTV and existing satellite providers has entered the picture, it's time to quickly allow new players into the space and treat them equally.

Texas has taken a bold first step as the first state in the nation to allow new video entrants to obtain a state-issued, statewide cable and video franchise instead of requiring franchises from individual municipalities.

"This legislation will ensure that Texas is at the forefront of the telecommunications industry, bringing thousands of new jobs and billions of economic investment to our state," said Rep. Phil King, House sponsor of the Texas legislation. He's right, and other states should take note.

Stimulating Growth

Not only will IPTV help to create an environment for better, faster, and potentially cheaper video services, it will also stimulate economic growth as hardware and software companies will need to provide products and the content industry will have more outlets. Indeed, according to a recent report by the market research firm In-Stat, worldwide revenues due to new "premium services" such as video on demand, digital video recording, and interactive TV will surpass US$600 million in 2009.

Of course, the report also says that the U.S. will not get the biggest part of that pie. In an interview with Internet News.com, In-Stat analyst Michelle Abraham blamed franchise laws for slowing down the American market.

"The current franchise regulations -- needing a franchise license to serve a community -- really does require a lot of negotiation with each community," she said.

Another report by the market research firm Informa Telecoms & Media said that China is set to lead the IPTV market globally with nearly five million subscribers expected by 2010.

Exploring Options

With the recent revelation that American companies like Yahoo are bowing to pressure from the Chinese government to hand over information about journalists, it's more important than ever that America doesn't fall behind in terms of market size or innovation. The good news, in addition to the Texas legislation, is that FCC Chairman Kevin Martin understands the problem and seems eager to fix it.

In an August 2005 statement to USA Today, Mr. Martin said, "I asked the staff to explore what the Commission can do to ensure that local authorities are not unreasonably refusing to award additional competitive licenses" for video. That's a not-so-subtle message that if the problem isn't solved soon, the FCC may act in the interests of broadband deployment and consumer well being.

A lot can happen between now and 2010. The good news is that the obstacles to IPTV rollout are clear. All that's required for growth is for legislators to remove those regulatory barriers.