Walt Disney Co., which blocked Cablevision viewers from the first 13 minutes of the Oscars as part of a contract dispute, might be preparing for a similar game of chicken with Comcast (News - Alert) and Time Warner Cable, the two biggest U.S. cable operators, Bloomberg reports. 

 

The contract with Time Warner Cable expires in August 2010, while Comcast and CBS must renegotiate their contract by the end of 2010. 

 

But those on-going disputes might pale in comparison to more-fundamental changes that could happen if content owners decide they have more to gain from online distribution than presently is the case. 

 

But global telcos could face business model changes just as wrenching, and maybe before the end of the decade, researchers at IBM (News - Alert) now think. Huge mergers are almost a foregone conclusion, but many telcos might find themselves broken up into separate wholesale and retail units, or competing against their own handset and equipment suppliers.

 

At the heart of the potentially vast changes are growing stresses in business model. “As the broadcast networks are less able to get advertising revenue, they’re turning to the cable guys to make up for that shortfall,” says Todd Mitchell, an analyst with Kaufman Brothers. “For the cable guys, these programming costs are vastly outstripping their subscription pricing, so we’re getting to the point of showdowns.”

 

The process likely will be bruising when it comes to Comcast and possibly Time Warner (News - Alert) Cable as well, as the sums of money involved are much greater, for distributors as well as programmers. 

 

New York-based Time Warner Cable already weathered blackout threats from News Corp (News - Alert).’s Fox in December. The two struck a deal the day after their contract expired, preventing viewers from losing access to sporting events such as the Sugar Bowl on New Year’s Day.

 

In many ways, the global telecommunications already has experienced more change that the multi-channel video entertainment industry has. In fact, some would argue that 

“the telecommunications industry has experienced more change in the last decade than in its entire history,” says IBM. 

 

Consider that, in 1999, only 15 percent of the world’s population had access to a telephone; by 2009, nearly 70 percent had mobile phone subscriptions. If that seems unremarkable, consider that it took 150 years to add the first billion phone users. Then it took a decade to add the second billion users. 

 

So where will the industry be in five years, in 2015? While nothing is certain, forecasters at the IBM Institute for Business Value say they see four possible outcomes, and none of them are rosy for the telecom business.

 

In fact, IBM's scenarios likely mean further, and major, industry consolidation at a very minimum. The more-radical alternatives include fundamental industry restructuring in ways that separate network operations from retail operations.

 

In some of the scenarios where radical industry restructuring occurs, today's service providers might find themselves competing against device manufacturers or even today's suppliers of network infrastructure.

 

The key observation is that IBM presents a range of five-year scenarios that all involve significant pressure on service provider profit margins or gross revenue, or both. Further service provider consolidation is the least disruptive change in industry structure that could happen.

 

In half of the most-likely scenarios, the industry is structurally separated into wholesale network services operations and separate retail operators.

 

Keep in mind IBM believes it will take only five years for one of these scenarios to develop.

 

In one scenario, which IBM calls “survivor consolidation,” consumer spending for communications drops, leading to industry “stagnation or decline.”

 

In this rather-bleak scenario, developed market operators have not significantly changed their voice communications and “closed” connectivity service portfolios and also have failed to expand horizontally or into new verticals.

 

That will trigger an Investor loss of confidence in the telecommunications sector, which produces a cash crisis and leads to industry consolidation.

 

In an alternate scenario IBM calls “market shakeout,” carriers are structurally reshaped into separate wholesale and retail businesses, and the market is further fragmented by government, municipality and alternative providers.

 

In this scenario private capital is available only to dense urban areas. Telecom provider growth occurs in large part through sales of services to business partners.

 

In a third scenario called “clash of giants,”  carriers consolidate, cooperate and create alliances to compete with “over the top” providers and device manufacturers or even equipment suppliers.

 

In a fourth scenario IBM calls the “generative bazaar,” open access infrastructure leads to more competition from “asset light” and over the top competitors.

 

It is easy to dismiss the level of change the last 10 years has wrought. It might be easy to dismiss the level of change IBM believes can happen in just another five years. As always, the forecast might be too aggressive in terms of its timetable.

 

The major implication, though, is that the telecom industry might well be a very-different sort of business by 2020, if not by 2015. If you look at revenue sources, it is virtually certain that in developed markets, less revenue--in some cases far less revenue--will be earned from voice and text services.

 

More revenue will be earned from broadband services, and possibly from business partners rather than end users.

 

Under such circumstances, ecosystem conflict is all but inevitable.