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AT&T’s rollout of its U-verse high-speed data, voice and IPTV bundle has served as a reality check to the ongoing discussion of IPTV and bundled services.

Today it added two additional markets in Milwaukee and Racine, Wisconsin. AT&T continues its slow and sometimes painful march to roll out the service, with its eye on the eventual prize of becoming a prolific advertising and content distribution network. We’ve discussed many of the challenges faced by AT&T and competitor Verizon here and here.

Cable companies continue to hold a competitive edge with their current video offerings, but this could shift over to telecoms when their large-scale infrastructure deployments approach completion and when the content aggregation and product development efforts catch up to the infrastructure’s potential. Bring in wireless assets and telecoms have another edge in the bundled services battle.

Local will come into the picture increasingly as IPTV’s targeting abilities open up local advertising opportunities, akin to those that have developed on the Web. First more small businesses need to develop an affinity and ability to advertise with video, as we’ve said in the past.

Last but not least of the many balls in the air is the ability for telecom and cable companies alike to sell and distribute video ads for local advertisers. Cable companies like Comcast are in a good position with respect to local sales forces. Telecoms meanwhile have existing directory assets that could feasibly be deployed to start selling video advertising to small businesses for IPTV and online distribution.

They can also sell traditional directional advertising that is searchable through an IPTV channel (in addition to print and IYP) and is contextually integrated with relevant video programming. This was discussed as a point of interest and possible direction for AT&T by Dennis Payne, president of directory operations, at September’s Directory Driven Commerce conference.

And as discussed in the TKG White Paper “From Reach to Targeting: The Transformation of TV in the Internet Age,” the combination of some types of video (think home improvement, travel or any “how-to” content) with local directional advertising could add up to a meaningful direct response formula.

There are many different directions this could go and, again, many balls in the air. As was blogged recently by Michael Taylor, some of the forthcoming data in TKG’s User View study should point to the growing influence online video has on consumers. The ability and desire for small businesses to take advantage of this trend is where most of the question marks will remain.

We already know that many larger national advertisers have expressed a great deal of interest in online video advertising. But the long-tail possibilities of local video advertising will be the real story, and the real area to watch. As they say, stay tuned.

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