What to do about video entertainment has been a key issue for telecom executives for a long time. On one hand, the triple play – including entertainment video – has proven to be a necessary staple of competition between cable companies and telcos.

On the other hand, without scale, selling entertainment video easily can be a zero-profit business. And given the need to upgrade access networks to some sort of fiber distribution plant, the business case might not always be favorable.

That’s why telcos as large as AT&T and Verizon have sold DirecTV and Dish Network services in many situations. Even firms such as the former Qwest (News - Alert) and Frontier Communications concluded that becoming a video entertainment provider would not make sense.

Then again, there has been some talk about a possible third way: creating streaming video services – something Qwest executives had explored, and which Winstream is now doing with its Merge service (essentially Hulu (News - Alert) Plus), offered with broadband access fast enough to provide a consistent experience.

That approach makes sense for a number of reasons. For starters, Windstream’s (News - Alert) revenue is about 75 percent derived from business customers. So it really doesn’t make too much sense to invest in expensive and margin-difficult businesses such as consumer video entertainment.

And though the traditional broadband access buyer has done so to support Internet access and PCs, not every household sees a need for broadband Internet access. But nearly all households watch video, so Merge offers a new way to “sell video entertainment” without Windstream having to become a video services provider in the classic sense.

On the other hand, Merge gives non-buyers a new reason to consider using broadband access.

Someday, these approaches might make quite a lot more sense for a wider range of fixed network service providers, especially if/when content owners decide it’s time to license their content directly to end users for Internet delivery.

In the meantime, Merge is an interesting new way to answer the question of what to do about video.