If DirecTV wants to invest in Hulu (News - Alert) and Dish Network wants to become a mobile services provider, what does that tell you about the future value of distribution networks? "I think I know where this thing is going now," Charlie Ergen, Dish Network CEO has said.  

"If you were in the phone business and wireless came along and you kept on putting in a twisted pair of lines, that was still a good business for another 10 years, 15 years, but at some point that wasn't a very good business," Ergen has said, drawing an analogy to the linear video distribution business Dish, cable, and telephone subscription video providers now operate.

"So I'd rather be on the leading edge of that than the back end of it," he said. Ergen also has said that, if he had to do it again, he might not choose satellite video as the delivery network, but rather go online from the start.

Nobody should be too sure they really understand what happens to the business model when Internet delivery can displace linear video entertainment services. But it is fair to note that value moves in the direction of the packaging function and away from the value of the distribution pipes.

In other words, “distributors” start to emphasize a different role as “networks” or “channels” or “aggregators,” rather than delivery networks.

A decade or two ago, some might have argued that the Internet becomes the telephone network. That is functionally correct, up to a point, but largely incorrect from a regulatory and business model perspective.

Private IP networks, which is what the next generation carrier voice network and next generation video entertainment business will be built on, are not the “Internet” from a regulatory or business perspective. We sometimes explain the difference by calling one a “service” and the other an “application.”

The bigger distinction is between public Internet and private IP networks. These days, the public Internet and private networks are seen to coexist.

The technology might be the same. All networks will use the same protocols. What will be different are the details of business model, regulation, lead applications or devices and revenue sources.

Internet economics will, for that reason, be different than the economics of private network services and apps. But that also implies the economics of the video entertainment business will be different, once delivery shifts to the Internet, and today’s cable, telco and satellite providers become packagers whose customers can use any broadband connection to use those services.

Most consumer-facing ISPs will want to sell both broadband Internet access and video services in some way. It just won’t be the case that the video services come bundled with an access service.