Phillip Swann of TVPredictions made a couple of useful observations recently:

1. The quality of Internet video shown streaming or downloaded on full-sized TV screens must improve. He described AppleTV’s current video picture as “grainy and nearly unwatchable. It’s a total embarrassment and it should disturb a company with Apple’s reputation for quality. I’m told that Sony’s Bravia Link will look better, but we’ll see.”

He has company in that opinion, as evidenced by this piece and this particularly colorful one (“If you want to know what the picture quality is like, do a couple Tequila shots, spin around a few times, bang your head against the floor, and then watch broadcast TV on an old 19″ JVC.)

Not everybody has been so underwhelmed, of course. CNet Australia gave picture quality a qualified thumbs-up and Macworld described it as having solid picture quality.

Swann’s other point is also worth discussing: The Internet TV feature must be part of the consumer’s existing TV service. He describes it as critical. “Americans have set-top fatigue, and they are not going to the store to buy yet another one just so they can watch a short video from the Internet on their TV’s.”

That’s a key point as far as we are concerned. Only a handful of geeks (they’re over-represented on the Web, so their voices tend to dominate the discussion) will put up with complicated systems, hacks, and multiple gadgets. My wife doesn’t want anything in the room along with the TV.

I’ll let Swann say it, but I agree wholeheartedly: “When Internet TV is a seamless service offered by your cable or satellite operator for a monthly fee (and no upfront equipment cost), it will begin to generate a serious audience in this country.”