Time for a reality check
By Teresa Mastrangelo, Principal Analyst, broadbandtrends.com, teresa@broadbandtrends.com

There is no doubt that interest in offering video services continues to grow, particularly as telcos search for new revenue opportunities. And although the excitement level remains high, the realities of offering video are beginning to set in for many operators. This includes delays in product availability, bandwidth concerns and increasing competition from both cable and satellite operators, To further complicate matters, the proliferation and availability of content through other means (such as YouTube, Google, Apple, etc.) has the potential to impact the direction of telco-based video services.

Outside North America, where cable competition is low, IPTV is experiencing strong growth. Over the last 12 months, global IPTV subscribers have more than doubled. By contrast, IPTV subscribers in North America have only grown 24% and now represent only 10% of global IPTV subscribers.

A big reason for that is strong competition, Not only have both cable and satellite operators drastically increased the availability of high-definition programming, they have also increased their video-on-demand (VoD), digital video recording and interactive capabilities, and raised broadband speeds.

This puts more pressure on telcos to implement the right network architecture to deliver enough bandwidth to compete. Assuming increasing demand for HDTV, multi-stream personal video recorder and VoD, it is not difficult to imagine bandwidth requirements in excess of 50 Mb/s in the near future. FTTH is definitely the right architecture to future-proof the network. However, for most operators, VDSL2 will be more than capable of supporting that type of bandwidth, assuming loop lengths are short enough.

Among the alternative video providers, it is Apple and its iTunes application that have the most potential to be disruptive, particularly in the VoD market. Building on its iPod success with music and TV, Apple is now offering movie downloads. The fact that more than 125,000 movies were sold within one week, generating more than $1 million, is likely to grab the attention of other studios. In addition, Apple's will be wireless media router, due in early 2007, will give its service access to the TV.

These events magnify the fact that IPTV is not even close to living up to its hype. Without a large-scale deployment, IPTV remains a niche application. Although IPTV still has the potential to provide consumers with an unparalleled video experience by offering a level of interactivity, portability and personalization currently unavailable with any other video service, implementation has been more difficult than anticipated.

But all hope is not lost. Telcos still have one big advantage over traditional video operators: Without a legacy video service, telcos have the opportunity to change the game by innovating not only in pricing, but packaging of video services. By leveraging and embracing emerging trends, telcos will be able to offer consumers video services that live up to the hype and hope of IPTV.



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