IP-TV: A Game Changer for the Industry
Written by Teresa Mastrangelo
Published in VoIP Magazine

Not only is IPTV technology expected to change the way consumers receive their video entertainment, but new and innovative services are expected to have a significant impact on the way consumers view and use their video content; forcing change across the entire industry.

Globally, IP-TV deployments are in their early stage, as many operators have spent the last year planning their IP-TV launch. However, deployments are expected to ramp quickly resulting in strong subscriber growth over the next few years. In North America, we are witnessing the calm before the storm, as Tier 1 operators prepare to change the future of television.

The Good, the Bad and the Ugly
A number of positive factors are contributing to industry enthusiasm for IP-TV. This includes strong broadband growth, increases in bandwidth and advances in video compression and DSL technology. Additionally, the implementation of converged, IP-based infrastructures combined with the general availability of solutions that address the set-top box, home networking, billing, content protection, customer and service management, demonstrate that IP-TV is ready for the mainstream.

Sadly, the single greatest obstacle to IP-TV roll-out in the United States is no longer about technology or content acquisition, but the prohibitive process of negotiating and securing franchise agreements.

Currently, a number of states are considering legislation to offer state-wide franchise agreements. To date, however, this approach has only been successful in the state of Texas. To make matters worse, it also does not appear that relief will be granted on the federal level anytime soon. Based on current activity in the United States Senate, the role at the Federal level will be to help streamline the franchise process and treat all video providers the same, but leave the franchise approval process to the local government. This could have a significant impact on service availability.

No Time like the Present
The good news is that cable multi-state operators (MSOs) have proven to be vulnerable. Strong competition from Direct Broadcast Satellite (DBS) operators has not only impacted multi-channel video market share, but also on video programming. Since 2000, DBS providers have increased their share of multi-channel households from 15.7 percent to more than 25 percent, while cable MSOs percentage of total subscribers has steadily declined. In short, cable MSO subscribers has remained virtually unchanged since 2000, at 66 million, while DBS subscribers have more than doubled, to reach nearly 27 million at the end of 2005.

DBS changed the game by offering an all digital format, HDTV channels, exclusive packaging of programs, specialized/niche programming and services such as Digital Video Recording. This forced the cable MSOs to accelerate investments in their network in order to match and beat DBS services.

Unfortunately this advantage for DBS operators may be short lived. Their lack of other services, such as video-on-demand, high-speed Internet and voice services prevents them from being able to offer a bundle of services. This makes DBS subscribers an attractive target of telcos, who can offer consumers a bundle of wireline, wireless, data and video services at an attractive price and without the requirement of a satellite dish.

Next-Generation Television
Building on the momentum created by DBS, IP-TV is expected to further improve on the consumer video experience. By implementing an all-IP infrastructure, telcos will be able to fully converge and integrate their service capabilities, providing unlimited flexibility and content choices to the consumer. The next-generation of television services will be characterized by their ability to offer consumers a highly personalized, highly integrated and portable "on-demand" viewing experience, while enabling operators to rapidly introduce new applications.

Features such as electronic programming guides (EPG), quick channel change, one-touch recording, video-on-demand, Caller-IDTV and time-shifting will become standard fare while more advanced applications that combine voice, data and video, are on the verge of availability.

Localization and Personalization will play key roles in the future of television. IP-TV technology will not only allow telcos to customize content and services to the local market, but also to the individual consumer. Innovative consumer electronics, new applications and in-house distribution technologies will further enhance the experience by allowing these services to be shared across multiple devices (TV, PC, mobile phone, etc.). IP-TV will offer a level of interactivity, portability and personalization currently unavailable with any other video service.

Other applications that are proving to be attractive include the following:

Mosaic applications: These are often referred to as multiple picture-in-picture (PIP), offer viewers the ability to view multiple program thumbnails simultaneously. Some applications are quite sophisticated, offering such features such as multiple camera angles of a single event or multi-channel live television. Others are optimized as advertising portables for video on demand (new movie features) new channels, customer support or new services.

Audience Participation applications: In an era of American Idol, Big Brother and even Dancing with the Stars, programmers are developing more events that require audience participation. While most of these events currently use short messaging service (SMS) to cast votes, many operators are looking to incorporate that capability into the remote control.

Communication Services: This includes the integration of communications and messaging applications directly into the middleware to provide enhanced communications capabilities. Features such as on-screen messaging, video calling and teleconferencing, call management, Caller ID, and pause and record are just some of the features that can be offered with IP-TV.

Eyeing the Competition
Unfortunately, the video market is proving to be attractive not only to telcos, but to a quickly expanding field that includes "Bring-Your-Own-Broadband" application service providers (ASPs) and ISPs, creating a new operator called the video service provider (VSPs). These VSPs offer services that have been designed to take advantage of the "entertainment on demand" trend that is currently engulfing the entire industry.

Although VSPs have the potential to disrupt segments of the market, particularly with pricing and bundling of content, they continue to be disadvantaged by the fact that they are not in control of the network infrastructure and can offer no real guarantees in service, quality or availability. As such, none of these services are viewed as a "threat" to current or future video services. If anything, they are viewed as complimentary; potentially offering a unique on-demand component that could be paired with a more linear broadcast video service.

With no legacy video service packages to contend with, telcos are free to move beyond the traditional models of packaging and pricing video entertainment. By thinking "outside the box," the telcos have an opportunity to change the game of video entertainment. By leveraging emerging trends and advanced technology, telcos can offer consumers new and compelling services that provide convenience, choice and relevance, resulting in a successful entry into the world of video entertainment and perhaps setting the benchmark for all video services.

Teresa Mastrangelo is a Principal Analyst for broadbandtrends.com, a service of The Windsor Oaks Group LLC. She can be reached at teresa@broadbandtrends.com

 

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