IPTV must continue waiting game

So we are all reading from the same page, the basic premise of IPTV is receiving TV or video signals via an Internet connection. Users can receive these on a set-top box to allow a connection to multiple monitors or TVs for wider distribution of services. The key players in the IPTV market are the telcos, broadband IP operators and cable TV suppliers.

The current IPTV landscape and its future roadmap is a difficult concept to comprehend. This makes it even harder for resellers to know where to position themselves now and for the future.

“How is IPTV shaping up?” asked Paul Budde of communication consultancy BuddeComm. “It’s not. “We have all come to the conclusion that IPTV in its current format is not happening. This is not just the case in Australia because France rolled out a series of trials, but they all petered out.”

Budde said people are using the Internet for video content on YouTube and MySpace to personalise themselves, but this is different from IPTV video content that people are willing to pay for.

“I haven’t heard of any supplier in the world who has got the right IPTV model in place. At the moment it is a case of trial and error,” he explained.

Budde predicted that as IPTV progresses it will centre on interaction, as most content will be created by users themselves.

“The media might have the content, but it is a one-way street with
limited interaction. The Internet is all about interaction,” he said.

Where there is demand for technology, resellers usually find their role in the market, said Budde, and the channel may even be able to use IPTV to enable customers to interact with each other.

“This reseller-created customer interaction could cover a region or a particular area of interest. Resellers can then build offerings around this group and sell further products.

“At the moment in Australia we have the infrastructure in place that gives us the opportunity to start deploying IPTV. There have been signs that the government will be investing into the infrastructure too, which mean there are some good prospects in Australia,” he said.

Warren Chaisatien, managing director of telecommunications research house Telsyte, said: “Australian adoption of IPTV is very tiny. “Australia is still at least three years behind more developed countries in terms of broadband coverage and we are the same behind the like of the UK and France in terms of IPTV adoption.”

Chaisatien said in order for Australia to have full-blown IPTV adoption the country needs to improve its high-speed DSL or fibre infrastructure, which is not available on a large scale at the moment.

Forecasted IPTV growth

According to industry analyst Gartner, the global IPTV market should grow to 48.8 million subscribers by 2010, but companies will still struggle to turn that into a big profit.

Despite the eight-fold increase in users between 2006 and 2010, Gartner claimed that carriers will struggle to turn IPTV into a mainstream subscription TV platform on par with established cable or satellite services.

“Global IPTV revenue during the period will grow from US$872 million in 2006 to a still relatively modest US$13.2 billion by 2010,” said Elroy Jopling, research director for Gartner’s Consumer Communication Services group.

“IPTV will not be a panacea to replace diminishing voice revenue for carriers, but in the medium term it can be a powerful tool for carriers in helping to retain customers on existing voice and broadband services.”

Gartner maintains that carriers must understand the opportunities before them if they are to take advantage of IPTV.

“Carriers need to look beyond the immediate revenue opportunity to understand the longer-term importance of IPTV,” says the Gartner report. “This is because IPTV is not a single service; it is in reality a new carrier distribution platform over which many consumer communication and entertainment services can eventually be offered.”

Gartner estimates that IPTV subscribers will more than double in the next year from an expected 6.4 million in 2006 to 13.3 million in 2007, thanks to the launch of new services.

Gartner defined IPTV as the delivery of video programming over a carrier’s managed broadband network to a customer’s TV set and does not include streaming media over the Internet to a PC.

Eugene Razbash, managing director and founder of IPTV reseller CombiTel, was upbeat about IPTV and its future across Australia.

“IPTV is going well and we are receiving a lot of enquires. Businesses are heading in two directions; mainstream IPTV deployment through major ISPs and telcos, and niche IPTV deployment by ethnic providers who broadcast programs in their own language,” he said.

CombiTel’s service provider solutions enable carriers and ISPs to deliver IPTV services across any type of access infrastructure including DSL, HFC cable, WiMAX and others. Its flagship offering is an IPTV platform integrated and supported by CombiTel.

Razbash said ISPs and telcos are competing with the likes of FOXTEL, but have the advantage of having a more one-on-one relationship with customers compared to broadcasters.

“The reseller opportunity in IPTV is working with different operators and the market is similar to Internet access reselling. VARs can add on IPTV programming to a broadband deployment and create a significant value-add,” he said.

Razbash explained that a lot of CombiTel’s customers are web design and hosting providers, who are looking to provide streaming on their clients’ sites.

“Who will take the lead in the IPTV market? Maybe telcos and ISPs will work with firms such as Intel, or these telcos and ISPs will take the lead themselves. We have already seen Telstra’s BigPond march a lead so far,” Razbash added.

Razbash makes a valid point when he asks what will drive the IPTV market and who will lead the sector. However only last month several of the biggest names in IT and telecoms banded together to create an open forum to decide on standards for IPTV. The Open IPTV Forum includes AT&T, Ericsson, France Telecom, Panasonic, Philips, Samsung, Siemens, Sony and Telecom Italia.

The forum is looking to develop new IPTV standards and bring together current technologies to work more efficiently. The eventual goal is to produce a full IPTV standard that can be applied by all manufacturers to achieve full interoperability.

The first standards to receive attention will be IP Multimedia Subsystem and Digital Living Network Alliance, but content protection, managed network interfaces and interoperability with retail consumer devices are
also under consideration.

Annelise Berendt, senior analyst at Ovum, said: “There are plenty who argue that IPTV will be short-lived because of competition from what are now termed in the US ‘over the top’ providers players such as Google, Yahoo! and Joost, whose offerings effectively allow consumers to bypass telco-controlled services and pull content towards them over the public Internet.”

Berendt said one of the latest additions to the Internet TV scene is Babelgum, an ad-supported online video service targeting mostly small, independent productions. It will introduce its beta test this month
and is backed by Silvio Scaglia, founder of FastWeb, one of the world’s most advanced and mature IPTV operators.

“Add to this the increasing number of content owners using the Internet to go direct to consumers, as well as similar moves by traditional broadcasters, and the competition for IPTV services is certainly hotting up,” she said.

Berendt made the point that this adds to the argument that the telcos’ only role will be as conduits for the content services of others, as deliverers of Internet traffic often referred to as ‘bit pipe suppliers’ unable to sustain any form of retail play in broadband content services themselves.

“This idea arouses strong feelings, not least because they touch on the issues and arguments surrounding ‘net neutrality’, which have currently gone rather quiet, but have certainly not gone away,” she said.

IPTV versus Internet TV Berendt believes there is room for both IPTV and Internet TV in the market, and that players from both camps will be more successful with certain consumer segments than others.

“At present, where IPTV and Internet TV offer the same content, what these two camps essentially provide is a choice in the method for watching a particular piece of content. This choice is based on a trade-off between price, convenience and the quality of the experience,” she said.

Berendt said it takes effort to search and pull content together, however minimal, and there are plenty of consumers ready to receive pre-packaged content without having to think too much about or seek out their viewing experience.

“Quality, consistency and the ‘safe’ environment of the IPTV service should in fact be presented as a core differentiator by IPTV operators,” said Berendt. “Alternatively, for the market niches that are tech savvy, prepared to accept a lower quality experience and more inconvenience in order to avoid paying directly for what they watch, Internet TV is the answer.”

Berendt said a variety of IP platforms for video services will operate in parallel and will do so for a long time to come, alongside the traditional terrestrial, satellite and cable TV platforms.

“IPTV and Internet TV will cater for different requirements. Players such as Joost are certainly raising the game in terms of quality and ease of use, and vendors are working hard to take web TV to the TV set a vital requirement to take the medium mass market,” said Berendt.

Casting an eye into the crystal ball for IPTV, Berendt said all this means that some Internet TV services will represent greater competition for IPTV operators. The latter will therefore have to be one step ahead in terms of quality, convenience, functionality and of course content.

“We expect to see a closer working relationship between IPTV and Internet TV. Telcos will look increasingly to both services and players on the open Internet, sometimes bringing them into the IPTV garden, as is the case for example with Verizon and YouTube, and with BT and PodShow.

Berendt said the role that telcos take in the IPTV market will also vary market to market. Some will find the wholesale role the most lucrative, most will have a direct offering alongside key partners, and some will be capable of taking the leading role.

“In fact this ability to vary the roles played will also help establish IPTV, ensuring that those companies and brands that are strongest in individual markets are able to grow the platform most effectively. It’s quite possible that one day we will see a ‘Joost’ or ‘Google’ IPTV channel or even service as part of a telco’s proprietary IPTV offering,” Berendt added.

On Australian shores last December, local broadband provider Internode purchased additional Cisco core and Internet equipment to act as a foundation for its ADSL2+ service to deliver products such as IPTV throughout metropolitan and regional Australia. Internode’s recent network expansion involved the purchase of two Cisco Catalyst 6500 Series switches and its sixth Cisco GSR 12000 Series router.

The Cisco 12000 Series router was deployed in Adelaide and linked to Internode’s five other Cisco 12000 routers in North America and Sydney. It features Multiprotocol Label Switching (MPLS), a routing technology that manages voice, video and data traffic over a single pipe.

Simon Hackett, managing director at Internode said at the time, with the upgraded network in place, Internode plans to expand its flagship business service, Internode Business Connect, which offers private IP networks to businesses.

The upgrade will provide the foundation for Internode’s continuing national expansion, including the move into areas of regional Australia. Cisco MPLS protocols are deployed across Internode’s regional backbone networks.

“This means that end-to-end MPLS-based virtual private networks (VPNs) can be
constructed to originate in an Australian town and terminate anywhere else across the Internode backbone, through to and including California,” he said.
Internode is also looking at readying its network platform for IPTV and other video services, said Hackett.

Also targeting the Australian IPTV market is US-based provider Akamai, which believes that IPTV has a big future, as people are prepared to pay for more content online versus expecting it to be supported by advertising. The firm also claimed to have already helped companies provide IPTV and video streaming capabilities to Australian businesses and consumers.

Stuart Spiteri, director of Akamai for Asia Pacific, said: “The key issue in Australia is the subscription model of the carriers. This restricts access as users only have a set amount of downloads, which is impeding IPTV adoption. Most of the rest of the world has an all-you-can-eat model.”

Spiteri said a lot of the carriers such as Telstra lock-up content rights so they can position themselves in the IPTV market.
“In Australia we are seeing a lot of our customers looking to deliver high-grade content over the Internet,” he said “In the future you will see the large content owners getting in on the IPTV act through various types of deployment models, some set-top, some subscription based.”

Spiteri said Akamai already has a number of go-to-market partners for IPTV in Australia.

“The good news for resellers is that there are ongoing service fees with IPTV, with good margins to be found. For resellers, IPTV provides an ongoing and stable revenue in an area that is going to grow,” he said.

Future of IPTV

So what does the future hold for IPTV? “It will be a messy period for IPTV over the next couple of years until firms figure out what is the best model,” added Spiteri.

Chaisatien at Telsyte, said: “Australian adoption of IPTV by 2010 is realistic. By this time we will see Australians using IPTV applications and it will go beyond content and be more interactive.”

“The biggest factor for IPTV is how quickly the country can roll out wide-scale broadband fibre which anyone can use,” he added.

As for a channel player perspective, Razbash at CombiTel said: “IPTV in five years will be one of the key elements with small businesses and the entertainment sector.”

Is IPTV something to get excited about now? In short, not really. Australia does not have the underlying infrastructure to support wide-scale adoption. In three to five years we will have a clearer understanding of the IPTV landscape and its future success.

A lot will hinge on the government’s dedication to expanding Australia’s broadband infrastructure and the $162.5 million Australian Broadband Guarantee. The Guarantee will particularly target difficult blackspot areas to ensure that all Australians can access affordable broadband regardless of where they live.

It will also complement the $600 million Broadband Connect infrastructure program which will rollout sustainable, high speed,
open access broadband networks in regional, rural and remote areas
of Australia.

Resellers looking to position themselves for potential IPTV growth would be well advised to concentrate on spreading Australia’s broadband coverage first.
If a reseller can build a solid base of broadband customers, when advanced applications such as VoIP and IPTV rise in popularity, they will be in the best position to upsell to an already established install base.