Delivering on the promise of IPTV

As a BusinessWeek article recently pointed out, it was just a few years ago that phone companies delivered voice communication, wireless companies delivered cellular, Internet service providers delivered Internet access and cable delivered multichannel video.[1] Each industry was essentially a self-contained vertical market, defined as much by the delivery network as by the service being delivered.

Today, the rules have changed dramatically. In a world of fast-paced technology and Moore’s Law, four years can seem an eternity. Technology innovations, market forces and the proliferation of Internet protocol (IP) within delivery networks and consumer devices have ushered in a marketplace where the multimedia boundaries are blurring and, in some cases, disappearing altogether. Today, cable companies and ISPs offer telephony, while wireless, cable and telephone companies offer data services. Multichannel video, however, continues to be primarily the domain of cable and satellite operators--but that exclusivity is changing. Services delivered to homes are no longer dependent on the type of physical network that serves the home. Be it coaxial cable, twisted pair copper wire or fiber, today that pathway can be the conduit for a rich array of consumer services.

The growing use of IP to ship all forms of communication, including data, voice and video, is one of the driving forces behind the changing competitive landscape because it enables a variety of services to be delivered over the same physical pathway to homes. Voice services can be transmitted over IP, as can video and data.

Recent technology innovations enable the delivery of high-quality television over a secure IP network. Call it IPTV. But let’s be clear: IPTV is not about streaming video over the Internet to a PC. IPTV is about delivering a truly high-quality, competitive, multichannel TV service to consumer television sets over a closed IP network controlled by the broadband provider. IPTV is to TV services what voice over Internet protocol is to telephony services. While the technologies--especially the delivery network itself--are effectively the same for high-speed data services and for IPTV, the real difference when talking about IPTV is the business opportunity. IPTV, as the industry is quickly defining it, is about delivering a full range of next-generation multichannel TV services to subscribers.

Delivering video over a switched broadband network is not a new idea. Over the past decade, there have been several experiments that sought a profitable way to compete in the video entertainment business. In the United States, Bell Atlantic, Pac Bell, Ameritech and US West (now Qwest) are among those that tried--only to face quality of service, business model viability, and network scalability issues that prevented the delivery of a viable TV service to compete with cable and satellite.[2] The early attempts all centered on ATM networks, and home devices that decoded MPEG video delivered over ATM were expensive. Back in 1994, the cost of the home consumer device ranged from $2,000 to $4,000, based on the approach taken.

Though none of these pioneering experiments proved successful from an economic standpoint, they were successful in fulfilling many of the goals of the pioneers. The West (California) was settled and commercialized by the people who followed the trailblazing pioneers. Similarly, these early experiments demonstrated that the initiative had (and still has) merit, yet was hampered mainly by the state of the technology at the time. Moreover, each of these trials has advanced the industry’s understanding of what it takes to deliver video over broadband.

So what’s new in the world that now makes IPTV an attractive and economically feasible value proposition for broadband network operators? Let’s take a look.

When you’re talking about delivering “pipe-hungry” services such as video (especially high-definition video), it is important to conserve as much bandwidth as possible, lest you overtax the network. That’s why advanced video compression technologies are so important. MPEG-2, which requires anywhere from 3Mbps to 19Mbps bandwidth to deliver TV-quality video, can deliver a high-quality picture, but its bandwidth efficiency is fairly dated. Fortunately, several new video technologies have been introduced recently that significantly reduce the amount of bandwidth required. Using as little as a third of the bandwidth needed for MPEG-2, advanced video compression technologies such as Microsoft Windows Media Video 9 Series allow higher-quality content to be delivered at lower bandwidth and at lower costs.

The rapid proliferation and shrinking cost of gigabit Ethernet (GigE) has dramatically increased the amount of information that can flow up and down a broadband pipe. With such high data speeds, GigE, and the emerging 10 GigE, enables capacity such that an operator can cost-effectively deliver an almost unlimited number of channels over its networks. Consider that in just the past year the average price of the 10 GigE ports has shrunk by about $30,000![3]

ADSL2 improves network data rate, performance and diagnostics while saving power through a standby mode. ADSL2 really addresses the growing demand for bandwidth to support services such as video. The primary benefit of ADSL2 and related ADSL standards is that they do not require a complete forklift replacement of existing ADSL equipment. Often just changing the line cards from ADSL to ADSL2 is sufficient.

The business of fiber is all about lasers and lights. Technologies such as dense wavelength division multiplexing (DWDM) and passive optical network (PON) use light wavelengths over an optical fiber thinner than a strand of hair to transmit billions of bits of data instantaneously, every second. These improvements in optical networking are outpacing the computer processing power gains defined in Moore’s Law. It’s this tremendous growth in capability, coupled with equally dramatic price cuts, that are driving the continually evolving DWDM and PON technology to become ubiquitous in the network. As these costs continue to drop, more operators are looking to deploy fiber, in some cases all the way to the home. As evidence of this, Verizon, BellSouth and SBC Communications recently issued a joint proposal to the industry with plans to rapidly expand the fiber that runs their IP networks.

Piracy and illegal duplication of content are major issues for content providers. In fact, these are often the key hurdles to making available a commercial IPTV offering. It’s important to enable a suitable content protection model that safeguards the interests of content owners while not sacrificing consumer rights to reasonable use. As long as safeguards are in place, content owners are ready to introduce new paradigms in the content purchase model that are beneficial to end users. Digital rights management (DRM) describes systems or technology that preserve the rights of the end user to fair use of the content, as well as the content owners’ rights for managing the distribution of content.

An advanced DRM solution will make available a variety of delivery options for IPTV. For example, a home network might contain several IP-based devices capable of accessing, storing, sharing or displaying DRM-protected digital TV content in a secure way. To illustrate, think of a set-top box that receives an incoming TV signal, which is then stored on the PC (which acts as the home’s digital video recorder, or DVR). The home PC could securely make content available to other televisions in the home or to a portable video display device that a consumer can take on the road, as long as the portable device and the other televisions have the right to view the content and as long as this right has been negotiated and acquired from the content provider.

With the technology in place, the next challenges are to figure out how to build and market a successful service. Obviously, subscribers aren’t going to flock to an IPTV service just because it’s available. From a marketer’s standpoint, IPTV must clearly differentiate itself in terms of product, packaging, pricing and distribution. Packaging (bundling) is particularly important because IPTV has the ability to reinvigorate the operator’s existing primary services, such as high-speed data or telephony services, while significantly decreasing subscriber churn. The technology advancements listed above translate into significant subscriber benefits and provide broadband network operators with major business incentives to enhance their services by adding IPTV.

More and more, consumers are becoming used to interacting with digital entertainment on a personal level. Cable and satellite operators are aggressively rolling out “personalizing” services such as video on demand (VOD) and digital video recording. Beyond support for VOD, digital video recording and high-definition TV (HDTV), IPTV is capable of enabling attractive next-generation TV services, including the following:

• Networked and remote digital video recording.

  DVRs are all about watching television on your time, and adding the television to an IP-based home network increases that ability for consumers. Imagine programming the family room television to record a baseball game while the television in the master bedroom records “Frasier” simultaneously. Also possible is the ability to remotely program the DVR from the work PC, or any other Internet-connected device. No new hardware is required--in an IP-networked home, the memory already available on the PC can serve as the DVR for the home.

• Advanced communications features.

  Today’s generation is conditioned to being able to chat with friends in real time while sharing experiences such as photos, music, etc. IPTV’s broadband connection brings chat, instant messaging and e-mail to the TV screen.

• Next-generation interactive TV features.

  IPTV’s two-way connection is ideally suited for advanced interactivity that involves the viewer in the TV experience. Applications such as voting, changing camera angles, real-time shopping and matching wits with game show contestants are among the many possibilities.

• Targeted ads and program recommendations.

  IPTV is a broadband, not a broadcast, architecture. This means there is a 1:1 relationship between the network operator and the television, which enables the delivery of more-personalized content based on viewing history or “opt-in” personal information from the consumer.

• “Millisecond” channel surfing.

  Digital TV is great, but currently it takes two to three seconds just to tune a new channel on conventional digital TV platforms. IPTV can offer network-based tuning that enables a subscriber to flip through channels in milliseconds--faster than the blink of an eye. As we’ve seen with the launch of digital TV services by cable and satellite operators, the user experience is extremely important. IPTV services can positively add to the user value and not be an intrusion on the user experience.

• Multiple picture-in-picture.

  For picture-in picture (PIP) functionality, today’s hardware requires multiple tuners--one for each picture shown simultaneously. But with IPTV, tuning can be network-based and driven by software, meaning no hardware tuners are required and multiple moving pictures can be cost-effectively shown on the screen at once. One application of multiple PIP is a richer interactive program guide (IPG) with six to eight moving video thumbnails per screen, contrasted with the text-based IPGs people are familiar with today.

IPTV will offer significant savings in customer premises equipment (CPE). The network-based tuning of IPTV means that set-top boxes just decode the digital video rather than tune to a specific broadcast channel, which helps keep the price of CPE low. Moore’s Law and integrated chipsets will drive down CPE costs. It’s now possible to create a system-on-a-chip that decodes the digital video of an advanced compression schema such as Windows Media 9 in hardware, and chip manufacturers are already embracing the idea. And the CPE marketplace for IPTV is emerging to be much more competitive than the CPE marketplace for traditional digital TV devices today, with many more companies developing CPE devices, which will continue to drive innovation up and costs down. For these reasons, the bill of materials for an IPTV set-top box is expected to drop from around $150 per box today to roughly $50 per box for scale deployments by 2007.

Eventually, the low cost of devices and proliferation of open standards will empower a retail model in which CPE costs are shifted to the consumer. A retail model takes that initial capital expenditure off the operator’s books, which makes the CFO happy (not to mention investors). It also benefits consumers, who no longer have to pay a monthly leasing fee and are free to take their set-top box (or eventually their integrated TV set, game console or other device with embedded IPTV functionality) with them if they move. And because software downloads take place over the network, each box is remotely upgradeable once connected, which can dramatically increase the lifetime of the box and minimize the need for costly truck rolls.

With the technology now in place, IPTV services are poised to enter the digital TV market and expand the landscape for the distribution of multichannel video. The next step is for the industry to prove whether IPTV is a service it should embrace. Chipset manufacturers such as STMicroelectronics have announced plans to produce system-on-chip solutions that will drive down the CPE costs, and several broadband network operators have announced plans to test IPTV services, including Bell Canada and Swisscom’s Bluewin, to name a couple.

Is the next generation of digital TV delivery here? Push 'play' to find out.

[1]

BusinessWeek

, “Tearing Down the Walls in Telecom,” by Olga Kharif, March 2, 2004

[2]

The Yankee Group, March 2004

[3]

“10-Gbit/s Ethernet Components,” A Heavy Reading Competitive Analysis, April 2004

Lynne Elander is the general manager of marketing, Microsoft TV Division, and can be reached at LynneE@microsoft.com.

Visit Microsoft TV online.