The economy won't be all that's disruptive about 2009

For IPTV, the year is opening on a world where things aren’t quite as they seem. And I’m not referring to the economy.

One sign of change is the recognition of hybrid IPTV. I say “recognition” because hybrid has been around for a long time. It’s the most prevalent deployment model in Europe, where live TV is delivered over DVB-T, DVB-H or DVB-S, while premium and on-demand programming is delivered over fixed-line IP. Hybrid delivery exists because, for some operators, existing copper couldn’t deliver it all on its own. Verizon’s FiOS TV can be seen as another kind of hybrid, using one wavelength to deliver live TV using QAM, and another for on-demand, using IP. AT&T’s Homezone service is another, although it is being discontinued with the ending of AT&T’s relationship with Echostar. In all these cases, the common motivator has been time-to-market, using available facilities when pure-play IP didn’t make the grade.

The U.S. switch to digital TV creates a new reason for Telcos to consider hybrid, though operators should remember that digital terrestrial broadcast won’t deliver premium programming. But offer a box that combines a digital TV receiver with a solution like Roku or Sezmi and it might be a compelling broadband offer for some. Will it be enough for the traditional TV viewer? For some, maybe. Will it be “sufficient enough” that a Telco no longer needs to deploy IPTV? That’s a big question (and no, I don’t think so, for reasons of content availability and video quality).

Another sign of change is for the wholesale model, where a company would acquire the TV programming, process it into MPEG video for IP transport, and bundle it up to distribute to local operators, who would receive and unbundled it, add local programming, and deliver it over their networks to subscribers. The value proposition to local operators is compelling: save big by reducing the headend investment, and just write a check for the content and the professional services needed to turnkey their way into the video business.

These wholesalers take two forms. The one that I like to call “the quiet type” is exemplified by Iowa Network Services, which uses land-based SONET or IP transport to bring an extensive bundle of video and music to about 40 ILECs, CLECs and municipalities across Iowa, from a centralized headend.

The other form uses satellite transport, which brings us to IP Prime, the IPTV venture of SES Americom and the NRTC. Although the sudden announcement of IP Prime’s demise last fall was an eye-opener, the company had to spread its high costs of operations and transport across more than 60 local operator relationships -- which also cost money to maintain – to a subscriber base totaling less than 10,000!

A senior representative of IPTV Americas, a wholesaler that delivers bundled programming to local operators in Latin America from a headend in Miami, confirmed to me this week that his company’s attention has turned to Latin American cable operators because “they make their decision much more quickly than the Telcos do.” It’s a fertile market that’s still mostly analog, pay TV penetration is increasing, and the value proposition is just as compelling for local cablers as it is for Telcos.

So, for the wholesalers, the challenge has been the combination of high costs, seasoned perhaps with some organizational inefficiency, combined with the Telcos’ hesitancy to commit and scale.

Although they represent disruptions in the conventional wisdom of IPTV, the recognition of hybrid IPTV and the challenges facing the IPTV wholesalers can’t be pegged to the current economy.

In fact, this may be the best time for Telcos to follow through and build out – whether it’s pure-play IP or hybrid. New consumer studies indicate that as consumers cut back in bad times, pay TV is likely to benefit, not suffer. Hopefully, the kinks will be worked out of the IPTV wholesale model so it remains an option for local operators: IP Prime may be going away, but there are others.

Steve Hawley focuses on the evolving world of IPTV as principal analyst and consultant for tvstrategies (Advanced Media Strategies LLC), http://www.tvstrategies.com