Independents consider Europe's hybrid strategy

More than 35 new IPTV operations began trials or deployment across the globe in the past six months, suggesting opportunity in the market despite the economic downturn and rise of alternative video options. Only two trials took place in North America, with the majority occurring in emerging markets, but the U.S. has done better than originally expected, said Gary Schultz, CEO of analyst firm Multimedia Research Group.

In many of the new IPTV deployments, telcos took on the hybrid approach rather than launching full-blown IPTV systems. This is still more common in Europe, which has been more aggressive in converting analog subscribers over to digital terrestrial services. Schultz said that in many of these cases, it made more sense for a local telco to go hybrid rather than try to carry all the broadcast channels through their network. The most sophisticated example North American telcos — particularly Independents — can learn from, he said, is BT, which has digital terrestrial channels and uses IPTV for its on-demand component.

“It will apply to the North American market, particularly in Tier 2s in rural areas where there still needs to be a faster and cheaper way to get to market,” Schultz said. “The operators can save a lot of capex on the headend. We think you will see replacement models for IP-Prime, which SES Americom was pushing, and we think you'll see some other sources for those kinds of services develop. The rural U.S. market can go with a hybrid solution.”

Independents have many hybrid set-top box (STB) vendors to choose from, too. It is a crowded market, with the top eight suppliers capturing more than 1 million subscribers. Motorola and Amino, following its acquisition of hybrid STB provider Tilgin, are leaders here. Still, despite expectations the market will peak in the next few years, Schultz said there is room for multiple, regional players.

“Why isn't there a world standard [for STBs]?” Schultz asked. “A lot of local jurisdictions don't want it that way. They want their own version for competitive reasons and also because it keeps their business local.”

MRG actually had to increase its forecast for global IPTV subscriber growth, which it had lowered back in August when it last published the standings, Schultz said. Growth rates aren't quite what they were a year ago, but they are still steady and respectable worldwide, he added.

“We think the telecom industry in general paid its major dues back in the last dot-com bust,” Schultz said. “The telcos themselves know how to pull in their belts quickly and keep their capex spending up. AT&T is an example. We were surprised they are keeping their capex budget around $18 billion. That doesn't sound like an austerity budget to me. They will continue to build out. In general, we are pleasantly surprised that the industry has not taken a nosedive south.”