CAPITALIZING ON IPTV REVENUE

Economics 101 teaches the average high school senior that there are two things that drive Wall Street — fear and greed. Despite its history of regulation and monopoly that makes it not quite raw capitalism, telecom operates on pretty much the same basis.

The sudden interest by incumbent telcos in deploying video services is a direct result of fear. Fear that cable operators finally will make good on their promise to attack the residential voice market, fear that access line counts will continue to drop for the foreseeable future and fear that revenue from traditional landline services will erode further. One of the best weapons telcos have, though, is the information and data generated by early IPTV deployments. In this supplement, we have tried to present as much of that information as possible, recognizing that every deployment is going to be slightly different.

IPTV holds great promise for telcos, not only to counter potential access-line losses to cable operators, but also to capture significant revenue from a market where they currently have none. Early IPTV deployments have shown it's not unusual for telcos to hit 20% penetration rates in the residential video market. More important, with the addition of video, telcos have one more piece of a triple-play offer that has proved remarkably efficient in holding on to customers.

IPTV's greatest potential, though, comes in its ability to turn the viewing experience into something more than just passively watching entertainment emanating from a glowing box. As noted in the cover story, starting on page 6, because IPTV exists in the IP domain, it gives carriers the ability to offer services that blend video and data into a new form of entertainment that includes things like e-commerce, interactive gaming and access to massive libraries of video content on demand. Ultimately, carriers will be able to add in whole-home services that contribute to things such as energy management and security services. The first step in that process is figuring out how to create IP networks and transport multimedia within the home environment (see page 28).

Fear and greed will always be factors in strategic business decisions. Making the leap in to IPTV, though, can be done intelligently by using the knowledge learned by the pioneers.