IPTV: EARLY RESULTS POSITIVE

Unlike voice over IP and even broadband in general, operators worldwide are equally embracing IPTV as a means to increase the average revenue per user. Although the competitive reasons vary substantially from region to region, one thing is crystal clear: A triple-play strategy that includes IPTV is critical to long-term survival as a communications operator. By the end of this decade, the triple play will become the single play. Everyone will have one, or should.

Implementing and offering IPTV is not without its challenges. And they remain numerous, impacting every aspect of a network operator's business. In the long run, infrastructure and technology may be the easiest part. The business of offering entertainment services will likely have a longer learning curve.

The good news for operators is that IPTV service adoption is actually quite strong. We are finding that penetration rates are averaging 20% to 30% of broadband subscribers in the relatively short time frame of less than two years. In addition, operators in developing countries with low PC penetration are discovering that IPTV just may be the right driver to encourage broadband adoption.

By the end of this decade, it is expected that the Asia-Pacific/Europe/Middle East/Africa region will hold the largest numbers of IPTV subscribers, given both their high penetration of DSL subscribers and low cable TV competition. However, high subscriber numbers do not necessarily mean high penetration rates. In that respect, North America actually is expected to see the highest levels of IPTV penetration and the greatest degree of IPTV innovation.

Operators that have been in this game for a while will advise others to start slowly but innovate quickly. Although it is important to differentiate from the competition, offering too much too soon, may backfire and confuse the customer.

Successful IPTV deployments have started out looking very much like cable programming, with the addition of new features such as caller ID on TV and a customized electronic program guide. Although some will criticize these as “me-too” packages, consumers are better able to understand and compare these offers against cable and satellite. The long-term goal is to upsell these customers with new and innovative features that will further drive up APRU.

For many operators, 2005 will be the year of IPTV planning, 2006 will be execution and deployment, and 2007 will be about customer acquisition and retention. Operators just entering this space will benefit from the trials and errors of operators before them, which were often used as guinea pigs by equipment vendors to test new technology. Thanks to these early adopters, IPTV solutions and equipment availability have made tremendous improvements during the last 12 months and are setting the stage for a market that is ready to takeoff.