Solutions to help your business Sign up for our newsletters Join our Community

Making More of IPTV

As the quest to replace cable companies falters, telcos consider satellite partners, over-the-top video and a plethora of set-top boxes.

THE END RUN AROUND IPTV

More on this Topic

Industry News

Blogs

Briefing Room

AS TELCOS WATCHED their access lines slip away to mobile operators and cable companies, the conventional wisdom was that they had to respond with either IPTV or perish. IPTV would stem access line loss and grow new revenue with innovative features unavailable through plain old TV. The truth is a little more complicated.

IPTV providers, though benefitting from bundled offerings, are still suffering from line losses. IPTV itself is still, for the most part, a clone of traditional cable services and not a highly profitable one. And of course, it requires a fairly significant upfront investment and a lot of technological know-how to launch.

For a lot of telcos, Qwest Communications' strategy is sounding more sensible all the time. When Qwest announced it was deploying fiber-to-the-node without using that network for its primary video service, as AT&T has, it confounded more than a few in the industry. But Qwest knew that IPTV economics would be challenging and that consumer behavior and technology could shift in their favor over time.

In fact, a number of trends now evident in both video consumption and consumer electronics could well give hope to telcos who are considering foregoing a U-verse-style service in favor of a two-pronged approach that relies on a satellite partner for standard TV service and the broadband connection for a more interactive form of IPTV.

At this point, it's hard to imagine online video replacing TV for a significant chunk of the market anytime soon. Despite the rise of iTunes, Hulu and Netflix, the average time spent watching online video is about nine minutes, a number that, while growing, is dwarfed by the time-sucking power of the TV.

“The good news is that the IP video space has come a long way over the last two to three years,” said Steve Sklar, director of product management for Qwest. “Encoding rates have improved considerably. Wi-Fi is improving considerably. Carriers are upgrading their plant. When you combine those, it translates into more options.”

Qwest uses DirecTV's satellite video service as its own flagship video offering — a strategy that recognizes that the best case for telco video so far is in supporting a service bundle rather than delivering big margins. But Qwest also is leveraging that partnership in other ways. DirecTV has its own on-demand offering that uses terrestrial broadband and IP- and Ethernet-enabled set-top boxes (STBs) to offer a library of video content, which Qwest is now offering to its subscribers. And Sklar said Qwest is working on a number of initiatives to further exploit the combination of its satellite partner and its own terrestrial broadband network.

In addition, Qwest late last year launched subscriptions to Starz Play, a video-on-demand (VOD) service for PCs and mobile devices (also offered by Verizon), through its QZone content portal, which has largely offered video games but will increasingly include more video content. “We're looking at all business models — subscription, pay-per-view, electronic sell-through, free content,” Sklar said.

Qwest also is looking for ways to offer video services to those who won't sign up for a satellite. “We're watching closely what Netflix and Amazon are doing with the Roku box and what Blockbuster is doing with Mediapoint,” Sklar said. “In time, we'll determine what's the most sensible strategy for Qwest.”

Meanwhile, major content houses are getting serious about using broadband for video distribution and hammering out those business models. ESPN, for example, has been licensing its online video content to select ISPs rather than allowing universal Web access to it, putting ISPs in an exclusive distribution role similar to the one cable operators have long played for cable TV channels. In January The Wall Street Journal reported that a group of media heavyweights, including CBS Interactive, Microsoft, NBC-owned online TV broadcaster Hulu.com and Yahoo! have been collaborating since November on a project — codenamed “The Pool” — to test online video ad formats to help flesh out business models in the space. Those involved with the group (which notably excludes Google, but maybe not for very long) told the Journal that the current recession may help bolster long-sought online ad standards, as hard times have forced media firms to work together and move forward quickly.

“There are so many ad formats you can choose online; it's a little overwhelming for publishers and ad agencies to understand,” said Kurt Scherf, vice president and principal analyst for Parks & Associates. “I still don't think anyone understands the true return on investment.”

And the wrinkles in these unexplored advertising models can reveal important flaws, as cable companies found in response to the Slingbox, which lets users send content to remote devices. “Sling was hammered when it was first introduced because broadcasters said it shattered the ad business model because it does no good to show me an ad for Joe's pizza in New York City when I'm in L.A. watching it,” Scherf said.

For telcos, a big part of determining the best video business model involves the subscriber acquisition cost. And much of that math may be determined by what hardware is needed. Standalone STBs for incremental video services have a rocky track record — recall VOD STB vendor Akimbo, which closed its doors last May after winning investment from AT&T and Cisco Systems — and the growth of ever more OTT video may make their value proposition even harder to see in consumers' eyes.

“Is the customer ready to have yet another device that complements the TV and the DVD player?” Sklar said. “Do they expect it to replace the linear TV service? If they do, the customer may look for more things that are in the Apple TV box and the current Roku box. Service providers need to understand all those things to evaluate their options.”

LG, for example, has promised that its Blu-ray disc players will support YouTube and CinemaNow this year, in addition to already supported Netflix. Sezmi is designing a user interface aimed at making video content easy to consume and familiar. And with many game consoles now including Ethernet ports, some have suggested telcos partner with gaming console manufacturers, adding telco service and user interfaces to gaming devices. In Japan, Nintendo Wiis have been used as STBs to deliver NTT's IPTV service; BT also has used the Xbox as an STB.

Sklar said that strategy — like ones in which the necessary functionality is in the TV itself — is limited by the penetration of the particular device to which it is tied. “There are a bunch of nichey approaches out there,” he said. “But you've got to ask yourself how you can do something more broad-based. There may be nichey opportunities to get into the game and get some experience — to learn what's possible and bring that learning to the next stage.” — ED GUBBINS









































Want to use this article? Click here for options!
© 2014 Penton Media Inc.

Learning Library

Webcasts

White Papers

Featured Content

The Latest

News

From the Blog

Briefingroom

Join the Discussion

Resources

Get more out of Connected Planet by visiting our related resources below:

Connected Planet highlights the next generation of service providers, as well as how their customers use services in new ways.

Subscribe Now

Back to Top