page twenty four www.csimagazine.com Cable & Satellite International september-october 2009
IPTV
Europe has been storming ahead in
the IPTV stakes for several years
now, leaving the US and Asian
markets far behind it. Figures published by
the Broadband Forum in June 2009 show
that Western Europe continues to be the
leading IPTV region, with 11.3 million
subscribers and an impressive year-over-
year growth rate of more than 56%.
Within this catchment area, France alone
accounts for France on its own accounts
for some 25% of IPTV subscribers
worldwide. In France, de-regulation created
the competition, choice of services and
one-stop bundles that created the
awareness and subsequent penetration
of the consumer market for IPTV and
other services.
Eastern Europe is not far behind with a
21% adoption pace, and about 1.1 million
subscribers signed up to IPTV.
As a result of this growth, the 12.5
million or so European IPTV subscribers
accounted for almost 10% of the
continent's pay TV market in 2008.
Analysts forecast anywhere between 71.6
million and 100 million subscribers
worldwide, by 2012, and Screen Digest
predicts that Europe will account for over
22 million of these.
While IPTV has made it possible for
telcos to get in the pay TV business, and
round out their triple play bundle to the
consumer, the market is still embryonic and
evolution in terms of technology and market
dynamics are still far from set. Nevertheless,
growth rates are slowing somewhat; despite
the continued rise in IPTV subscriptions,
analyst firm Frost & Sullivan issued a
revised forecast at the beginning of 2009,
predicting that growth would now be closer
to 15%, instead of the 25% initially
predicted in the next three years.
The widely held view is that operators
need to look beyond bundling and over-the-
top (OTT) content in order to sustain the
business model going forward.
Bundling strategies, and beyond
Bundling has so far been the main
foundation for building market share. “There
is no way that IPTV would have grown as
fast without the triple play bundling. It is a
very good way, but also very costly, to
quickly get new subscribers. The other
option to quickly get new subscribers is the
traditional TV operator way to get exclusive
content. Long term, neither of these
strategies is key for profitability. Operators
need to generate additional revenues from
their subscribers to be able to generate
profit from the huge investments.
Continuous focus on ARPU growth and new
content and services will be key for long-
term success,” argues Michael Lantz, CEO
of Accedo Broadband.
As Ronald Brockmann, MD for Europe
at ActiveVideo puts it: “IPTV will have a
larger and larger market share, but OTT
video may also play an important role as
broadband infrastructures improve. The
question will be whether 'closed network'
IPTV will be the dominant form or whether
OTT, perhaps combined with hybrid
terrestrial/ satellite/cable broadcast
reception, becomes a serious alternative.
This depends on various factors such as
quality of service, Conditional Access and
support for broadband-connected devices
such as TVs.”
This is very much the view held by Alan
Delaney, IPTV business development
director for EMEA & APAC at Tandberg.
“The market requirements are continuing to
evolve and you are seeing a more complex
set of deliverables being demanded
including hybrid, increasing video on
demand capabilities as well as a greater
awareness of OTT features - Facebook,
Twitter, RSS support etc”.
Frost & Sullivan's Yiru Zhong believes
that IPTV has further room to evolve. “A
disappointing IPTV performance is not the
end of the road for telecom incumbents, but
it has spurred new service creation and
more innovative business models across the
value chain. As end user media
consumption patterns change, both telcos
and broadcasters face a window of
opportunity to invest and/or collaborate to
meet the evolving user demand.”
This view is shared by Ian Walker, director
of sales and marketing for EMEA payTV at
EchoStar Europe. Walker points out that for
telcos the provision of video over
broadband was seen as a defensive play
against cable TV operators offering
telephony over cable and also as a driver
for uptake of broadband subscription.
Tandberg's Delaney believes that
telecoms and broadband providers can
see a real opportunity to lead a
revolution in television by delivering a
much more personalised experience,
something that IPTV facilitates. As a
result, the impact of IPTV will grow
during the next decade, he argues.
European IPTV has been successful in terms of buildingup subscriber numbers but revenues remain elusive, andwith growth rates slowing Farah Jifri looks at lessonslearned from European IPTV deployments so far and askswhat’s in store for the sector in the coming decade
Euro IPTV under thespotlight
24_26_28_Euro_IPTV.qxd 13/08/2009 15:41 Page 2
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page twenty six www.csimagazine.com Cable & Satellite International september-october 2009
IPTV
According to Walker, those operators who
open their networks and platforms to third-
party service providers as opposed to
offering 'walled-garden' services will be the
only survivors - if not the winners. “Co-
operation in the provision of
complementary multimedia content and
service, and the embracing of micro-billing
and pay-per use impulse revenue will be the
order of the day,” he says.
As cable operators start to offer higher
and higher peak bandwidth through
DOCSIS 3.0, as well as voice, Thierry
Boudard, director of marketing of video
service platforms at Thomson thinks that we
will see telcos bundling mobile and 3G
services and move to quad-play, which will
provide them with an advantage that many
cable companies cannot match.
Mobility will also be an important part of
IPTV development, according to Tandberg's
Alan Delaney. He believes that as HSPA
Evolution delivers upwards of 21Mbps and
LTE makes 150+Mbps broadband possible
over cellular networks, mobile broadband
will have a significant impact on the
multimedia environment. This will also
unlock the true potential for fixed/mobile
service convergence that operators have so
long promised.
Impact on wider TV industry
IPTV is now a serious competitor where it
didn't exist at the beginning of the decade.
IPTV has acted as a bit of a wake-up call
to innovate services, according to Steve
Farmer, strategy and business development
director at Motorola Home & Networks
Mobility. “The 'choice' offered by IPTV, the
potential to deliver content in an all-IP
environment, making it easier to deliver,
share, etc means that the traditional pay-TV
providers are having to look beyond
delivering TV to the lounge and in more
formats,” he argues.
But it is still a small distribution
technology and it's not economical to
launch new pay TV channels just for IPTV,
according to Accedo’s Lantz. “I think that
the main impact from IPTV on pay TV is
the consumer awareness for new TV
services such as catch-up TV and video
on demand that telcos have created with
their marketing communication.
Consumers have accepted the new
features and now demand this from all
operators. This leads to a change in
viewing behaviour among consumers and
thus also the overall pay TV business.”
Thierry Fautier, director of telco solutions
at Harmonic, echoes these sentiments.
“Telcos are true game changers and despite
initially struggling they have re-shaped the
payTV market in many regions and are also
keeping operators of other services on their
toes. We are now seeing both cable and
satellite operators scrambling to offer on-
demand services; an example would be the
acquisition of ISPs by Sky to allow it to
bundle services,” he notes.
In this sense, satellite providers are
increasingly harnessing hybrid networks in
the shape of broadband IP to enable
interactive services.
Cable operators are not resting on their
laurels by any means in the face of this
push towards a more IP-centric service
offering by their telco and satellite
competitors. As Brockmann explains
IPTV's ability to offer greater
personalisation of services is forcing
operators of across the board - whether
cable, satellite or DTT providers - to re-
think their approaches.
“To compete with IPTV's native support
for broader content libraries as well as on-
demand services, you're seeing cable
companies expanding their product
offerings. There's also a lot of competitive
response among satellite and DTT
broadcasters, who will need to look at
hybrid combinations with OTT delivery of
content,” he says.
IPTV service providers face the same
challenges - fighting for customers,
improving services and lowering costs,
according to Farmer. “So investments
should remain in expanding addressable
markets through broadband investment
and use of new compression like MPEG-4.
Also ARPU through introduction of HDTV,
and novel services like 'catch-up TV' will
really drive loyalty.”
New decade, new services
In the longer term, for IPTV operators
looking ahead to how the industry will move
forward, Tandberg's Delaney believes that
they will need to deliver a service offering
on a par with the best of what satellite and
cable has to offer - including HDTV, time-
shifting and multi-room capabilities. “They
should be looking to differentiate their
service through picture quality, the user-
interface and innovations like Internet TV on
the television and IPTV on the PC,” he says.
Thierry Fautier, Director of Telco
Solutions, Harmonic is of the view that 'true
convergence' of services will take full shape
over the next decade. “Content will be
available on any connected device, in any
region, supported by either advertising or
through subscription for premium content
(sports and movies). The content you have
recorded on your TV, directly from STB or
through PC or mobile, will be available on
any device, for streaming or download and
play experience,” he says.
Thomson's Boudard believes that
standardisation efforts will see a shift in the
landscape. “Manufacturers like Samsung
and LG are offering connected TVs, and
open standards like the Open IPTV Forum
will force the commoditisation of some
elements of the home network, strongly
impacting the STB, which may disappear.”
Selected Euro IPTV operators, 2009
Operator Subscribers
Iliad Free 2m+
Orange France 1.85m
Neuf Cegetel 850,000
KPN 835,000
Telecom Italia 688,00
Telefonica 604,800
Belgacom 589,000
TeliaSonera 509,000
Deutsche Telekom 448,000
Portugal Telecom 443,000
BT 433,000
Swisscom 139,000
Source: CSI; Various
24_26_28_Euro_IPTV.qxd 13/08/2009 15:42 Page 4
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“On the network side, operators have to
invest to prepare and manage the content
to deliver diverse formats through diverse
networks. The requirement is for content
any time, any where, any device. To keep
a strong position in this market the operator
will have to develop the capacity and
systems to acquire, prepare and deliver
content any way the subscriber wants it.”
Boudard does, however, go on to warn
operators that they face a stark choice:
either invest to become the content
operator, or go back to the legacy position
of simply providing the pipe, allowing
content providers to use the subscriber
base to deliver the content.
If operators don't want to end up little
more than bandwidth merchants,
ActiveVideo's Ronald Brockmann says they
must assure sufficient bandwidth, quality of
service and an attractive content library.
“But it's really, really important that they
also maximise their advantages in on-
demand and personalisation,” he adds. “The
operators who are offering CI+ modules
with IPTV support are taking great strides
forward by offering greater amounts of
streamed content from the network 'cloud',
optimising ease of use for end users, and
reducing CapEx for themselves by removing
the need for an STB.”
Operators are increasingly looking
to deliver their content and brand to as
large a market as possible, often over
more than the single traditional offering.
Delaney cites France Telecom which is
offering a satellite service, and of
Portugal Telecom with
its IPTV service as examples of this.
“You will also see further
consolidation in the operator space
as a smaller number of larger
players start to emerge.”
He adds: “We expect to see
unified cross-media advertising, so
that television providers can target
selected groups of users over one or
more delivery platforms, and better
leverage economies of scale. The ultimate
aim as far as telcos are concerned is an
IPTV service that puts each user at the
centre of their own entertainment universe,
connected to all the content and services
they care about, and all the people they
care about, all the time. Consumers will
have always-on access to the IPTV platform
regardless of device, location or network.
They will find services, and services will
find them.”
“While there is an argument for
categorising IPTV as a market, there is an
equally valid rebuttal when it is referred to
as a capability,” says Rob Gelphman, chair,
marketing work group, MoCA, who adds,
“Content is king, but reliable bandwidth is
the prince in waiting. Delivery of content
without interruption to any room is available
through an IPTV environment, but reliable
delivery of that content helps round
out the experience.”
A report published by analyst house
Gartner at the tail end of last year provides
some important pointers for IPTV providers
on the challenges that lie ahead. According
to the report 'IPTV Seeks Differentiation' by
Gartner's Adam Daum, “The market for TV
services will become increasingly crowded,
and the basis of competition will move
beyond content and price.” Gartner
predicts subscriptions to IPTV in Western
Europe will rise to almost 19 million in
2012, while annual service revenue
will reach 4.0 billion Euros.
The key to success will lie in an
operator's ability to turn customer
insight and social media
applications to their advantage.
The report states that as IPTV
operators move into video
services, their expertise in
communications opens up many
possibilities for integration, integrating
communication with elements of social
computing via applications like caller ID
on TV, remote DVR programming and
remote authentication.
page twenty eight www.csimagazine.com Cable & Satellite International september-october 2009
IPTV
CSI
Western European IPTV subscribers and service revenue breakdown
2008 2009
IPTV subscribers (thousands):
Total IPTV subscribers 8,211 11,492
Growth 56.7% 40.0%
Household penetration 4.9% 6.8%
Multichannel package IPTV subscribers 4,660 6,649
VOD-only IPTV subscribers 458 780
Other IPTV subscribers 3,093 4,063
Premium-package IPTV subscribers 3,211 4,637
Total VoD subscribers 2,383 3,957
Revenues (millions of euros):
IPTV subscription revenue (basic & premium) 992 1,492
VoD IPTV service revenue 124 255
Value-added IPTV service revenue 9 23
Total IPTV service revenue 1,124 1,770
Growth 53.0% 57.5%
Source: Gartner
24_26_28_Euro_IPTV.qxd 13/08/2009 15:44 Page 6
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