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Nimble telcos driving impressive IPTV growth

Written by Chris Andrews

North American bottom lines could be improved if AllVid solution adopted

Telcos have been making some smart investments, discreetly improving their IPTV offerings, and are set to outperform their cable and satellite competitors over the next four years. This according to new findings from the Multimedia Research Group.

MRG has published an updated report on global annual growth of IPTV subscribers, and despite difficult economic conditions, it is estimating that this will reach 102 million in 2014, or a compound annual growth rate of 25%. This, said MRG, will see service revenues growing from $17.5 billion to $46 billion in the next four years.

MRG said that telcos have been ‘discreetly’ improving their bandwidth capacity to sub-markets that require upgrades, without overspending in markets that do not - using fibre in high-competition markets and advanced DSL in other less competitive markets. The results of this broadband and IPTV investment will result in that impressive forecast growth and in telcos meeting or outperforming their cable and satellite competitors.

The Eastern European IPTV market is moving quickly to early maturity, said MRG, and by 2014, Europe will represent 45% of the global IPTV market. “As late as 2007, Eastern Europe had only a few IPTV trials or start-ups,” said Jose Alvear, IPTV Analyst with MRG. “Now, there are 16 fully operating IPTV Operators and another 3-6 in trial. These Operators continue to grow their service base, because they have much greater technical and creative control over their service than their cable competition.”

As a further example of this creative and technical control, the report points to Verizon and AT&T in North American, each of which added about a million subscribers in 2009. Since Verizon stopped signing new franchise agreements outside its existing footprint, said MRG, speculation is growing that the company will switch from its QAM/IPTV architecture to an all fiber-based architecture for franchises after 2010. “Meanwhile AT&T, with no such technical constraints, is free to use a ‘discreet upgrade’ approach to growing bandwidth using a mix of advanced DSL or FTTX as needed.”

The report also found that capital expenditure will grow from $3.1 billion this year, to $5.1 billion in 2014. The lion’s share of this expenditure, over 70%, is on set-top boxes. “Therefore we can expect greater penetration of integrated hybrid, IPTV, and OTT STBs including connected TVs with STBs embedded in TV Sets,” said Mr Alvear.

As such devices emerge, IPTV operators will see obvious improvements to their bottom line, particularly if some form of viable third party STB marketplace can get up and running. Of potential help in this area, in America anyway, is around the so called ‘AllVid’ solution currently being bandied around by the FCC. This is, in part, as a potential replacement for Cable Cards – a widely acknowledged failed experiment – though one which will go beyond cable operators.

The idea is to allow people to purchase inexpensive universal adapters, featuring common interfaces and standards, that would connect with smart video devices – including TVs and STBs. As a result, all pay TV providers would simply provide their customers with an adapter that makes their content available on a customer’s home network. Instead of working out a way for individual third-party devices to directly interconnect, they will just need to support industry-standard home networking protocols and media codecs. This will also allow for televisions to be directly connected to the Internet.

The theory is that this will encourage innovation and competition among third party video device manufacturers, including STBs, and that the customer will benefit (this was also the theory with Cable Cards, but this booming marketplace never materialised).

AllVid was mooted by the FCC back in April, and has gained the support of rights groups such as Public Knowledge, which has said: “By creating a simple set of rules for access, device makers can innovate and compete, creating a market that will lower prices and increase variety in video devices for consumers.”

It also has support from the likes of Google, which has a definite interest in increasing the number of internet connected televisions, as Google TV is now on the cards.

Google said on its public policy blog that convergence of the Internet and television screen would “enhance consumer experiences, and drive broadband adoption and usage”, as well as Google advertising revenue of course.

“While the technical ability to access Internet and video content through a television platform has been possible for years, an open and vibrant retail video device marketplace has yet to materialize.”

Whether the AllVid solution will gain the support of operators is another question entirely, and there are many who think that the FCC shouldn’t be involving itself with this in the first place. It could be very interesting, however, if a retail video device marketplace were to emerge, as this actually could be good news for consumers. Real choice that doesn’t come at a premium usually is.

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