IPTV is another area that I have been tracking for a while. I read recently that Cisco bought Scientific-Atlanta for close to $7 billion. I wasn't as exasperated as when I read that eBay bought Skype for a total of more than $4b, because I think I know the direction where this is headed, and it has more potential that what eBay might do with Skype ! Scientific-Atlanta is a well known hardware, STB, dish provider in the IPTV world, and amongst others ,has good in-roads in delivering equipment to SBC for their IPTV trial (if I recall correctly, having partnered with Alcatel).
First let's talk about IPTV in general and if I think it will ever see light of day in terms of earning profits. After all, most of us who have gone through the last downturn of all things IP have grown to be more cynical about anything that does not make money yesterday. In addition, it is much easier to say 'Gee, I don't think it really is going to work' vs. trying to lay out a vision saying 'Here is why it will work' and 'here is how to do it'. So I am going to go out on a limb to say I see good potential here, both for consumers and operators. I am going to reserve my comments on the 'Here is how to do it' part - you'd need to employ me to answer that for you ;-)
So, do I think IPTV is a revenue generating source for operators? I don't. Infact, I think IPTV will eat at operators margins and actually may result in losses for them for quite a while after deployment.
What ?!? And just a few lines above I said it is a promising business model !
Let me explain: Convergence is about "service bundling". It's about being able to offer a variety of services integrated together as a whole to consumers to enhance their user experience. Trying to dissect a convergence service into individual streams and questioning "Will voice make money" or "will IM make money" is naive at best. Think of IPTV as another delivery system for converged services. While IPTV on its own may be a loss making proposition, being able to tie in the eternally lucrative TV/content delivery system using an IP backbone and common service delivery architectures mean that a smart operator can bring in multiple service sources and stitch them together to offer a lucrative whole. And that is where the money lies. Not just in IPTV, but in effectively being able to use IPTV as one of the mediums to bundle services.
Cisco sees this for sure. Their strategy is that if any service is delivered over IP, they need to be in that business. After all, a majority of the world happens to use Cisco routers - it just makes sense for them to fortify their dominance in IP by also being able to provide delivery of IPTV, and more importantly converged services via their robust infrastructure. For a while now, Cisco has been upping its 'IP' play by talking about the importance of applications and intelligence in the Internet.
Anyway, I digress, back to IPTV. Some very valid concerns:
IPTV has been in the pipleline for a while, often called a utopian dream. Why will it work now ?
The most critical assumption IPTV makes is the availability of last mile broadband. This was the biggest challenge for any multimedia service based on IP. Parts of Asia, Europe and US have shown significant increase in rate of broadband adoption over the past 2-3 years. This is one of the main reasons why I am very gung-ho about broadband based services in the next couple of years.
Another reason is maturing of trials around the world. It typically takes an operator a trial of around 1-3 years to roll out services. Several trials are close to completion (PCCW, MaglineTV, FastWeb, SBC, BellSouth, China Telecom and more) and they expect GA rollout in Q2 2006.
Finally, at the same time, several other IP based networks are being rolled out and the commercial success of providers such as Vonage and Skype have proved to the general public as well as operators that IP works. These networks include 3GPP IMS for mobile services as well as a lot of new age content delivery services spearheaded by the likes of Google, Yahoo and Microsoft, such as programmable Maps, advertising mechanisms that actually work, new age applications and more. The important thing here is that during the short span of 2003-2005, several companies have put their money where everybody's mouth is and have individually proved them to increase customer stickiness and potential for revenue generation.
We are now in a situation of the sum of the parts. It will still take a lot of business savvy and finger on the customer's nerves to put individually excelling areas into a combined service of excellence, and we will still see more failures than successes.
What sort of converged services can this provide?
- multimedia calling - your TV becomes your video screen for a video call over VoIP
- Presence integrated interactive-TV - based on your current preferences ('At Work', 'Available' , 'Busy' etc) the content provider could enable/disable options such as multi-party interactive participation or remote invitations to a video-game
- multi-device alerting - you have 'programmed' your interactive station (erstwhile called a TV) to register your participation for a distance learning interactive program, but you forgot. Half an hour before the program, you automatically get a message reminder on your cell phone. Oh and guess what ,since it is over IP, you could participate via your IP enabled Cell Phone.
- Viewer specific advertisements - so you are a Star Trek fan. You watch all episodes of Star Trek - so why waste time showing you ads about 'Dental Care'. Maybe, 20% more time focussed on telling you about the newest Star Trek DVD collection and a 'click here' link to buy which you can purchase via your remote control will yeild better returns for you and your advertiser ?
You get the picture. The biggest advantage of a common service platform is that the play for innovation increases manifold.
Who wants IPTV ?
- Internet Service Providers - they want a pie of the lucrative TV market
- Mobile Operators and MVNOs - to create value differentiation
- Consumers - they may not really know it till they get it. The convenience of integrated services is only felt when delivered, not when thought about.
- Traditional TV providers (Cable/Satellite) - After all, they own the ppTV market and keep cutting at each others throats with value differentiation and price cuts. For their own good, they have to constantly be ahead of the game
First and foremost, Cable and Satellite providers. Cable already provides a lot of high speed fiber and it is logical for them to capitalize on their high bandwidth network and make sure no other source can cut in. In addition, Cable and satellite providers will surely undercut their prices in a bid to keep their customers and lure in other 'Internet' users. They can afford it (especially cable, due to their low latency hi-speed networks)
In other words, deployment of IPTV will have different challenges in different areas. In places where pay-TV is predominant (such as Europe, US) the battle will be on bitter pricing and service differentiation, whereas in places where pay-TV is still not common and infrastructure investment is still less in comparison (India and others) it will mainly be a bitter pricing war and service differentiation may be a while away.