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