What are important factors for the successful implementation of IPTV across countries?Jiwhan Kim*, Changi Nam*, Min Ho Ryu**

0900-1000

*KAIST School of Business and Technology Management

*Hoseo University Graduate School of Management and Technology

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Contents

Introduction

Literature Review

Data & Methodology

Results & Discussion

Conclusion & Implications

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Introduction

• IPTV is facing significant changes caused by the rapid evolution of the video streaming industry

Exponential growth of VOD services (Netflix, Hulu) and the market entry of global ICT giants (Google, Amazon)

Proliferation of smart devices intensifying the trend of cord cutting

Changing media consumption patterns

• IPTV can be a viable option for telecommunications operators to evolve beyond the old subscription-based business model and pursue sustainable growth

IPTV has an advantage over competitors in terms of interactivity and personalization

Thus it can be an effective strategy to both defend telecom operators’ legacy business and attack the media market

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Introduction

• However, the level of IPTV penetration is different across countries

Hong Kong has the most developed IPTV industry, with PCCW’s Now TV dominating the market

Japanese IPTV industry has been struggling due to difficulty of securing exclusive contents

• Research on what influences IPTV penetration in various markets around the world has been rather insufficient

Therefore, this paper attempts to identify the key factors that lead to successful implementation of IPTV

across countries

Provide strategic implications to telecom providers on

1) Taking advantage of IPTV services to increase their user base

2) Successfully transform their business model

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Research Questions

1• Factors influencing successful IPTV penetration across countries

2• Comparison of countries with different IPTV penetration levels

3• Implications for telecom operators

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Literature Review

• Different marketing measures should be used to target consumers with different motivations

• Interactivity and personalization foster IPTV usage

• Kang and Lee (2013), Kant et al (2014), Blasco-Arcas et al (2013), Jan et al (2012)

Consumer motivations for using IPTV services

• Telecom operators’ diversification into IPTV and use of bundling positively influenced performance

• IPTV is in a competitive relationship with other pay-TV services

• Terrestrial broadcasting does not hinder VOD consumption through IPTV

• Shin et al (2015), Lee and Cho (2015), Sung and Kwack (2016)

Inter-channel relationships

• Market share of leading paid television provider, broadband internet penetration, pay TV market size, urban population, product experience

found to be significant factors

• Park and Lee (2012), Lee et al (2015), Sawng et al (2013)

Factors affecting IPTV diffusion

Existing research on determinants of IPTV diffusion is relatively scarce and somewhat limited in scope

This research analyzes a larger set of variables affecting IPTV diffusion in various countries

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Data and Research Design

Dataset

• Obtained from two sources (International Telecommunications Union and PricewaterhouseCoopers)

• 23 variables on 37 countries during the period between 2009-2014

Variables

• Various aspects of the telecommunications industry that could possibly affect IPTV penetration

• Number of subscribers to fixed and wireless broadband, satellite TV, telephone, internet

• Yearly revenue and investment in telecommunications infrastructure

• Broadband speed, cap, and internet bandwidth

• Broadband and telephone installation fee, monthly subscription charge

Research Design

• Explanatory factor analysis to group variables into larger factors

• Regression analysis using obtained factors to identify determinants of IPTV diffusion

• Comparison among countries with different levels of IPTV penetration

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Data and Research Design

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Results – Explanatory Factor Analysis

• Factor analysis conducted with 20 variables

• Two variables removed due to low communalities

• Fixed internet subscription and fixed broadband excess usage price

• KMO measure and Bartlett’s test signal that results were acceptable

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Results – Explanatory Factor Analysis

• Six factors extracted

• Broadband penetration

• Telecom industry development

• Broadband quality

• Telecom service fee

• Broadband cap

• Satellite TV penetration

• Accounted for 83.69% of the total variance

• First two factors accounted for 29.98% and 23.66% respectively

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Results – Regression Analysis

• Regression analysis used to examine how the six factors influence IPTV penetration in each country

��� = ���� + ����*BroadbPen + ����*TelcoIndMat + ����*IntQual + ���*TelcoSerFee + ���*BroadbCap +

����*SatTVPen + ��

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Results – Regression Analysis

•Telecom operators often employ bundling strategies (TPS, QPS) to offer IPTV as an extension to broadband and telephone

•High level of broadband penetration signals a highly attractive market with many potential IPTV subscribers

•High quality internet service is necessary for providing satisfactory IPTV service

Broadband penetration and quality (+)

•Higher broadband and telephone installation fees would lead to lower broadband subscription, and consequently less IPTV

subscribers

•Satellite TV is a direct competitor of IPTV, so higher satellite TV subscriptions would lead to lower IPTV penetration

Telecom service fee and satellite TV penetration (-)

• Increase in revenue and investment in telecom infrastructure increase price burden for consumer, which causes them to

refrain from subscribing to additional services

•Development of technology makes it easier to provide a higher cap for lower costs

Telecom industry development and broadband cap (insignificant)

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Results – Group Comparison

• Group comparison conducted to gain additional insight into difference between countries

Countries sorted into three groups based on their IPTV penetration: high, medium, and low

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Results – Group Comparison

•Broadband penetration, broadband quality, and telecom service fee found significant, which signals that bundling was

actively utilized

•Negative coefficient for broadband penetration due to increase of alternative video contents platforms (VOD, YouTube)

when broadband penetration is high

High penetration group

•Broadband penetration and satellite TV penetration found significant

•Insignificance of broadband quality and telecom service fee signals underutilization of bundling strategies

Medium penetration group

•Broadband penetration and broadband cap found significant

•Similar to medium group, lack of bundling

•Broadband cap could be an important concern for IPTV subscribers in these countries

Low penetration group

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Conclusion & Implications

• This study examined which variables lead to higher IPTV penetration across countries

Factor analysis uncovered six factors, which were used as independent variables in regression analysis

Broadband penetration, broadband quality, telecom service fee, and satellite TV penetration were significant factors affecting IPTV diffusion

Group comparison conducted to gain additional insight

• Strategic implications to telecom operators

For telecom operators in countries with high IPTV penetration, it is critical to find a way to compete against

newer forms of video streaming services

For telecom operators in countries with low IPTV penetration, it is important to invest in broadband

infrastructure and improve the quality of broadband service

Bundling strategies should be actively utilized