IPTV – A Safeguard for Telcos?

It has been a slow burn for IPTV, but the experts and analysts are convinced that it will continue to take off. Telcos have had to fight hard to differentiate themselves and to meet the challenge presented by cable and satellite platforms. In fact, telcos are using IPTV as a way to retain customer attention. By bundling their products, they can increase their Average Revenue Per User (ARPU) and many are offering some very attractive deals. For example, Belgacom have recently introduced a free television package for their subscribers who already use their Internet and phone services. Telcos must be innovative. There is a lot of competition out there and they have to make themselves stand out to survive. According to Informa Telecoms and Media, by 2013, the worldwide IPTV subscriber base will rise to 57 million, although not all subscribers will be paying for their TV services. In fact, they believe that revenue is not their priority. Telcos must concentrate on customer retention by offering services such as Video on Demand and exclusive content such as movie and football rights and content that is tailored to the demands and interests of specific regions. Its success will largely depend on broadband speeds.

Broadband Speed

The issue of broadband speed is central to the success of IPTV and it is a problem for many as they are simply not receiving the broadband speeds that they have been promised. Recently, concern has been expressed in the UK about this issue.

The UK regulator, Ofcom, revealed that the UK’s average broadband speed is 3.6mbps – less than the average maximum possible speed of 4.3mbps. This is significantly below the advertised headline speeds.

3.6 mbps is sufficient for many Internet applications including audio and standard definition video. However, Ofcom discovered that over 60 percent of UK consumers currently subscribe to packages that promise much more – up to 8mbps. The report found that:

* On average, consumers living in urban areas receive speeds 15% faster than those in rural areas, largely because of distance.

* Consumers in London received the fastest average speeds, with those in the north east of England, Wales and Scotland receiving on average the slowest speeds.

* DSL broadband speeds depend in part on distance from the local British Telecom exchange.

* DSL and cable broadband speeds vary by time of day due to differing traffic levels on ISPs’ networks.

Ofcom’s Chief Executive, Ed Richards said: “Ofcom’s research is one of the most comprehensive assessments of consumers’ broadband experiences to date. We want to see all Internet Service Providers meet the needs of their customers by clearly explaining what speeds they should expect and by ensuring that their networks meet consumers’ increasing demand for higher speed broadband.”

UK broadband subscribers have been promised super-fast broadband with deployment to begin in 2010.

Regional Deployment

IPTV’s success is highly dependent on the region where it is being implemented. In Europe, for example, IPTV has seen significant take up in France – the world leader in IPTV services. This is due to the fact that the cable market here is fairly weak in comparison with other countries. IPTV tends to fare well where there is little competition. This is also true of Italy and Spain. Telefonica has seen its subscriber base grow to 600,000 and in Italy, Telecom Italia has also witnessed great demand due to little competition from other delivery platforms.

The Asian market is an interesting one in terms of IPTV as it can work in different markets if telcos target niche groups. For example, let us take India. This is a vast market but also a market where there is a lack of disposable income. Therefore, by targeting the middle classes and those with money, IPTV could succeed. The IPTV market in China is expected to be huge with 13 million subscribers by 2013. The market is so vast that there is room for competition making it a very unique proposition for IPTV service providers. In terms of countries such as the Philippines and Indonesia, IPTV take up is not expected to be high as they are served more by DTH. However, in markets such as Singapore IPTV is already experiencing success with products such as SingTel’s mio TV.

Advertising

The key to the overall success of IPTV will obviously be making money and this revenue will be generated mostly through advertising. However, the advertising used will differ from the advertising that we are currently used to. In fact, we can expect a revolution in advertising over the coming months and years as telcos move into media. TV consumers are very used to watching commercials between their favourite programmes but they are very general. They go to the entire subscriber base. There is a certain element of targeted advertising on standard television. For example, during a children’s programme the level of advertisements showing toys will go up. However, generally there tends to be a mixture of different advertisements for different ages and interests in the hope that one will have the desired effect. Advertising on IPTV will be very different. It is known as Addressable Advertising. Unlike standard TV, IPTV can give the service provider valuable information on their viewer demographics. The telcos are all-powerful in the world of IPTV. They glean a great amount of data about their customers through their direct relationship with them. They know how old they are, where they live, where they like to shop, what their interests are. This information is golden as they may now build up a profile of each customer and can use this analytical advantage to get the correct genre of advertisements out to the correct sector of the population. Let’s face it, no-one wants to view hundreds of commercials that are irrelevant and completely uninteresting to them. Here is the solution – and it is going to make the telcos a lot of money.

IPTV has struggled somewhat to establish itself and one thing is for sure and that is that IPTV has some way to go before it achieves mass-market adoption. Telcos firstly need to offer an attractive package with eyecatching and exclusive content to help them retain a strong subscriber base. They then have to ensure that broadband speeds can cope with the content that they are delivering ensuring a high level of service to viewers. Telcos should also consider hybrid delivery of content using satellite, for example, to get to their customers. They must also decide on the best way to target their advertising. IPTV is very region-specific and heavily depends on the TV services already available to customers. As we have seen, some regions of Europe are doing extremely well, and leading the way in terms of IPTV adoption. Asia is expected to surpass Europe in time with a vast untapped market, but again, its success will vary from region to region and depend upon affordability and, of course, content.

There can be no doubt that IPTV providers have been finding it tough recently but adoption is still expected to pick up. If telcos can get the balance right, IPTV could make an impact if there is tight focus on what the consumer wants and needs.

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