Achieving commercial success
IPTV—the transmission of television over broadband networks using Internet technology—is a hot topic in the communications industry right now. Almost every telco in the world sees IPTV as a new part of their product portfolio. As a result, there are almost 300 services or trials currently underway, yet very few companies have launched at scale. Even the main names in the industry—companies such as PCCW in Hong Kong, Fastweb in Italy and Free in France—are still relatively small compared with the size of audiences reached by existing broadcasters or cable operators.
So for most CEOs and CFOs of telecommunications operators, the question appears to be not should we get into IPTV but rather how to do so successfully and quickly. IPTV is seen as a means of addressing the decline in the traditional voice business, but this is still unproven at scale and investment costs are such that the implementation risks must be managed carefully.
Anticipate the challenges
At Accenture we have identified four main areas that CEOs and CFOs have to assess and manage as they move from plans and small scale IPTV trials to commercial deployment.
First, the business case and customer proposition must be strong, especially in a competitive market.
Secondly, the technology for IPTV is still relatively new, and there is no single solution that currently covers all aspects of an IPTV
system, so the capability to integrate multiple products in a way that is scaleable and avoids lock in is critical to success.
Third, learning how to acquire, manage and distribute compelling content is a new skill for a telecoms operator to develop or acquire—with all the cultural changes that implies.
Fourth, managing operations to give consumers the high reliability they expect without incurring higher operational costs presents significant challenges in an emerging market.
All this is set against a background of emerging regulation, different in every country: this promises to become more complex as cable and satellite operators challenge new competition from IPTV.
Build a holistic business case
The first challenge is the business case and customer proposition. There is no denying that investments required to scale an IPTV
business are significant. They include network upgrades, content acquisition, video platforms and changes to the operational systems that provision, operate and bill the service.
From our analysis and experience, the infrastructure upgrades required for IPTV make it generally hard to justify the business case for IPTV on a standalone basis.
However, virtually every home has a TV set and through IPTV operators can seek to extend the reach of broadband to many more homes. IPTV also opens up the opportunity for new value-added services, including advertising. Web-based advertising is growing, while conventional TV advertising is declining, and thanks to personal video recorders such as the TiVo and Sky Plus, viewers are skipping the TV advertisements that are there. By 2009, 9% of all US linear TV ads are expected to be skipped, representing a potential $6 billion fall in advertising revenue. (Source: Bernstein Media research May 2004, Accenture analysis based on Yankee projections).
IPTV offers an opportunity to fill that void— and the demographic information available from the network, combined with highly
accurate statistics about the number of viewers, could allow operators to charge advertisers for well-targeted advertisements.
Know how to integrate the technologies
Given the newness of IPTV and the lack of large scale (i.e. multi-million) implementations, the technology aspects cannot be ignored
during the decision and trialling processes.
Firstly, understanding what IPTV technology can do is central to designing a compelling, differentiated and achievable customer
product. Secondly, knowing how to integrate and implement a solution from many vendors with products that are new to market takes a different skill set to implementing mature stable technologies. Thirdly, knowing the implication of key architectural decisions on the ability to scale and to provide the planned services can be the difference between an expensive trial that has to be reworked or a stepping stone to a full implementation.
Accenture worked on many of the digital broadband TV over cable launches (including the first). The experience we gained there is
proving valuable in guiding our clients on their IPTV implementations, especially once the scaling challenges become evident.
Bringing together content and telecoms was less of an issue for the cable operators, but is one of the key challenges for a telco. The
cultural differences between a “process based” telco and a “creative and investment based” content company are significant. Telcos are
taking a variety of approaches to develop the required capabilities, including partnering with content businesses, setting up deals with content aggregators and hiring staff from studios and TV companies.
Differentiate through content
Creating, or gaining access to, a library of content that will appeal to the target market is fundamental to IPTV success. This must then be secured with rock-solid security and protection of IP and content rights. Finally, the content must be accessible in a reliable, fast
and easy to use manner—not via a sluggish and confusing Electronic Program Guide that leaves viewers frustrated.
IPTV, with a greater emphasis on “On Demand” content, does present some key differentiators for operators. By providing access to large video libraries, along with easy to use search functionality via a remote control, operators can give viewers the ability to find the programmes they want to at a given moment, and not be limited by a set number of channels. The launch offering, however, must be a combination of these and other more advanced services, along with more traditional TV programming. Explaining on-demand to
customers has proven difficult, although the statistics from operators such as Comcast, who reported over 1 billion on-demand viewings last year, are encouraging.
Operators around the world are launching IPTV in a variety of ways. PCCW in Hong Kong sticks to the traditional channel-based
concept, but instead has differentiated in how they bundle and package the content. In Italy, Fastweb offers some more advanced services, with a library of on-demand movies and TV and some interactive channels. In the UK, Homechoice has made much more use of video on demand, and in how they integrate it with their channel-based viewing.
A new approach to operations
Making all this happen reliably and with a low cost to serve is critical to take up and to making the business case stack up. Selling entertainment packages will require the development or acquisition of new skills and approaches, for example how to drive impulse and additional purchases for video on demand and interactive
Services must be easy to set up and reliable to operate. The cost of an engineer visit to repair faulty installations will rapidly erode the
additional revenue gained by IPTV. Billing and rating systems need to be modified to deal with new types of charges and the settlements with multiple content parties.
All the above areas should be viewed in the context of a regulatory framework which in most countries is only just beginning to cover
IPTV. At first regulators in some administrations seemed not to take IPTV developments seriously, regarding them apparently as little
more than an interesting lab experiment. Now they can clearly see that operators are planning to commit investment and develop services—so they are evaluating their decisions.
In the US the cable companies and the broadcast satellite companies have become very aggressive and have been lobbying the FCC to
put more stringent requirements around IPTV.
They have seen that AT&T, BellSouth and Verizon are really serious about the technology and are starting to get customers.
In China—a big growth area for IPTV—the authorities are trying to spur the investment in technology while at the same time making sure
they do not create a new monopoly, so they are wanting to let existing broadcasters have some ability to compete as well.
Regulatory bodies are starting to examine IPTV in Italy, France and other countries. The fight appears to be getting bigger, and if it is
not resolved quickly the lack of decisions will cause people to slow down deployment, slow down investment, and potentially wait to see
what will happen.
IPTV represents an exciting opportunity for telcos to grow their broadband markets and develop new revenue streams. Developing a
strong proposition, business model, managing the technology issues, securing the right content and planning for large scale simple operation from the start are all critical to succeed.
Whilst there are few large scale IPTV deployments today to learn from, there are some key lessons from the cable industry’s move to digital broadband video and from the more advanced IPTV implementations that can provide valuable insight for CEOs and CFOs facing the challenges inherent in scaling IPTV businesses. ¦
Ray Dogra - email@example.com
Greg Douglass - firstname.lastname@example.org
Gavin Mann - email@example.com
A special report in association with
REQUEST FOR PROPOSAL
SERVOCOM IPTV PROJECT
One national competitive operator is looking to build an IPTV service across its network in just 12 months. The challenge for systems integrators and vendors is to pitch secure, integrated multimedia solutions that will serve 40 cities and 100 towns.
Achieving commercial success
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