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TV directly from the internet a threat to telco’s IPTV?

September 3rd, 2008 · 1 Comment

There is more than one way to the living room for internet based TV. One is the domain of telecom operators and is our familiar IPTV. The other is what we shall call direct internet TV, not often portrayed as a direct competitor to IPTV.

IPTV basically is a telco’s ploy to avoid becoming a commodity. Fat pipes into the home will soon be, and might even be superseded with wireless solutions. Economics would predict that content is king, or perhaps it should be slightly altered into good content is king.

As long as there are a couple of fat data pipes offering roughly the same ‘fatness’, these providers need other stuff to distinguish themselves from their competitors. IPTV is one such thing. It started out as the telco’s answer to cable encroaching on their advantage; telephony.

Direct internet tv could become a competitor in the race to the living room. They go via the PC and (relatively advanced) home networks. It cannot (yet) compete on quality, we’ll go into that below.

First, an interesting article encroaching on some of the same topics:

Cable, Satellite, IPTV against the direct model

  • The real opportunity seems to be for content owners to build a direct entertainment billing relationship with consumers, offering download to own content, high-quality compressed streams via their websites, developing exclusive subscription or ad-supported VOD product offerings.
  • The success of content owners developing this model is not necessarily tied to the demise of traditional pay-TV and the business of network operators.  Possible partnership scenarios will continue to evolve in which operators partner with content owners to deliver high-quality product effectively to consumers on-demand to any device, any time.
  • The economic relationship will inevitably change from a content-wholesale to operator-retail model towards something like looks more like their ad sales relationships today.  Operators and content owners each adding value, sharing common inventory as part of a larger carriage agreement.
  • The surge of new video operators competing for household entertainment market share has clearly just begun.  The price to enter the game may change dramatically over the next few years, as the nuances of net neutrality unfold.  Google, Joost, and other large broadband TV providers will spawn the emergence of other new over-the-top video providers.
  • These new nimble lower-cost content distributors will clash with large MSOs, satellite providers, and telcos for marketshare as they compete for one important household entertainment billing relationshipOperators with existing distribution (and broadband infrastructure) can benefit from converging service delivery with existing customer bases, moving beyond providing bundled service discounts for customers to pick up an additional product.  New OTT providers can benefit from efficient scalable content distribution to anyone with a broadband device.
  • Existing operators launching IPTV can combat the new OTT threat by delivering converged video services, leveraging their existing broadband subscriber bases.  Importantly though, incumbent operators must move beyond incremental product enhancements… additional linear HD capacity, new genre programming packages, caller ID on TV, and instant channel change.
  • The opportunity to deliver converged services is now a reality as early launches enable customers to easily schedule a DVR from a wireless handset, monitor home security cameras from their office PC, video chat from the TV via an IP set-top box.  Customers will purchase wireless ring-tones, broadband VOD, packages of HD programming on the TV.  So what’s next? Unified messaging applications from your TV EPG, multi-player gaming, and of course social networking on the TV.
  • Simplicity, above all, should be the driving force as operators, wireless carriers, set-top middleware develop launch new interoperable content.  Short, time-sensitive video clips work well on the small screen, long-form HD 1080p lends itself well to the big screen, very straightforward as a foundation to program for these platforms.  IP video & broadband distribution will enable any content asset to any device, and yet, the digital HD display will be the media hub in the home from which to program, set-up, side-load all other devices.  The importance of an intuitive middleware & program guide cannot be overstated.
  • As 2008 nears, many new IPTV operators continue to struggle with the issue of delivering the necessary bandwidth to meet the growing demand for linear HD content.  We suspect in the coming year, several new delivery models will begin to prove out, specifically; store-forward content to a device in the home.  Think AppleTV, Moviebeam, but improved and seamless portability to any broadband device.  Set-top manufacturers, third-party middleware providers, and network services companies will drive this trend, as they develop new delivery scenarios to enable consumers to access a wide array of HD content instantaneously, without a traditional download or buffer lag-time.

In our view, the telco’s IPTV model holds a couple of advantages in this new competitive landscape:

  1. It’s an integrated model with an existing customer base (unlike the ‘Joosts’ of this world)
  2. It is an aggregator, greatly simplifying consumer choice
  3. It goes directly to the TV set
  4. It can offer better quality (because of infrastructural elements in place, assuring IPTV video signals do get preferential treatment, for instance)

However:

  1. The third advantage will be eroded pretty rapidly with the emergence of home networks capable of HDTV
  2. The fourth example will also be eroded with better codecs and more bandwidth (but not just yet)
  3. Video directly from the net has much more choice.

The last point could be particularly interesting:

  • There is no inherent technical limitation on providing the same (full internet available) choice on telco’s IPTV services (although at present they are ‘walled gardens’, offering only limited choice)
  • Telco’s IPTV services could serve as aggregators, simplifying the bewildering choice for the consumer, but the net has it’s own aggregators like Joost, You-tube, etc.

We do think in the end, there will not be much difference between the still computer centric model of the web and the TV centric model of telco’s IPTV. Convergence is still alive. Differences will be mainly a result of commercial relationships, not inherent to technological platforms.

At present, webtv cannot fasttrack the telco’s IPTV to the living room (via a pc and a good home network) mainly because of technological limitations (IPTV services do include certain preferential treatment of the streams), so they cannot yet match IPTV. This is a critical window of opportunity which IPTV should take to build a consumer base. However, as you can read at the end of the article above, that advantage might not last.. IPTV better hurry up.

Tags: SIGM

1 response so far ↓

  • 1 Another hybrid business models delivering customized tv // Sep 5, 2008 at 4:30 pm

    […] have recently briefly discussed the advantages and disadvantages of something which we called Direct Internet TV, that is, video on demand over the internet (cable or phone lines, or even wireless) could be […]