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Pray it doesn’t take off
By jpenston | April 30, 2007 |
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The list of ISPs that are doing IPTV is quite remarkable. Telenor, Telefonica, Telefonica O2 Czech Republic, France Telecom, Deutsche Telekom, Belgacom, Free, Fastweb, City Telecom, Neuf, Versatel, Maroc Telecom, PCCW, Tiscali Home Choice… The very act of calling this lot ISPs shows how far the market has moved since the 1990s.
I want to share with you some of the common themes that I can see having heard presentations from 8 of the above over the last month or so. It is clear that all of them (with the possible exception of PCCW), see IPTV as a way of protecting their legacy voice and messaging businesses. Even those who are not directly offering an IPTV service (those that have built networks for others IPTV services) are not investing because they see the RoI coming from the new services, but to protect and extend the RoI from the old. Reading between the lines, most don’t seem to believe that IPTV is financially viable as a standalone service.
Which is easier to promote, voice or IPTV? Answers on a postcard please… That’s why they are doing it: because the sexy product sold at a loss means the ugly product continues to rake in the profits. So what? We are in the age of the bundle and this is just modern marketing isn’t it?
To me though the problem is the mindset. Safety first, offence wins games but defenses win championships and all that. Telcos are playing with 10 men behind the ball and trying sneak a goal to win 1-0. I don’t like this approach and not just because I support Arsenal and not Chelsea. In fact when Arsenal were at their most defensive in the mid 90s, my loyalty towards them was at its most strained. For exactly the same reason, approaching IPTV as a defensive strategy is unlikely to win you many “supporters” (aka customers).
The point I am making about ISPs is that they don’t really seem to want this new market, which is why they seem to be doing such a poor job of monetising it. I won’t go so far as to tar them all with the tokenism brush, but clearly for some IPTV is just that: a token effort that looks good in brochures and on adverts. The common thesis seems to be “we need IPTV or our voice customers will go to someone else who has it”.
That may well be true. I certainly don’t want you to finish this article thinking that I think you can survive on voice alone as I don’t believe that you can in the age of the bundle. I think what I am missing is the foresight, the speculation, the innovation and the risk taking that will be the difference between a winner and an also ran in the Internet Service Provision space. IPTV is another example of the ISP way of doing the same as your competitor as quick and as dirty as possible.
It is all a bit same old, same old: replicating the broadcast TV experience using a new and perhaps less efficient distribution mechanism. Where is the uniqueness that leverages the uplink that broadcast simply cannot compete with no matter how hard it tries (and screws up) using premium rate phone services?
So what of Joost whilst we are talking of innovation? It seems that the bubble that insulates ISPs from the rest of the world is still working well, because Joost was dismissed as a threat to IPTV strategies. The basis of this dismissal was that people watch TV on the TV. The “lean back” experience from watching socially in the lounge versus the highly personal “lean forward” experience on the PC makes what the network companies are developing for the front room fundamentally different from what is being developed for the PC.
Personally I think the distinction between what is a PC monitor and what is a television is pretty hazy already and if your strategy is based on the belief that this will remain, you might be in for a nasty shock. All it takes is a little bit of middleware and that barrier that is keeping the barbarians locked away in the study could come crashing down.
Will YouTube replace the TV, probably not, but it might steal half an hour here and there as it certainly adds to the choice of programming which is growing rapidly. We already have way too much choice on the Freeview and Sky platforms and suddenly with catchup TV and internet content coming soon we could be left looking for trees in the forest. The winners may well be those that help us find something interesting to watch - note I didn’t say find “what we are looking for” because novelty is one of the great entertainers.
The second major theme was that all of those I have heard from are (thankfully) using multicast for their “live” or “linear” TV offering. Maybe I will be proved wrong when I said that multicast might have missed its 15 minutes of fame. This is great.
However, they are all also offering video on demand catch-up or time-shifted TV services. This would also be great but for one fact: VOD content uses unicast which means that the same file is sent many times down the same pieces of network because of the time delay between individual requests. Here I will highlight one of my conclusions from the pre-conference research: that if you send the same file 7 times it is cheaper to pay for local storage than for wet string.
One other note worth throwing in here is that Tiscali Home Choice boldly stated that between 15 and 18 hours per week of viewing is time shifted. The average household watches around 25 hours per week in the UK, although THC didn’t give their stats on this. Catchup TV is clearly one of the big benefits that consumers can see from IPTV, but it is also the most likely to drive the operator to financial ruin. Oh dear…
But they really don’t seem to be worried about that. I continue to be astonished by the short-termism of the industry. IPTV in general is a recent example of short-termism, but it goes back longer than I do in this industry, and to me this is frankly bizarre in a capital infrastructure intensive industry like ours.
I asked a number of people about the network architecture and without exception all held the view that unicast was not a problem because the volumes are so small. What happens, I asked, when you grow and have more customers? [Nervous laugh] Are you frightened of success? Is your business model predicated on failure? Like I say, a bizarre way to do business…
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