The market is supposed to explode. Gartner is indicating a 5 fold increase in 4 years in western Europe and others indicating a roughly 4 fold increase worldwide, over the same timeframe, to 34 million total subscribers. At the high end of the speculation, 63 million subscribers have been quoted in the press.
If the U.S. has 500,000 subscribers now, who has them? Parts of Rural America, in that there are hundreds of Independent Operating Companies (IOCs) who are running IPTV today. Places like Ramondville, Texas and Lenora, Kansas. Nearer to me; Fallon, Nevada.
Outside the U.S., IPTV is rolling along, in places like Belgium and Brazil, Sweden and Slovenia, Ireland and Italy. With price sensitive Germans, the expectation of interactivity is expected to help generate money for the carriers. In France, it’s sold in consumer electronic stores, similar to our Best Buy or CompUSA. Gartner, again, predicts that by the end of this year, roughly half of IPTV subscribers will be in France. As the other western European country’s growth catches up, France will still keep a third of these subscribers.
Why haven’t we heard about this much here?
- Elsewhere, the combination of low entry prices from competitors and incumbents (like France Telecom) and the idea that content from firms like the Pay per View players are willing to embrace new distribution channels. According to Gartner, however, a lot of the subscribers captured via this aggressive pricing have yet to be completely “hooked” on the IPTV service itself, it’s simply packaged as part of their “triple play” bundle. The factors that follow contribute to situations unique to those of us here in the U.S.
- The phone companies, here, usually have copper, “twisted pair” for the “last mile” to your house. Running voice at 64kbps is what this last mile distribution was designed for. A pair of wires, and thus 2 possible phone lines for each house, who could want for more? A couple of decades ago, this was satisfactory thinking. DSL internet services, rolled out for the demand for broadband internet, uses this same twisted pair copper wire to get to a “DSL modem” in your house. The investment they’ve made in DSLAMs in the central office may not yet have paid off enough, for them to start to look at upgrades to this infrastructure. The newer services, such as streaming HD TV, or even a basic DVD movie compressed in MPEG2 (a popular video compression technique) is 5-7 Mbps of bandwidth that will obviously put a strain on this kind of infrastructure. So, either they must add hardware in the “last mile” part of the network, to enhance and strengthen signals to go farther or stay stronger or they must go to something the industry calls Fiber to the Curb (FTTC). Verizon calls this FiOS, or Fiber Optic Services, and they are pretty much ready to push the button. Very expensive stuff, but the market is seeing some action here from these smaller operators, the IOCs, rolling out fiber. In Sanborn, MN, where I grew up, Cable TV (which is also the phone company in Sanborn) service was so troublesome with an aging HFC network, that about 5-6 years ago, the Cable company dug up all of the streets and laid fiber to everyone’s house. My dad has fiber at his back door. Sanborn, MN – population 434. No IPTV yet, but he certainly has a pipe large enough if and when they finally offer such a service. A bigger population area, different fiscal issues, but as operators such as Verizon are demonstrating, not necessarily impossible to solve.
- The U.S. legacy cable operators, the MSOs, have been delivering your standard TV over coax cable and this is called Hybrid/Fiber Coax or HFC (From the head-end to your neighborhood, it’s fiber, to a device on a telephone pole or in a vault, appropriately called, the “fiber node” and then it’s coaxial cable to your house). All of the channels are “broadcast” in separate frequency channels along this infrastructure simultaneously. Telephone service and regular internet service to your “cable modem” is delivered similarly, in a channels right alongside the video. Digital TV is delivered right down these same channels, encoded in something called QAM, decoded by your digital set-top-box. There is a lot of money invested here in this infrastructure and it is not yet financially compelling for the MSOs to change.
- Communications Opportunity, Promotion and Enhancement (COPE) Act of 2006 – Specifically, this is the house version of the major overhaul of the last Telecom bill. The senate had it’s own involvement in the issue, but basically, we have a lot of rule making to be done before it’s clear who/what/where/when money will be made by this or that operator, distributor, content provider, etc. – too many rules, it’s hard for anyone to predict and thus only agile companies, ready to move after rulemaking, will gain rewards.
- Telephone companies have never delivered TV content before. Sure, some are supplementing their voice and internet offerings with satellite TV, but let’s face it, they are just putting their name on the satellite TV offering from another company. Licensing, broadcasting, distribution rights – well, the MSOs have a lead in this space.
- The MSOs and satellite companies offer premium content right now, some of it in High Definition, or HD. To compete, and IPTV offering must be better than the MSOs level of the playing field. Better technologically: Effectively, it must be better than what European and Asian operators are delivering in the early MPEG2 encoding technology. It’s almost expected now, that a true offering must be multiple HD streams, each 12-20 Mbps – not 5-7 Mbps. They also must offer DVR or “TiVo-like” services, either home based or network based, for the streams coming into the home or the movie libraries the carrier is involved with. Sometimes it is barely likely that 5 Mbps is getting down to you, must less multiple HD TV streams. The “broadcast flag” issue over who owns the right to push advertising at you and force you to watch it (also tied into the Senate bill) may hinder IPTV’s acceptance, particularly if it screws up who can and cannot produce the devices that will “play back” IPTV. Better services: Interactivity (think sports betting in some countries) may be key for adoption, something that is harder to do in today's world (not to mention that gambling is a real political problem here in the U.S.). The success of SMS texting linked to reality TV has shown the desire for the public to interact, paying real money, but with SMS the revenue is going to a wireless carrier, not necessarily the IPTV carrier. So, interactivity within the platform (think "Deal or No Deal" kinds of interactivity.)
- Finally, distributing this streaming mess of bits around the house to what ever device needs it, The HDTV set, a desktop computer, a 2nd TV set, a laptop computer. Should this be Ethernet? Or Ethernet over Power cabling? Or WiFi? It’s this last point that a small company, named Ruckus Wireless, with several announcements this last week, is becoming a key player. They secured $16 million in additional financing from telco and electronics company’s VC arms. They also announced shipping wireless product for reliably delivering these video streams within the house, thus eliminating the potential wiring mess a consumer or professional installer would have to undertake. A lot of their technology is involved in the dynamic tuning aspect of the antenna systems. Essentially, they “beam” the bits to the TV set, instead of 360 degree broadcast to everyone nearby, because the antenna system locates the remote station and “locks on”. Problems with walls and beams are resolved in this manner. Essentially, Ethernet performance, without the physical cable. Ruckus has indicated that industry-wide there is an approximate cost of $400-500 for a 3 room install as part of IPTV launching. This is per subscriber.
So, quite a lot that has to come together before you can literally sit down in your favorite chair, flip on the HD to watch your favorite game over an IP infrastructure. Except, if you are in Wyoming or Kansas.