IPTV promise for Asia is stronger than ever

By Jeffrey Soong, CEO of BNS Ltd It is safe to say that IPTV has ‘turned the corner’ so to speak. Within a short period of time the service has moved from pioneering pavement to mainstream penthouse and is set to continue to head the wish list for telcos and service providers in the years to come.

While lately Europe has transformed itself into the global IPTV leader, IPTV has also made considerable headway in Asia and is predicted to outpace Europe in the not so distant future. That’s not particularly surprising, if you look at the enormous market potential of populous nations like China and India, which are in the midst of a tiger leap onto the economic world stage.

Asia’s IPTV Opportunity
However, one of the biggest arguments of those who don’t think Asia had a big IPTV future, or at least not in the near future, is that with such a large economically disadvantaged population, IPTV would simply be too expensive to reach economies of scale any time soon.

But oddly enough, it has emerged that this is exactly where key opportunities lie for IPTV in Asia. A la carte models, first championed by PCCW’s Now service, have shown to break down the high-cost entry barrier normally associated with premium Pay TV services and their expensive channel bundles. This can make a big difference in countries such as Indonesia, the Philippines and Thailand, where affordability is an issue.

Of course, the IPTV sweet spot remains at the intersection of high broadband penetration and a weak Pay TV market, which to date only a handful of countries in Asia such as Australia, HK, Singapore and Japan can offer.

In countries with low broadband penetration but a strong Pay TV market, it is more of a challenge to make IPTV work, as simple multicast - a la carte or not - will not differentiate the service well enough to lure subscribers. Here operators should maximise IPTV’s interactive capabilities but also pay close attention to unmet content needs in their specific market.

Asian IPTV Business models
Since PCCW exploded on the world IPTV stage with Now Broadband TV in 2003, IPTV has experienced a steady spread through the Asia Pacific region’s collective of heterogeneous nations. IPTV has now been launched or is trialling in 12 nations, and some countries even run multiple services, such as Japan and Thailand, where the rural telco TT&T just recently announced the launch of its IPTV trial to combat eroding fixed-line revenues.

So what’s the collective wisdom that we can see among these deployments in Asia? From a business model perspective, five common threads have emerged:

Firstly, STB subsidies lower the entry barrier which is critical in driving service adoption and shows that finding a low-cost STB remains paramount for operators.

Secondly, as mentioned above, a la carte and/or mini-pack subscription models have shown to break down barriers of huge channel bundles with equally high monthly fees to make a service more affordable.

Thirdly, cable TV look-alike packages are still prevalent but local programming is rapidly becoming more important due to the diverse nature of Asia as a region where many languages, religions and cultures require very different programming approaches.

This goes hand in hand with the fourth point, which is a significant spread of the ‘niche channel concept’ throughout the region. The past months have seen more channels than ever before becoming available in Asia – including locally produced programs – which clearly points towards an explosive growth in the popularity of entertainment options that brings with it an increased appetite for content.

Fifth, time shifting has finally landed in the region which, together with interactivity and possibly User generated Content (UGC), promises to be one of the main drivers for IPTV going forward. UGC is still in its infancy, much the same as anywhere else, however it is definitely destined to eventually become critical for IPTV in Asia, although it is also set to raise fresh issues with the region’s still at times shaky regulatory environment.

Regulation: still a grey zone in some countries
Talking of regulation, this area remains fluid in many countries.

In South Korea, telcos are still not allowed to launch IPTV services except VoD and regulators continue to squabble over who has jurisdiction over IP-based television. So far Hanarotelecom has launched download-to-TV service Hana TV with over 200,000 subscribers, and Korea Telecom is readying its Megapass TV VoD service for launch in the first half of 2007. Hanarotelecom has announced ambitious subscriber targets of 1 million for 2007, which indicates the operator’s confidence that the conflicts will be resolved soon to allow the launch of a fully fledged IPTV service.

A similar situation still prevails in China, where a clear framework for IPTV regulation has still not been established. However, there has been some considerable movement particularly over the past year and licences have now been extended to four operators which are gradually increasing their coverage across the country. Promising is also the government’s indication that IPTV is their platform of choice which puts a definite positive spin on the future of IPTV in the country. So far, the most successful operator, the Shanghai Telecom/SMG service BesTV, reportedly has signed up 120,000 subscribers to its IPTV offering, almost a quarter of China’s total IPTV subscriber numbers, with a strong growth tendency.

Across the Taiwan Strait the news are less rosy though. Having always had a difficult standing against Taiwan’s highly competitive and protected Pay TV market, Chunghwa Telecom’s MOD service faces fresh challenges from the local regulator, who is requesting the telco transform its MOD business into an open platform available for use by ISPs, channel operators, digital content providers and operators of fixed-line telecommunication services, a move that may have serious implications and could jeopardise the future of the MOD service.

And finally Japan, one of the earliest adopters of IPTV in the region, where regulatory issues are still preventing operators to truly maximise their country’s ‘IPTV sweet spot’ status. Japan separates carriage and content and IP broadcast content is considered communication, not broadcast. This results in different rights to be granted to the organizations that transmit and the organizations that broadcast, which causes ongoing friction between all parties.

Asia’s IPTV wildcards
India and China have been coined the ‘wildcards of IPTV’ and there’s good reason for it. India for example has not only a roaring economy that rivals China’s but is also set to become the world’s third biggest Internet market, surpassing Japan, by the end of 2007. What’s more, 50% of the country’s telephony infrastructure is already IPTV ready. But there are still huge issues which could impact India’s ascendancy to becoming a serious IPTV player for years to come, such as low broadband penetration, cable TV having broader last mile access than Telcos and general affordability issues. Nonetheless, IPTV services have been launched by MTL and BSNL and Bharti, Reliance and Tata have all announced plans to follow suit soon.

The issues holding back IPTV in India resemble those in China, where broadband penetration and affordability – regulation aside - are significant hurdles to overcome for IPTV to gain mass appeal. But analysts consistently see China becoming the largest IPTV market as early as 2010, a prediction no doubt fuelled by the country being the fastest growing broadband market in Asia and hosting the Olympic Games next year which is expected to give IPTV a huge boost.

Asia: Set to Shape IPTV on a Global Scale
As I said many times before, only IPTV has the intrinsic flexibility and power to be the chief conduit of a person’s entertainment life, the place where TV, PC, Mobile TV and any other device that not doubt will emerge in the future will come together.

With its vast population and rapid economic emergence, coupled with people’s voracious appetite for content and readiness to pay for it, Asia is in pole position to lead the IPTV fray and shape IPTV’s further evolution on a global scale.