MTNL targeting 80,000 IPTV subscribers by March 2008

Initial teething problems have slowed MTNL at the starting gate but two energetic content partners and a host of technology partners have high hopes for success. By Ritesh Gupta

As the technology revolution swept across India's cable, satellite and free-to-air industries – particularly in major cities like New Delhi, Mumbai and Kolkata -- Mahanagar Telephone Nigam Limited (MTNL) launched its IPTV service. MTNL is one of the two state-run telecoms incumbents, with the Government of India holding a 56.25% stake. Both MTNL and the other state-run telecommunications firm, Bharat Sanchar Nigam Limited (BSNL), have been working on expansion of their backbone infrastructures and have been building ADSL2+ access networks for some time. Both of them introduced broadband Internet services about two years ago.

IPTV starting slow but gaining steam
In assessing the roll-out of IPTV service, Mumbaibased Piyush Aggarwal, MTNL's general manager for broadband, said that, given the complexities relating to infrastructure and integration, and the shortage of set top boxes, the operator's IPTV achievements have been "creditable." "We did face problems pertaining to availability of set top boxes. (The) cost of the STB, too, was a hindrance," said Mr. Aggarwal, who added that MTNL is targeting a doubling of its ADSL2+ broadband subscriber base from the current levels of 420,000 in the next year or so. Although MTNL managed to capture a total of 500 IPTV subscribers in New Delhi and Mumbai during its first five months of operation, the company expects to acquire 80,000 over the next twelve. Active advertising began in mid-March and by late April had resulted in bookings approaching 3,000 in Mumbai. However, both cable and satellite TV have gained ground at a rate that is much higher than IPTV.

MTNL Content and Distribution
MTNL has signed revenue sharing deals for content aggregation and distribution with several companies including India Online (IOL) Broadband and Time Broadband Services Pvt. Ltd., which both deliver content for  Mumbai; and Aksh Optifibre Ltd., which manages software, hardware and content delivery for the IPTV services for both Mumbai and New Delhi. While the deal with Time Broadband is under dispute now, the other partners have strengthened their TV content, especially pay-TV channels.

IOL Broadband
Dr. Ajay Chauhan, Executive Director of Mumbaibased IOL Broadband, notes that the offering has increased from 24 last October to 150 channels by April 2007; including 60 pay channels from some of India's main distribution bouquets: Star India, One Alliance (which is a Sony Discovery joint venture) and the Zee Turner distribution joint venture. IOL's infrastructure partners include HP, SeaChange, IBM, Kasenna, Verimatrix, Amino, Widevine, Cisco Systems, and, for convergent customer management and billing, MagnaQuest.

"Until December 2006, our 'Plan 199' service was offered free of charge, following a one-time fee of 999 Rupees (equivalent to US$22.20)." said Dr. Chauhan. He added that "(we believe that) the timing was right but every new technology initially faces teething problems. Even if you consider the broadband Internet offering of state-run telecom companies, it took a while to get a favourable response. The price of broadband has come down from Rs. 1000 (US$22.25) to Rs. 250 or US$5.60 now." TV services are additional. He added, "Jointly with MTNL, we expect 40,000 subscribers by March 2008 in Mumbai," (and an additional 40,000 for New Delhi, where MTNL has operations). Like Mr. Aggarwal, Dr Chauhan said that availability of set top boxes was a major issue following the launch.

When its IPTV service was launched, MTNL's chairman and managing director R.S.P. Sinha declared, "Consumers have come to expect sterling services from MTNL that are both innovative and affordable. We take the lead, yet again, in ushering in a true revolution in home entertainment with the country's first IPTV service. Our existing presence in more than four million homes in New Delhi and Mumbai through our broadband service will give MTNL a tremendous head-start in changing the way people watch television."

According to Mr. Sinha, the services will consist of traditional broadcast television, video- and music-on-demand, videoconferencing capabilities and time shifted TV, allowing users to access television content on any channel up to one week in the past. But the current reality of the service still differs slightly from the promise. According to Dr. Chauhan, time-shifted TV and video calling services have not yet been made operational although NPVR/time-shifted TV may be activated in the coming months.

Introductory pricing was phased out in April. "Under the basic `Plan 199', we were charging Rs. 199 ($4.42) for all TV channels and Rs. 99 ($2.20) for the set-top box rental per month, from January to March 2007," said Dr. Chauhan. "Until now, we have been showing movies (normally varying from Rs. 10 - Rs. 40) and songs (normally Rs. 5 - Rs 20 per song), free of charge. But beginning in April, we will charge the normal fees, and multiple Plans will be offered to the subscribers. These plans will offer flexibility. For example, the subscriber could choose a basic package of free-to-air channels plus any 20 pay channels," he said. Dr. Chauhan expects gross ARPU to reach $23.00 for basic and other services such as VOD, VOIP and E-Learning.

"Right now households in Mumbai are paying Rs.300-350 or $6.70-$7.70 (per subscriber) for cable TV services. A family outing to any movie theatre costs around $11.00. If there is an option to view latest movies in the environs of your own home, obviously, it would be an attractive option." he said.

Competing cable services lack VOD. Dr. Chauhan acknowledges that there is a huge potential in the triple play, considering VoIP and Internet services can be offered via an IP-based STB.

But right now, the contract is only for video service and doesn't include Internet. "Though keyboards are available, there isn't (yet) any deal which enables us to convert TV sets into Internet option for browsing or checking emails."

On future plans, he shared that IOL has committed to an IPTV infrastructure investment worth $56 million in 2007-08 and about $38 million in 2008-09, to add servers and establish service in additional cities. "We also plan to invest about $14 million in 2007-08 for content acquisition. The content focus will be on Bollywood or Hindi movies, Hollywood titles and regional movies from India," he said. All in all, MTNL and its partners paint an optimistic picture. However, an analyst from Price Waterhouse Coopers India felt the take-up of the service has hardly been encouraging. Arpita Pal Agrawal, associate director, PricewaterhouseCoopers said, "BSNL that holds about 70% market share in fixed line has announced plans for IPTV service whereas MTNL, the fixed incumbent provider in metros of Delhi and Mumbai, has already launched commercial IPTV service in India. Consequently, there is a lot of buzz generated around IPTV but the results in terms of adoption of services have yet to materialize."

Time Broadband
Sujata Dev, Managing Director and Chief Executive Officer for Time Broadband, is quite bullish about IPTV. She said with IPTV's ability to provide facilities like watching programs on both PC and TV, time-shift and interactivity, the consumer would control the content viewed as per his or her convenience. Though Time Broadband's contract with MTNL is temporarily in dispute, due to a problem pertaining to revenue sharing, Time's IPTV service bouquet, called "My Time," includes VoD, Gaming, Email, Chat and SMS; to the TV in addition to PC, according to Ms. Dev. "Depending on market needs we will introduce services like video-telephony, e-trading, e-learning and t-medicine. The viewer will be able to execute transactions from his TV," said Ms. Dev. "This will convert a TV into virtual PC. With PC penetration at only 8.2%, and a latent need for PCs at home, there is a potential for a significant jump in usage. We also need to consider that PC penetration at growing at 25%, the need for content to be addressed via PC will also be huge. This displays the enormous potential and business possibilities. We have just experienced the tip of the iceberg. With technology witnessing dramatic changes the possibilities could be extended to untapped avenues exponentially increasing opportunities and revenues."

UTStarcom sees IPTV as both providing a public service and as entertainment UTStarcom, Inc., which had announced a three year contract through its partnership with Aksh Optifibre Ltd. to deploy its RollingStream end-to-end IPTV solution with MTNL, acknowledges the fact that in near future entertainment and lifestyle applications will play a strong role in creating urban-centric revenue models.

UTStarcom's spokesperson said, "However, applications that are related to fields such as education, skill development, health and agriculture will be more appropriate for drawing immense value from the broadband infrastructure in India. Services like gaming and e-commerce will definitely influence and dominate the market." By creating an entirely new set of revenue-generating services, service providers can supplement traditional voice services via an upgraded version of their traditional network architecture.

"By first demonstrating the feasibility of delivering basic TV services over a telephony network, IPTV then provides a launch point for delivering successively more sophisticated future services like video-on-demand, time-shift television, etc," added UTStarcom. In addition to ADSL2+ over fixed copper lines, other access technologies under consideration by operators in India include Passive Optical Networks (PON), and wireless broadband technologies, like CDMA2000 EVDO and WiMAX.