IPTV is a multi-billion dollar gamble but Telcos do not have any choice but to deliver content 

Shelly Palmer, chairman of the Advanced Media Committee of the National Television Academy, ponders the battle between Telcos and cable operators in the wider context of broadcast vs on-demand (Taken from the September edition of IPTV News Analyst)

There’s a lot of noise about Telcos and IPTV, but cable companies are equally interested in IP provisioned distribution. The platform also allows cablers to offer churn-reducing triple-play more efficiently. So which is better: broadcast (network) or IP provisioned (networked)? Each system has strengths and weaknesses. Let’s think of Network vs. Networked as ‘Broadcast’ vs. ‘On-demand.’

Making sense

Consider how two different movie theatres might use the telephone to communicate with you. For a one-screen movie theatre a ‘Broadcast’ announcement that says, “Star Wars is showing at noon, 4pm, 8pm and 10:30pm, tickets are $10 each” is much more efficient than, “Press one for movie titles, press two for show times, press three for ticket prices.” However, for a 15 screen multiplex movie theatre, the “press-one-for ...” or “Ondemand” announcements make much more sense.

Similarly, for shows like the Super Bowl, broadcast is the most efficient model. For an obscure piece of content like ‘Remlap’s Sonata for Krumhorn’ an on-demand system makes more sense. Of course, nothing in the real world is ever this cut and dried. In a networked system, viewing habits matter more than the number of channels available. For example, a household with two analogue televisions and a dual-tuner PVR would require about one-fifth the bandwidth of a household with a single, heavy HDTV viewer.

Battle for consumers

So who will win the battle for video consumers? It is not so much a battle of technology as it is a battle of business rules, legislation and brand permissions. In my book (named at the end of this article), I offer up some ways to think about it. At present, it is much easier for a cable company to offer competitively priced telephone services than it is for telephone companies to offer cable television services. This is because enabling cable subscribers to use VoIP telephone services over their existing cable networks requires only a minimal investment for the cablers. On the other hand, for Telcos to offer all of the services that cable offers they need to build a new, expensive network. The fibre optic/IP-provisioned infrastructure requires an investment of several thousand dollars per household from the Telco. This fibre-optic telephone network will be several times more powerful and efficient than most existing cable networks, and it will allow the Telco to sell-in a slightly differentiated quadruple-play bundle (video, voice, data and wireless).

However, it is not possible to estimate the short-term threat that Telcos pose to cable. Firstly, they have to build the network. Telco executives estimate that they can pass about 3 million homes per year. They won’t bring fibre-to-the-home to every household in America, but to reach 60 million households (a good competitive number) we’re still talking about 20 years. Homes passed has absolutely nothing to do with subscribers. It simply means that the Telco has the ability to turn on the service if you decide to subscribe.

No matter how you look at it, this is a multi-billion dollar gamble, but the telephone companies simply don’t have a choice. The cable companies are taking access lines away from them at an alarming rate. To fight back, the Telcos are going to try to get into the television business. For some reason, local telephone companies thinkthat they can get enough market share in the television business to get a respectable ROI. Pundits say they might hit 20 per cent market share; Telcos hope to take 26pc of the market...time will tell. There are some very smart people who think that the telephone companies are delusional in thinking that they should be in the content business. Others believe that it is the only way for the Telcos to survive. By 2020, we'll have an answer.

The National Academy of Television Arts and Sciences presents the annual Emmy Awards. Mr. Palmer also is the author of ‘Television Disrupted: The Transition from Network to Networked TV’ (2006 Focal Press).

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