North American IPTV started in small rural telcos but has grown up and left home for the cities

In the first of our market overviews, Steve Hawley takes an in-depth look at IPTV progress in the US and Canada - where some services have achieved penetration rates above 20 per cent in large local markets

In North America, the telco video market has gathered a great deal of momentum during the past two years. As the decade began, the service category now known as IPTV was largely an early-adopter phenomenon: most of them being small rural telephone companies that believed they possessed the technical know-how to deliver VOD and multi-channel TV using the broadband infrastructures they had put in place in the 1990s to deliver the broadband Internet.

Choice TV

The best-known large carrier offering TV during these early days was Qwest, formerly US West, which had deployed the VDSL-based Choice TV service using an Asynchronous Transfer Mode (ATM) access infrastructure. Today, more than 200 US and Canadian telephone carriers offer TV-based services to residential subscribers over broadband IP networks; most of them using IP all the way to the home. To do so, from a regulatory perspective, telcos must do just as cable TV providers have had to do: negotiate and obtain franchise agreements with local municipalities. The four Tier-1 US carriers are what remains of the original AT&T Corporation and the ‘Baby Bells’, the Regional Bell Operating Companies (RBOCs) that resulted from the break-up of the Bell System in 1984. During 2004, the three other Tier-1 US carriers, Verizon Communications, BellSouth Corporation and AT&T Inc. (now made up of the former SBC Communications, which acquired AT&T Corporation in 2005 and had earlier merged with the RBOCs Ameritech and Pacific Telesis), announced that each would build and introduce TV-capable service platforms in ensuing years. Meanwhile, Qwest’s Choice TV maintained service to a total of about 50,000 subscribers in Omaha, Denver and in the highly competitive Phoenix market. Because Verizon was created from the merger of Bell Atlantic (incorporating NYNEX and serving the north eastern US) with GTE, which itself served much of the rest of the United States, Verizon was in the position to introduce services nationwide. To do this, Verizon announced a major network initiative called FiOS, its acronym for Fibre Optic Services, to upgrade its network infrastructure to optical fibre-to-the-home, and to deliver the full range of voice, broadband data and FiOS TV services. AT&T’s Project Lightspeed is a similar initiative that contrasts with the Verizon approach by using fibre-to-the-node to feed ADSL2+ based copper access networks in the last mile. AT&T is in the process of introducing its U-Verse TV service using the Project Lightspeed network. Similar to AT&T, BellSouth is employing fibre to distribute video to DSL access nodes that use ADSL2+.

Bonded ADSL2+

BellSouth’s implementation of ADSL2+ is expected to use a technique known as ‘bonding’, which allows existing copper to deliver more than 20Mbps to the home. Of the three US Tier-1 carriers, Verizon Communications is furthest along. In the fourth quarter of 2005, Verizon began FiOS TV service in Keller Texas, and has since announced TV launches in communities elsewhere in Texas, as well as in Virginia, Massachusetts, Florida, New York, California and elsewhere. In the process, some states are announcing unprecedented state-wide TV franchises. Because the deployments began so recently, few statistics are available relating to success, although a Verizon official claimed during a January 2006 investor conference call that FiOS TV had already captured 21 per cent video penetration in Keller after just four months of service. The official went on to say that it expected to pass a cumulative total of six million subscribers by the end of 2006.

Hybrid delivery

Unlike most of the telcos in North America now deploying TV services by using all-IP delivery, Verizon has chosen to take a hybrid delivery approach. Using a specially designed set-top box, Verizon delivers multi-channel (broadcast) TV tiers over fibre using QAM modulation (RF analogue) while using IP for on-demand content. Verizon made this choice because it was sensitive to reaching the market quickly. Rather than waiting for a mature version of its chosen IPTV technology platform to be ready, it decided to use proven broadcast technology. BellSouth has not yet deployed IPTV services and while AT&T quietly began a U-Verse TV trial at the end of 2005, subscriber figures are not yet available. All of the US Tier-1 carriers, it is worth noting; also have fallback positions in their partnerships with a US direct-to-home satellite TV network (either News Corporation’s DIRECTV or EchoStar’s DISH Network). In Canada, where even the major cities are relatively small in comparison to the US, the telco video deployments are smaller, which is one reason why video services were commercially available from major carriers earlier than was possible from their US counterparts.

High penetration

Canadian Tier-1 carriers offering broadband TV services include Manitoba Telecom Services (MTS), Canada’s third largest telephone carrier. When MTS began offering 250 channels of TV service in nearly 30 bundles to the 250,000 plus population of Winnepeg over its Motorola VDSL access infrastructure in 2002, cable competitor Shaw had more than 90 per cent of the market. Now, MTS can offer TV to nearly 90 per cent of Winnepeg. As of late 2005, it had captured nearly 50,000 subscribers - more than 20 per cent penetration. Another is SaskTel, which has been offering 150 channels of TV, nearly 80 channels of music services, VOD, caller-ID and games on TV in the province of Sasketchewan since late 2002, over an all-IP network using Alcatel and Lucent DSL access nodes. In mid-2005, SaskTel crossed the 40,000 subscriber mark, with an average market penetration of about 19 per cent in the cities it serves. Services are offered in the cities of Regina and Saskatoon. Major TV competitors include cable operators Shaw and Access Communications, Bell Canada’s ExpressVu and StarChoice satellite services. In 2006, SaskTel plans to add PVR and high-definition television programming. SaskTel claims that six out of every ten new TV installations also represents a completely new broadband customer. Telus, the incumbent local service provider in the western provinces of Alberta and British Columbia, and in eastern Quebec, began to offer IPTV services in late 2005. The company is using ADSL2+ and MPEG-4 [Part 10] for its service, in the cities of Calgary and Edmonton (both in the province of Alberta). Bell Canada, the national carrier, is in the interesting position of both being able to compete with and partner with Canadian local exchange carriers offering TV services.

Bell Canada

Bell Canada is currently ramping up to complement its existing ExpressVu direct-to-home satellite TV service with broadband IPTV using the Microsoft TV IPTV Edition middleware offering. As an interesting side note, the IPTV software platform once known as iMagicTV, which was acquired by Alcatel in 2003, had its origins at Alliant Telecom, the incumbent local exchange carrier in the Canadian Maritime Provinces. Alliant is majority-owned by Bell Canada and it replaced its DSL/IP-based VibeVision TV service with Bell ExpressVu satellite TV in 2004. In the US, two types of service provider have emerged to help local telephone companies obtain content and help them share centrally-deployed headend resources that telcos can share. The first is when local telephone companies team up to build centralised headends and obtain their programming centrally. These telco consortia then distribute the TV content across a commonly-owned and centrally managed broadband backbone to locally attached member telcos. In many instances, the local telcos are too small to build their own headend economically, so this option is appealing.

Own headends

The other is a class of service provider that builds its own master headend, then uses a commercial satellite network to distribute programming to receivers and local headends that they build and operate for local telcos. In this latter category are companies like Broadstream Communications and Eagle Broadband. They offer broadcast TV line-ups and on-demand video content via bundled systems that include the receivers, headends, software infrastructure and set-top boxes designed for use with their service platforms. In 2005, Broadstream and Eagle were joined by two new entrants: Auroras Entertainment LLC and the National Rural Telecommunications Cooperative (NRTC).

Local delivery

The Auroras end-to-end solution delivers MPEG-2 and MPEG-4 standard-definition and HD content to local service providers using Telesat and Globecomm Systems’ satellite delivery networks. The NRTC has partnered with SES Americom for content delivery to Scientific-Atlanta headends. It remains to be seen whether this group of providers can capture the appropriate content delivery agreements from the content owners and deliver their services to telcos profitably.