IPTV evolves as a necessity

Sin Siew Teyew/Frost & Sullivan
04 Aug 2007

When IPTV first entered the IT lexicon three to five years ago, industry players toyed with the idea of adopting it to get a grip of the technology. That experimentation is now over, with its adoption considered imperative rather than just merely riding on the wave.

This is because service providers worldwide, particularly fixed-line operators, are faced with dwindling voice revenues in an increasingly competitive market. More importantly, new players come with disruptive business models never seen before in the industry, catching the traditional operators off-guard.

Service providers understand the need to plan and embark on business transformation well ahead of these challenges to exit from the existing red ocean, moving on to find and develop the blue ocean. Is IPTV indeed service providers' blue ocean‾

Over the past few years, IPTV has become the buzzword in the telecommunications industry. Every fixed-line and broadband operator has either planned, evaluated, or is in the midst of deploying IPTV.

IPTV is portrayed as the missing piece to offer blended triple-play services of video with voice and data, and is viewed as the initial step toward achieving convergence.

More recently, IPTV has also morphed into the mobile space, completing the quadruple-play equation. IPTV is seen as the most compelling value-added service with infinite opportunities and the key driving force for service providers to seriously look into the need for next-generation network (NGN) transformation.

But how should service providers position IPTV‾ Is it purely a defensive weapon to reduce churn by offering multiple services to create stickiness, or an offensive approach to increase revenue‾
As it stands, IPTV is mostly bundled together with broadband access to entice customers on board, which in turn helps to reduce churn; not so much yet in terms of generating new revenue stream.

In the entertainment sector, service providers that position IPTV to compete in the entertainment space with the broadcasters, cable operators or satellite providers risk jumping out of their current predicament and falling into another red ocean.

Little value is gained by duplicating broadcast TV over IP networks. This is an area unknown to most telecom operators. Cable and satellite operators, on the other hand, have set the bar very high in terms of both quality and content. Media companies have strong relationships and understand the content business well. They tend to have smaller investments in capex, while being generous in terms of revenue share with content providers.

On the contrary, telecom operators are used to huge capex investments, hence keeping a bigger share of the revenues for themselves. This gap presents a significant cost element for telecom operators if not managed properly.

IPTV as integration point

The strategic importance of IPTV lies in its ability to be the point-of-integration (POI) to enable 'blended services'. This is where the different elements of voice, data and video can be integrated to create new innovative services, hence enabling traditionally independent services to interact with one another, typically by sharing information such as buddy lists, location data, presence information, and subscriber preferences and profiles.

For example, services such as instant messaging can be combined with IP voice and video capabilities to create new offerings such as multi-party video conferencing.

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