Increasing pressure on telcos to offer IPTV services, say experts

The pressures of vertical integration are increasingly pushing Canadian telecom operators into offering Internet Protocol Television (IPTV) services, say experts. Pacôme Revillon, CEO of satellite applications, communications, and digital broadcasting research and analyst firm Euroconsult, told The Wire Report that the telcos are under significant pressure to offer IPTV. “I think will try to offer as a kind of standard delivery channel, as opposed to a kind of additional service to provide access to Facebook or other Internet services on a television screen,” Revillon said in an interview. “The forces of vertical integration will probably force them to do it,” he added. “It doesn’t look like they can really take over the market and generate huge return rates for the providers. From a financial standpoint, it’s not as good an opportunity as they .” Despite the grim outlook, Greg MacDonald, a telecom analyst at National Bank Financial, said IPTV is the future of television and companies can’t afford to ignore it. “I would say it’s vital for a local telephone company to have a broadband and television product,” he said. “It’s necessary to have a television solution because bundling is the way these products are sold now … People don’t want just a solution that’s restricted to what historically has been broadcast. They want to be able to do things with it.” MacDonald said the trend will lead to consumers being able to purchase the shows or channels they want as opposed to bundles of channels. “Look at the way that teenagers are downloading programs off the Web,” he said. “It’s giving you an indicator that consumers are going to start to demand--if it’s technologically feasible--programs more on an a à-la-carte basis.” According to a report last month by Moody’s Investors Services, IPTV will continue to grow in Canada as converging telcos compete with cable companies for television services to win back market share lost to cable. “As Internet Protocol Television (IPTV) continues to develop, and as the telephone companies upgrade their wire-line networks—a development that will also enhance their Internet products—we think that IPTV will provide a credible wire-line alternative to cable television. This is the key to the telephone companies being able to reverse the market share trend,” the report says. “Wire-line network infrastructure investments will transform Canadian telecommunications and cable companies into interchangeable broadband services providers.” MTS Allstream currently offers IPTV services with Microsoft Mediaroom, which allows access on-demand and live television programming through set-top boxes and a closed broadband connection. In March 2009, MTS announced the launch of a digital television service, which counted 86,520 subscribers by year-end, according to the company’s fourth quarter results. Telus currently offers IPTV to 170,000 subscribers in British Columbia, Alberta and Quebec through the Microsoft Mediaroom program and set-top boxes. The service offers high definition (HD) programming and allows consumers’ televisions and phones to interact. On Feb. 4, Bell also announced that it will launch a Bell IPTV service this year in Toronto and Montreal through Microsoft Mediaroom. “I think it’s certainly a cornerstone and really it’s about multiple services in the home. That’s why bundling is so important,” Chris Langdon, Telus’ vice-president of networks services, said in an interview. Telus announced Tuesday that it is investing in its broadband networks in British Columbia to better deliver its IPTV services. Langdon said the company will be looking into expanding its IPTV coverage across Canada. According to Revillon, Canada has been “somewhat conservative” in offering IPTV services due to difficulties in securing revenue streams. He said that while free-to-air broadcasters may be interested in offering catch-up services and IPTV content, they are worried about cannibalizing or losing their revenues to competitors. He also said telecom operators may hesitate to offer IPTV if they have signed agreements with pay television platforms, which offer more secure revenue streams. In Europe, he said France and Belgium are leaders in IPTV, but countries like Portugal and Romania offer more basic services focused on content. Revillon pointed to hybrid television and over-the-top television as the coming trends for IPTV. Hybrid television provides IPTV over a digital subscriber line (DSL) and allows users to switch seamlessly between IPTV and conventional television. Over-the-top television broadcasts video and audio via the Internet to users anytime, anywhere, and on any device. “Everyone is talking about convergence, but you have an increasing number of devices in your living room, and I think a large part of the game is to make them compatible,” Revillon said of over-the-top television. “The second element is to get the highest speed rates. With fibre services, you will get increasing capacity, which enables more interactive, more OTT services.” Revillon said providers continue to struggle with how to approach advertising and how much interactivity to include. For instance, providers can take a utility-based approach, in which users view information briefs, such as horoscopes or the weather. While utility-based advertising is good for customer loyalty, it generates little revenue, Revillon said. He said the best revenue-generating model continues to be “classical stuff: sports and shopping kinds of services.” Revillon said providers shouldn’t be worried about IPTV pirating. He said consumers can access pirated content for free online, but as long as legitimate providers focus on quality and interactivity, consumers will pay for online television services. “It’s partly an issue of interactivity to make the service personalized, and let people get control of the interface, organize their content and share certain elements, which make the service pretty good,” he said. “If you look at pay television, you have your HD services, and as well a PVR and a number of options on it, so you might decide to just get pirated content. But would you get the same experience? This comes into play.” kfournier@thewirereport.ca

Increasing pressure on telcos to offer IPTV services, say experts

Broadcast | April 6, 2010

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