 | Issue: | Asia-Pacific I 2007 |
| Article no.: | 10 | |
| Topic: | Beyond IPTV | |
| Author: | Paul Berriman | |
| Title: | Head of Strategic Market Development | |
| Organisation: | PCCW Limited | |
| PDF size: | 296KB |
About author
Paul Berriman is the Head of Strategic Market Development at PCCW Limited. He has also served as PCCW’s Senior Vice President of Strategy and Marketing. He previously worked as the Managing Director of Arthur D. Little’s Hong Kong office and, before that, with his own consulting business, Contactica, which he sold to Arthur D. Little in 1999. Prior to that, he held technical, engineering and operations management roles at New World Telephone, Reuters, HKT CSL and the Hong Kong Telephone Company. Mr Berriman is a Chartered Engineer through the Institute of Electrical Engineers and a member of the Institute of Acoustics. He earned a BSc in Electroacoustics from the University of Salford in the UK and an MBA from the University of Hong Kong.
Article abstract
IPTV plays a pivotal role in the strategy of any operator that wishes to be more than a communications pipe. Value-added services, such as IPTV, guarantee vital revenues, help maintain the customer relationship and provide a base for additional services – such as on-line shopping, interactive gaming, video-on-demand – and the revenue they bring. IPTV is, above all, a way to build a two-way service, interact with the subscriber and personalise the service offering in an increasingly fragmented market.
Full Article
IPTV has a pivotal role to play for the future of Telcos, the future of TV and the future of the content industry in general. For the Telco, it is a key first step towards transformation from being solely an access provider to finding new sources of revenue – from content, applications and transactions. For the TV business, IPTV is an opportunity to become more ‘two-way’ and interact with the user. This is exemplified by News Corporation’s BSkyB getting into broadband, in search of interactivity, by buying Easynet in the UK. In some countries where PC penetration is low, such as India or China, it will mean that the TV set will become another Internet terminal, especially with HDTV sets where the resolution can support Internet Web Pages. For the content industry, IPTV means a whole new set of delivery platforms offering security and two-way interactivity. The added security means a dramatic increase in the ability to combat piracy and provides greater revenue assurance for content providers. The delivery platforms for IPTV include the public Internet for ‘best efforts’ TV viewed on PCs, PCTV, managed telco networks for high-quality, high-definition images or over cell phones for mobile TV. For some, this can even lead to the convergence of fixed and mobile platforms. IPTV also offers the opportunity to develop more interactive services and applications, related to content, games, merchandising and other revenue generating services. Some statistics and forecasts follow. By 2011, the Asia-Pacific market is expected to reach 39 million IPTV subscribers. Total IPTV revenue in the region will reach US$8.1 billion by 2011. It is currently at US$2,765million. China’s IPTV subscribers should exceed ten million by 2011 – a four-fold increase. However, there will be only modest growth until 2008, as China needs to establish clear standards and regulatory policies surrounding this new technology. India also expects 2008 to be the year when IPTV takes off and, ultimately, they expect 50 per cent of all broadband subscribers to receive IPTV service. Hong Kong has had IPTV service for three years; it is now the largest commercially deployed IPTV service in the world. The service has been in operation since September 2003 and provides a choice of more than 125 top-class channels plus interactive services to over 700,000 customers, representing over 30 per cent of households. This is a clear validation that viable business models do exist that can enable telcos to make this transformation. Hong Kong is a territory of about 1,000 sq km., with a population of seven million and 2.1 million households. Within this area, however, resides a very technologically advanced and highly competitive market for telecommunications and TV broadcasting. Here are some of the key statistics: • seven million people live in about 2.1 million households, the majority of which are multi-lingual but native Chinese-speaking; • five fixed telecommunications operators, with 3.8 million telephone lines and the world’s second most developed broadband market (after Korea) with over 60 per cent penetration; • five mobile phone operators with over 120 per cent penetration and 3G launched in 2003; • four pay TV operators with over 1.1 million legitimate customers and over 100,000 pirate set-top box users on the incumbent cable TV network; and, • two free-to-air broadcasters, each with two channels (one Cantonese, one foreign, mainly English, channel each). A traditional telco can transform itself beyond basic broadband Internet access to become a ‘trusted partner’ to content providers for secure content delivery with revenue assurance. NOW TV has delivered a compelling Pay TV proposition in a market where four Pay TV operators compete fiercely, including an incumbent 14-year-old cable TV operator. In Hong Kong, the incumbent monopoly provider in the fixed network market, which was deregulated and opened to competition in 1995, has since seen its traditional fixed line business lose market share to competition and its broadband grow in a competitive environment to reach over 60 per cent market share and over 980,000 broadband customers. The Hong Kong monopoly provider in the fixed network market faced intense competition from new entrants, the pricing policies of which were often irrational and were pressurizing prices and squeezing margins on basic broadband and Internet access in the territory. The company also faced a competitor, in the form of a cable TV operator which was moving into the telco space of broadband and voice over IP, VoIP, services. These factors became natural drivers for the incumbent to start ‘taking the game back’ from the cable operator by moving into the pay TV space. The incumbent divided its four main businesses into four brands, each brand holding its own licence to operate: the traditional telco business; the Internet service provider business; its pay-TV business; and, mobile operation for its 3G and mobile TV services. The company’s main philosophy in entering the pay TV business was to treat it as such, rather than just as a value-added service to the telco business. They devised a telco approach in dealing with content and its relationships with the content providers. A telco approach means both utilizing the key assets and strengths of an established, incumbent, fixed network provider, and doing what they do best: building bandwidth, providing secure access to content – even a telephone call is a form of access to content – providing customer service, care and billing with the highest degrees of quality, accuracy and revenue assurance. Squeezing its assets means capitalizing on its installed base of, at the time of launch, over 650,000 residential customers for broadband; pursuing and supporting them through its call centre business, including a very successful outbound tele-marketing business. It also capitalizes on the fact that its network is developed to the extent that it can deliver at least 6Mbit/s of dedicated broadband access to over 95 per cent of the households in Hong Kong. Applying this telco approach brought some innovative features to both customer and content provider alike, many having not been possible or simply never implemented by traditional cable TV operators. This includes the ability to provide an extreme level of content protection and revenue assurance – with auditable viewership feedback and statistics – through network-based conditional access as well as new innovative interactive services through the two-way nature of a broadband line. In the future, access to valuable content and transaction revenues via multiple access technologies for a number of customer situations and experiences – fixed, wireless and mobile – will continue to grow. This is why the incumbent found it desirable to re-enter the mobile business, by acquiring a GSM 2G and 3G operator, its own mobile branded 3G service as part of its fixed mobile convergence strategy. It also explains, in part, the strategy of developing the broadband pay TV business in support of what is now a quadruple play offering including mobile TV. The result of this strategy is a 30 per cent penetration of Hong Kong homes with over 120 channels, on-demand services, online games and an interactive TV merchandising platform, which includes access to on-screen cinema ticketing, DVD sales and books. This has also achieved a key objective in having reduced our broadband churn by more than 50 per cent. Much of the growth was due to building trusted partner relationships with content providers, the incumbent signed unheard of exclusive agreements – some of which remain in force until 2014. Many telcos are still exploring ways of making this transition. The incumbent did it alone, without relying upon vendors, “if we had relied on vendors we would still be waiting now”. It is important to get past the technology deployment as quickly as possible. Many operators around the world are still contemplating technologies. Success does not come from implementing lots of fancy features at the start. A quality picture, which is stable, is all that is needed to get started. A cost-effective infrastructure and set-top box, STB, is also vital. The most important things to do are to get good content, get good marketing and maintain sales momentum to get lots of customers to sign up to lots of channels. The interactive services and new features can come afterwards. Linear channels and live content are the real ‘bread and butter’ of an IPTV service. Video on Demand is ‘icing on the cake’; it provides important additional revenues, but first make sure you have the whole picture, so to speak.
