Home Asia-Pacific II 2006 Reducing IPTV total cost of ownership

Reducing IPTV total cost of ownership

by david.nunes
Jim BeveridgeIssue:Asia-Pacific II 2006
Article no.:12
Topic:Reducing IPTV total cost of ownership
Author:Jim Beveridge
Title:Director, Broadband and Broadcast Policy
PDF size:60KB

About author

Jim Beveridge is the Director of Broadband and Broadcast Policy at Microsoft. Mr Beveridge has held a number of other positions within Microsoft in both the Windows Digital Media Division and with its Legal and Corporate Affairs group. Jim Beveridge now represents Microsoft on the DVB steering board. Prior to joining Microsoft, Mr Beveridge worked with Motorola Semiconductors in Scotland and Germany, where he led Motorola’s communications technology and microprocessor business. He served previously as the director of new business development at Pace Microtechnology and worked at News Corporation as their head of worldwide sales and marketing for conditional access systems. Jim Beveridge has a degree in Engineering with specialization in Economics from Glasgow University.

Article abstract

IPTV services are hot. Most fixed-line operating companies are either considering when to offer it, are working to get on-line or have already started service. IPTV will give subscribers a wide range of personal programming choices including video on demand, VoD. Implementing this service can be a complex process, given the wide range of choices on the market. Using a complete, homogenous solution from a single vendor can greatly simplify implementation and reduce long-term costs, such as for maintenance, considerably.

Full Article

A service provider considering the delivery of an IPTV service should consider the total cost of ownership, TCO, when assessing the merits of different service delivery approaches. There are basically two approaches: • A heterogeneous approach, in which multiple vendors provide different components of the solution, often with one or more systems integrators providing the services that bind these heterogeneous solutions into a single service delivery solution. In this approach, operations management is typically layered on top of the service delivery system after the fact. Most of the current IPTV deployments to date adopt this approach. In Asia Pacific, a systems integrator for the IPTV system at Chunghwa Telecom in Taiwan based their solution on components from two primary vendors. • A homogenous approach, in which a single solutions vendor designs, builds, tests, validates and supports the IPTV service delivery and operations management solution. Several major companies have adopted this IPTV approach. From the perspective of an IPTV subscriber, both approaches may deliver a similar service experience. However, the TCO associated with each service delivery approach differs greatly. The heterogeneous approach typically involves the integration of different systems from various vendors. Each system performs a very specific task in the delivery of the IPTV service. To perform these tasks as well as they do, these systems often rely on specially tuned or proprietary technologies that can be costly to acquire and support. Integrating these systems requires that a service provider engage a systems integrator, and the work involved with integrating, testing and validating the solution can be complex, costly and time consuming. No single party is responsible for the entire solution, so problems arising at any stage of the integration effort can be difficult to resolve – particularly if the problem involves hardware and software from different vendors. The homogeneous approach emphasizes the creation of a comprehensive IPTV service delivery and management platform based on a single integrated architecture. Wherever possible, the homogeneous approach relies on cost-effective, industry-standard hardware and software components. Where industry standard components are unavailable, the vendor developing the solution offers the service provider a choice of specialized components that have already been integrated, tested and validated to ensure proper service delivery. Operations management is incorporated as a core component of the complete solution, not an afterthought. The vendor developing the homogeneous solution has already identified the operations management needs at every point, from rollout to routine maintenance. It has identified, tuned and validated the operations management tools as part of the development of the service delivery solution. Even operations management costs are lower because everything a service provider needs to build and maintain the IPTV service is provided as part of the platform. There are several different ways to build and deliver an IPTV service. Each approach offers a similar outcome in terms of its ability to deliver content to customers, but each approach involves a series of decisions that have a significant impact on TCO. This paper examines a variety of IPTV deployment options and considers the ramifications of each on TCO. Looking at IPTV total cost of ownership The total cost of ownership associated with an IPTV service depends on a variety of factors, including: • Capital expenses, CAPEX for the service delivery hardware, software, and network infrastructure; • Operating expenses, OPEX for the development, ongoing delivery and maintenance of the service delivery infrastructure Some of the OPEX will be start-up costs, such as those associated with initial deployment, and those related to the integration of the IPTV infrastructure with existing business support systems, BSS, and operations support systems, OSS. Other OPEX are ongoing, including the expense of day-to-day monitoring and managing of the infrastructure. Still other OPEX will arise as the result of decisions to evolve the service delivery network. These expenses can be seen as project-related expenses, but decisions taken upfront about how the service provider will deliver the IPTV service can lead to higher operations costs, and projects that are more complex when it is time to upgrade the service delivery network. These downstream costs must be factored into the TCO equation. In addition to CAPEX and OPEX, service providers can encounter costs associated with content acquisition. These costs can vary based on the revenue opportunities a service provider can offer a content provider. Typically, the content costs are based on the number of subscribers. However, the expanded service delivery opportunities afforded by IPTV may change this. If, for example, the IPTV service offers subscribers a chance to select alternate camera feeds from a sporting event, the content provider that owns these feeds may charge a higher fee for content than it would if subscribers were unable to switch between camera feeds on their own. Therefore, there may be some variations in pricing for content delivered over IPTV. However, because it is anticipated that service providers will pass along this type of additional content fees in the form of higher subscription fees, the net effect of any content cost variations upon TCO will be negligible. Consequently, content costs are not a critical component in the calculation of TCO for the purpose of this article. Infrastructure costs To offer IPTV as a subscriber-oriented service requires investment in a platform to deliver and manage the service. The service provider must acquire systems for encoding and delivering live content as well as systems for encoding, storing and delivering video on demand, VoD, content. The service provider must deploy systems to manage this content and its delivery; it must also deploy systems to monitor and maintain the network, the content delivery, and the management systems themselves – and that is just a high-level description of a central head-end installation. There are multiple metro head-end configurations to deploy, and these involve local content delivery servers, local VOD servers, local management servers and more. TCO for such a network infrastructure depends in part on the service delivery approach that the provider selects. A service provider, as previously explained, can choose between homogenous or heterogeneous approaches. After many years of building voice networks, the heterogeneous approach may be familiar to telcos. It offers certain attractions, because it enables a service provider to build a service delivery solution based on best of breed components that may have been fine-tuned for the delivery of IPTV. At the same time, telcos are familiar with the downside of this approach: because best of breed products are so precisely focused on doing one thing well, they are often built on specialized or proprietary architectures that are costly to acquire and support. Moreover, individual component vendors are unlikely to have built their products to interact with precisely the collection of components in a given heterogeneous service delivery configuration; there are simply too many possible configurations and variations. Because no single solutions vendor has tested and validated the entire solution prior to the service provider’s acquisition of these separate components, the creation of a heterogeneous solution requires a costly and time-consuming systems integration and testing effort. Operations and maintenance costs Total cost of ownership involves more than the cost of deploying the hardware and software associated with the core service delivery platform. Maintaining the highest quality of service, QoS, across a distributed network demands 24-hour support. Given that the annual cost, fully-loaded, of a well-qualified support technician can run to between US$100,000 and US$150,000, recurring OPEX costs can be among the most important to consider when calculating TCO. Reducing TCO requires an approach to IPTV that enables a small operations management team to work efficiently. If the service provider chooses the heterogeneous systems approach, OPEX costs may be much higher than if the service provider chooses a homogenous systems approach. There are two key reasons why this is true. Because the individual components in a heterogeneous solution are typically specialized or proprietary, they typically require the attention of support personnel with specialized training and experience – who typically command higher salaries in the marketplace. Moreover, because operations management in the heterogeneous approach is typically layered on top of the solution as an afterthought, the operations management component may not be able to provide the levels of automation and efficiency that would enable the service provider to support a large distributed network with a lean operations team. An approach to operations and maintenance that enables a service provider to rely on a leaner and less costly support staff can have a dramatic impact on TCO. Indeed, reducing the size of the operations team by seven or eight positions can mean an annual reduction in costs of US$1 million or more. Solutions that rely on standards-based commodity hardware involve lower CAPEX than proprietary technologies. • Homogenous solutions typically lower day-to-day IPTV OPEX because they make the most of automation, provide end-to-end monitoring and management capabilities, and rely on easily obtainable professional skills; • Complete, fully architected packages can lower cost and risk. The providers of homogenous solutions have done the work to define and design the solution, enabling the service provider to deploy it to subscribers – and have it begin generating revenue – in a matter of days, not months. Moreover, with a complete package that includes professional support services, the service provider always knows where to go if it has a question. In a heterogeneous service delivery environment, there is no single resource for all the service provider’s support needs and no single entity to architect and validate the solution on an ongoing basis. As a provider’s IPTV service needs and opportunities evolve over time, the developers of homogenous packages can make the changes easier and less costly. They can anticipate how a service provider can evolve service delivery and prepare best practices guidelines in advance to help the service provider transform its service delivery infrastructure. With the solution provider acting to validate the entire service delivery environment, the service provider can be confident that when an update or enhancement is made to the solution, every part of the solution that could be affected by the change has been tested and validated already. Ultimately, a service provider’s goal is to deliver a competitive service that can help it increase its revenues and subscriber base at the lowest possible cost. With a comprehensive architecture and guidelines, integrated systems management services, and flexible deployment options, homogenous, complete, IPTV solutions can be designed to help the service provider meet their goals.

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