IPTV versus TV-over-IP

In the battle for video over broadband, the odds might just be stacked against IPTV, a complex and expensive technology. Instead, the fortunes might be favoring the more simplistic, television over IP.

In past few months, IPTV has gone from being an obscure acronym to a mass media phenomenon, that if you read the papers is going to solve all of world’s problems, usher a brand new television experience, and well, while its at it, help the Yankees win another dozen World Series. The coverage would make you believe that IPTV is here and now. Reality is proving to be something else.

IPTV, is the technology that is being deployed by phone companies either over copper or fiber networks to replicate (and perhaps enhance) a television experience normally available on cable networks. (Light Reading has a more indepth description for those interested.) In other words, an always on television stream (and hundreds of channels) just is available at the flick of the switch of a set-top box. This is a business that needs billions of dollars in investment. SBC, for instance is spending over $6 billion on Project LightSpeed, that will bring TV over next generation DSL connections. BellSouth is not too far behind. Verizon has similar plans and a bigger budget, for its fiber based network, called FIOS. (Thanks Karl for clarifications!)

Even with these apparently significant investments, “the Bells are five years behind the cable companies,” says Scott Cleland, founder and CEO of research company Precursor Group. “We have a cable industry that’s fully built out,” Cleland says. “Bells are a fourth entrant with three formidable players” in video entertainment.

Regardless of the underlying pipe – copper or fiber – one this is clear: the deployment of these IPTV networks is slow, laborious process. In addition, it is hard to find evidence of profits and scale. For example, Hong Kong-based PCCW is the world’s largest IPTV service and it has 441,000 subscribers in Hong Kong. The evidence of slow nature of the rollouts is evident in pre-announcements from two companies – UT Starcom and ADC Telecommunications. UTS was hit by slow ramp at Softbank Broadband in Japan, and ADC’s troubles lie at the Verizon’s feet.

Multimedia Research Group in its most recent forecast says that the total number of IPTV subscribers will grow from 3.7 million in 2005 to 36.9 million in 2009, with revenues going from $880 million to $9.9 billion in 2005-2009 time frame. That works out to about $267 a year per subscriber or roughly $22 a month. That doesn’t sound like too much money per subscriber per month, but hey that’s me. (Interestingly, IP video services in Asia Pacific will be a $4.2 billion market by 2010 as per In-Stat, a market research firm.) Bob Larribeau, MRG Senior Analyst in the press release says that Bells are “still lagging, due to issues that SBC and BellSouth are facing, waiting for low-cost MPEG-4 set-top boxes and Microsoft’s software, and dealing with the complexity of the system integration required.”

Now compare this with Television over IP, or broadband video. Television over IP, on the other hand is the high quality streaming video, that is made available over the fast pipes, without a set-top box. This is a (comparatively) fairly low cost, and perhaps a simpler model. This simplicity is one of the reasons, it might actually gain traction in the market. While I am not willing to put a lot in the “long tail” video efforts like video blogs and efforts of start-ups such as Bright Cove, I do think there is a lot of hope for branded content online, especially if content owners can create a superior experience. I have seen some of the video-over-broadband efforts of folks like Comcast and News Corp., and that looks promising. Other content owners are also cooking up broadband channels.

Today launch of mtvU Über, a network that allows aspiring student broadband creators to create broadband content is a step in the right direction, but not the final answer. The bottom line is that, the television over broadband needs some sizzling new kind of content in order for folks to go back and click. My feeling is that MTV should have done their MTV Desi channel over broadband, and perhaps used it as a learning experience for other niche channels over broadband. If done right, television over broadband has the potential to pip IPTV to the post.

The impact of Bit Torrent, RSS, and Networked Video Recorders will be covered in the part 2 and 3 of this series, which will also look into Google TV, Yahoo’s media efforts and why really the networks should not be fearful of peer 2 peer networks.

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