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IPTV Up Against Tough Competition

Telcos may be counting on IPTV to revitalize their businesses, but the competition they will face in the pay TV market will be expensive, relentless and possibly damaging. Cable and direct broadcast satellite (DBS) providers have been battling it out for PayTV subscribers and both are readying to take on IPTV.

Some of the satellite broadcasters have been experiencing significant growth, including the US provider, DirecTV, which added about 1.5 million subscribers in the year ending June 30, 2005 and the UK�s BSkyB still accounts for more than half of the UK�s PayTV subscribers.

"Satellite broadcasters� recent wave of success stems primarily from their exclusive content arrangements delivered along with superior value-added services," says Pyramid Research Senior Analyst Ozgur Aytar. Both DirecTV and Sky have invested heavily for the exclusive programming rights of sporting events including NFL and the UK�s Premiership. Aytar points out, "IPTV and digital cable providers are promising to change the way we watch television, but satellite companies are already transforming their customers� TV experience by introducing enhanced, interactive and personalized features and services."

In competitive PayTV markets, the key to telco success will lie in their ability to leverage triple play � bundled voice, video and broadband, combined with premium content to attract and retain customers. Satellite broadcasters have remained outside of the triple play ballpark largely due to technological limitations. They are focusing on what they do best (video) and will consistently seek to overbid cable and telcos for premium content. As competition heats up, however, they will be tempted to mimic the triple play business model, primarily through acquisitions.

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