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Misguided IPTV Offerings with Little Potential

Broadband service providers around the world are turning to IPTV to help them increase revenue and stand out from the crowd, but getting there won't be easy, says a new study from Infonetics Research.

Among the many hurdles are the top three business challenges named by North American, Asia Pacific, and European service providers participating in Infonetics' study:

- Competition from cable MSOs.
- Profitability of video services.
- Cost of video content.

The percent of service provider revenue derived from IPTV and video is very small now, but will grow substantially over the next 2 years as the number of subscribers increases, the study predicts. In addition, IPTV providers just getting into the market will likely have low introductory pricing to lure subscribers away from their cable and satellite competitors.

Infonetics believes that only when IPTV operators can add incremental services, such as video on demand (VOD), online gaming and exclusive content, will they be able to generate significant ARPU (average revenue per user).

"IPTV operators definitely know what they're up against, in terms of the competitive business environment, regulatory challenges, and technical hurdles to making their IPTV businesses successful. However, our results show they are focusing on technologies that enhance subscriber QoE for today's IPTV services, and are demanding clear product and service roadmaps from their chosen vendors to help them differentiate their services," said Jeff Heynen, directing analyst at Infonetics Research.

However, I believe that with the exception of PCCW in Hong Kong, which launched a unique a-la-carte pay-TV offering, other IPTV services demonstrate little imagination or innovation. Most are modeled after traditional cable and satellite TV offerings with undifferentiated channel tiers.

In fact, the vast majority of IPTV services were conceived for the TV consumer from a bygone mass-media era. PCCW's offering is one of the few forward-looking services that taps into current trends in fragmented digital media consumption.

It's been my experience that IPTV service providers that lack a customer perspective tend to focus on service aggregation and bundling. Those that are truly aware of current consumer trends focus more on service flexibility, personalization and consumer freedom of choice.

Infonetics study highlights include:

- Top drivers mentioned by providers for offering IPTV and video services: increase broadband subscriber ARPU and service bundling for customer retention.

- Top 3 technical challenges faced by service providers offering IPTV and video services: interoperability between multiple products, poor quality of in-home wiring, and ensuring QoE for viewers.

- Upgrading set-top boxes is the most common strategy for addressing QoE challenges.

- On average, service provider respondents plan to spend 28 percent of their 2007 capex budgets on IPTV and video equipment, software, and services.

- "More functionality" is the number one reason service providers would consider changing or adding new IPTV and video product vendors.

- The percent of service providers offering subscription VOD service grows from 58 perccent now to 84 percent in 2008.

- The most commonly offered interactive TV services in 2008 are home media (viewing and sharing of pictures and video), electronic program guide (EPG), and live weather/traffic.

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