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Can IPTV Fill the Revenue Loss at Telcos?

Infonetics Research reports that a growing number of North American, European, and Asia Pacific service providers are betting on IPTV and video services to stay ahead of their competition.

The report says the loss of revenue associated with fixed-line telephony services to cable operators and other competitors, along with the threats to revenue posed by over-the top Internet content providers (ICPs), are forcing service providers to move into the TV business to increase ARPU, reduce churn, and expand their brands beyond the staid, monolithic telephone company.

Further fueling the drive to IPTV and video is the fact that service providers now have many more access options over which to deliver high bandwidth, high revenue IPTV and video services to subscribers, including expensive access technologies that are now available at comparable prices from multiple manufacturers -- including DSL, PON, Ethernet FTTH (active Ethernet), cable HFC, and WiMAX.

IPTV is the application many service providers feel offers them the best opportunity to stem the loss of revenue from declining fixed access lines, and help them to more quickly recoup revenue from their ongoing fiber deployments. Yet, there are significant hurdles faced by IPTV and video providers, and chief among them is interoperability.

Various standards organizations are developing IPTV standards but all are in various stages of completion and adoption. Until the majority of vendors agree to rally around a particular group of standards, interoperability will remain a critical problem for would-be IPTV providers," said Jeff Heynen, directing analyst for IPTV and next generation OSS and BSS at Infonetics Research.

In contrast, I believe that the greatest challenge is the lack of pay-TV service differentiation. IPTV's current value proposition is essentially a decade or so late to market -- when linear programming delivery modalities were still in vogue.

Other insights from the Infonetics study include:

- The number-one technical challenge IPTV and IP video service providers face is interoperability between products.

- Implementing interactive video features is the second highest rated technical challenge, as providers move away from their legacy linear model and adopt interactive advertising, online gaming, as differentiators.

- The percent of service providers offering interactive advertising grows from 20 percent now to 70 percent in 2009.

- Ensuring QoE remains the most critical aspect to any operator's IPTV service because they absolutely must have a unique and differentiated service right out of the gate. That said, most don't.

- Approximately 30 percent of respondents use a hybrid solution, combining digital terrestrial (DTT) or satellite delivery of broadcast programming and multicast delivery of premium and VOD content.

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