During the coming of age of the Internet in the mid-1990s, products like AOL, Earthlink and Netscape radically changed the notion of Internet connectivity. By simplifying and packaging the Web’s content and user interface, they provided a user experience rich enough to create awareness that the speed of Internet connection was an important component of the Internet experience—and narrowband wasn’t going to be enough. Thus, the foundation and demand for broadband was born.
Over the course of the ensuing decade, as availability, traction and content accessibility has grown, broadband has ultimately emerged as the successor to the access line as the foundation of the service provider/customer relationship. Today, an ever-increasing array of converged information, communication and entertainment services are contributing to a fundamental redefinition of the term broadband. No longer a bursty, best-effort service capable of delivering up to a few Mb/s of bandwidth and one-dimensional content, broadband now encompasses services like AppleTV, IPTV and YouTube that have reshaped consumer expectations and demand for broadband bandwidth, reliability and quality.
Today, we are at an inflection point in the broadband services market. Entertainment and service convergence has become increasingly core to broadband experience. This, in turn, is driving consumers to demand more from their service providers. IPTV has emerged as the poster child of these changing consumer expectations. IPTV is the telco equivalent of the $70 billion North American cable market, and communications service providers see it as a bona fide consumer business that they can deliver over the broadband infrastructure. Just as important, however, these companies see IPTV is an anchor service—a readily understood consumer product that satisfies emerging demands and potentially preserves and nurtures the customer broadband relationship. As we add these drivers up, IPTV’s eventual mass deployment seems to be a foregone conclusion. But is 2007 the year to deploy IPTV?
There is no definitive answer for every communications service provider, but recent catalysts clearly indicate that, for most, the answer is yes. A recent survey conducted by Calix of over 100 North American service providers indicated that more than 75% had plans to deploy IPTV within the next year. This affirmation of IPTV’s near-term future speaks volumes about the maturation of the IPTV industry and a breaking down of the traditional barriers that historically have inhibited IPTV adoption. Indeed, the stars seem to be aligning for IPTV, and 2007 is likely to be the year that IPTV becomes a mainstream service for North American communications service providers.
A few short years ago, the majority of North American video deployments were delivered by small carriers, in out-of-the-way places, over proprietary solutions. Not anymore. Major Tier 1 and Tier 2 players are now commercially deploying in places like Oklahoma City, Sacramento and San Antonio. It’s fair to say that when AT&T announced its intentions to deploy IPTV, it single-handedly provided the large carrier validation that kick-started the maturation of the IPTV ecosystem. In the wake of this announcement, some of the largest equipment vendors in the world have stepped into the IPTV arena, providing economies of scale, stimulating innovation and spurring interoperability standards.
For service providers, this involvement of large vendors has translated into more choice, lower costs and greater confidence. Today, hundreds of vendors provide ecosystem components for middleware, access equipment, headend and compression, set-top boxes, security, video-on-demand servers and a plethora of other necessary equipment. The limited availability of stable high-definition television (HDTV)-capable MPEG4 AVC set-top boxes—which had stalled the industry for much of the last year due to chip stability challenges—has largely been resolved over the last few months.
Now, the challenges become increasingly focused on execution and strategy. Can service providers overcome IPTV’s perceived financial and operational burdens? Although these concerns are valid, telcos are benefiting from new, innovative solutions that are addressing these issues head-on.
The high cost and complexity of content licensing, encoding, compression, encryption and distribution has never been easy for telcos to digest. Not only is IPTV a business that is foreign to most, but also new HD content and encoding technologies like MPEG4 AVC have dramatically increased the cost and complexity of IPTV deployment. With standard and HD MPEG4 AVC encoding and compression equipment costing between two and six times the cost of comparable MPEG2 equipment, the cost of a full 200-channel MPEG4 AVC headend could easily be double or triple the cost of a legacy MPEG2 headend. The result: a $3 million-plus initial capital outlay for a typical competitive MPEG4 encoded channel line-up. New service provider models, however, have emerged to address this challenge, effectively cutting up-front costs by over 90%.
These new models leverage a super-headend—that is, a headend that provides the MPEG4 AVC encoding and compression for dozens or ultimately hundreds of telcos—and, for a nominal monthly fee, transport this access-ready content via satellite to telcos across North America. This model requires an initial capital investment of approximately $300,000, which covers the service, satellite dish installation, receivers and local channel insertion—about one-tenth of the cost of a traditional headend. In addition, solutions like IP-Prime from NRTC/SES-Americom can play a key role in facilitating content licensing, ensuring security and even managing middleware and set-top boxes. These solutions dramatically change the economics of content encoding and distribution for large and small communications service providers alike and greatly ease the access to IP video content.
Traditionally, one of the most oft-repeated challenges to IPTV has been that service providers considering the service cannot get the business model to work. In essence, the costs of plant upgrade and ongoing operational costs were seen as too expensive to be offset by service penetration and potential revenues. These models in the past have often burdened video services with the entire cost of the network upgrades necessary to deliver these services. Many communications service providers, however, now realize that, independent of video, their broadband infrastructure requires an upgrade merely to remain competitive for basic broadband services. Instead of burdening the video business case with the network buildout necessary to deliver IPTV, many service providers are acknowledging that IPTV is complementary to their emerging broadband expansion and upgrade plans.
As with any new technology, the devil is often in the details of deployment. The strategic battle is often won or lost based less on the initial capital expenditures and more on the operational expenses for customer turn-up and maintenance. IPTV is no different. The costs of home rewiring and customer provisioning amount to hundreds of dollars for both subscriber acquisition and opportunity lost due to delays in time-to-revenue. Even the most efficient home rewiring and turn-up is often a multihour affair, consuming valuable field technician and customer service time, and laying the foundation for potentially long customer backlogs and additional customer inconvenience.
As telcos gain deployment experience, their costs have certainly come down. But even more important, several new technologies are driving down costs and driving up revenues during the customer turn-up process. One major enhancement has been the introduction of wireless in-home distribution, where IPTV is distributed wirelessly to TVs scattered throughout the home without the need for laying new cable. Recently commercialized by a number of U.S. customers via equipment from Ruckus Wireless, wireless in-home distribution costs about the same as traditional home rewiring while reducing installation time by 75%. The result: More than three times the number of installations can be completed in a day, leading to fewer labor hours as well as faster service penetration and time-to-market.
Years of IPTV deployment experience are also now finding their way into vendor products and programs. Video-optimized element and network management systems incorporate integrated tools for video line testing, troubleshooting, provisioning and monitoring that arm telcos with the tools they need to efficiently deploy and support IPTV services. Optical network terminals (ONTs) may support features like integrated HPNA3 support to facilitate the distribution and management of services such as video in the home. Vendor interoperability assurance and certification programs have also emerged, speeding time-to-market and mitigating onerous integration and interoperability challenges that would otherwise add significant cost to IPTV deployment. Vendor-compiled best practices and methods-of-procedure documents—developed in conjunction with live customer IPTV deployments and aggregated as comprehensive training and reference materials for field technicians—allow video service providers to rapidly advance across the IPTV learning curve. Combined, these products and programs have systematically driven costs out of IPTV turn-ups, effectively turning what was once an operational black hole into a manageable science.
The promise of IPTV is finally here. The maturation of products, ecosystems and programs has turned what was once a leap of faith into a service ready for mass deployment. With cable stepping up its deployment of voice over IP, and satellite beginning to make strides in enabling competitive high-speed data services, the strategic imperative for IPTV is clearer than ever. An increasing number of service providers have seemingly already heard the call. For those still taking a wait-and-see approach, it may be time to reevaluate how far IPTV has come since the last time you looked. It is often hard to see points of market inflection when you’re in the middle of one. If you take a step back, it’s likely you’ll conclude that, for IPTV, the time to act is now.
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