As voice over Internet protocol (VoIP ) and competition from cable operators continues to erode the telephony market, telcos have increasingly been forced to build service portfolios outside their traditional sphere of interest. At the same time, core network developments have opened the door to a new world of triple play, offering consumer broadband, telephony, and television services in a single package. We know IPTV is something consumers value and will pay for—in territories in which IPTV services have been deployed, we have seen promising take-up. In Hong Kong 25 percent of the population—more than half a million subscribers—receive their television services from a single IPTV provider , PCCW's nowTV, a service that was only launched in August 2003. When you hear stories like that, it is easy to see why IPTV is regarded as one of our highest growth segments and why there is not a single tier-1 telco in the world that does not at least have a strategy for IPTV.
The introduction of asynchronous digital subscriber line 2 (ADSL2), coupled with significant improvements in encoding such as Moving Pictures Experts Group (MPEG-4), advanced video coding (AVC), and virtual channel 1 (VC-1), is making it easier to deliver broadcast-quality content to the home. But just because you can deliver content via broadband doesn't mean the consumer will want to watch it. Well-established cable firms already offer triple-play services to their customers, and satellite broadcasters have moved into the broadband and telephony arena. If IPTV is to progress, it must offer the consumer something that differentiates it from its commercial rivals.
France Telecom's MaLigne TV has recently held successful trials of high-definition (HD) via IPTV and in Japan NTT's on-demand TV is using our MPEG-4 AVC transcoding technology to reduce the bit rate of video delivery over millions of its DSL lines and to offer a new, extensive library of video on demand (VoD) movies to its subscribers in both standard definition and MPEG-4 AVC HD V-D. Many other telcos are also looking to offer HD now that MPEG-4 AVC and VC-1 compression is here to provide the bandwidth savings they need to make HD viable. However, with HD programming already available via satellite and cable and digital terrestrial TV (DTT) HD trials in progress, the rapid introduction of HD services will only serve to maintain parity between IPTV service providers and the competition. To continue to develop the market, IPTV providers will need to move quickly to distinguish themselves from existing platforms with the rapid introduction of VoD and interactive services.
In Holland, 90 percent of households that trialed KPN's IPTV service Mine TV have taken out a subscription. At launch Mine TV offered viewers 48 TV and 60 radio channels—similar to the local cable operator's offering. However, an important part of Mine TV's package was the FilmDirect feature, which offered on-demand content from the likes of Warner Bros., International Television Distribution, and Blockbuster Entertainment. It is these VoD services that have allowed Mine TV to gain a foothold in a cable-dominated market.
As the modern consumer becomes increasingly familiar with the on-demand nature of the Internet and personal video recorder (PVR) time-shifting services become more ubiquitous, there is a move away from the schedule-based world in which broadcasters dictate where and when viewers watch their content to an on-demand world where the consumer is in control. IPTV's one-to-one network architecture lends itself to VoD. The content provider only has to load the network with the program that is being watched at that moment, leading to less bandwidth pressure; improvements in compression technology mean two or three programs can be watched on different sets in the same house. In addition to VoD services, IPTV operators are introducing digital video recording services either via network PVRs or from a disk drive in the set-top box. These operators will be able to offer subscribers a new kind of triple play: live broadcast TV, time-shifted TV, and additional content on demand.
With viewers increasingly using PVRs to skip commercials, the interactive, real-time relationship that IPTV enjoys with its consumers offers considerable opportunities for advertisers. So-called telescoping will allow the viewer to use the red button on their remote control to launch an interactive, on-demand infomercial for a product or service that has caught their eye directly from a linear broadcast. Access to interactive games, appealing user interfaces such as easy-to-navigate electronic program guides (EPGs) and further integration with voice services—for example, linking the home telephone and television so that incoming calls are alerted on screen—will all contribute to viewer satisfaction, increased revenue, and reduced churn.
There is, of course, more to the success of IPTV than when people watch—there is also the question of where people watch. One of the byproducts of the success of MP3 players is that people have become accustomed to shifting content from one device to another to enjoy that content on the move. It is easy to see a time when programming via IPTV will be viewed not simply on the static home television, but also on a variety of smaller video-enabled mobile devices and watched during downtime—for example, while on the daily commute or relaxing in the park.
Convenience and content availability are the keys to any IPTV and VoD offering. A decade from now we will probably look back in amazement at a time when we rushed home to meet the scheduled start time of a television program. In the future how many viewers will continue to arrange their work and social life around Friday evening's Big Brother eviction? We already know there is huge demand for local language content from, for example, Chinese- and Spanish-speaking communities—does a Turkish or Japanese or Italian family living in the United Kingdom or the United States want to watch all their programming in English? Are there people for whom English is a first language who would rather watch some of their programming in French or Arabic or Spanish or Welsh? Is there a time in the near future where those who feel disenfranchised by traditional programming will generate their own content and upload it for others to view? IPTV has paved the way for all these possibilities.
Ultimately, whether content is "pushed" onto the set-top box or "pulled" from the head end via network-based VoD, consumers do not know and, frankly, do not care; what will matter to viewers in the future is getting access to the content they want to watch when they want to watch it, and according to estimates from Informa, by 2010 they will pay $10.7 billion a year to do just that. At TANDBERG television, we firmly believe that IPTV is well placed to meet the demands of the on-demand generation.
