IPTV: a breakthrough for US telcos? Michael Kende and Ada Shulman Edited by Mark Colucci and Tim Hills
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1 IPTV: a breakthrough for US telcos? Michael Kende and Ada Shulman Edited by Mark Colucci and Tim Hills
2 Analysys Research Fixed Networks and Services Analysys Research Fixed Networks and Services online market intelligence service World Telecoms Marketplace online market intelligence service Fixed Mobile Convergence: opportunities and strategies for the mass market Retail VoIP in Western Europe: forecasts VoIP versus Mobile: forecasts for the future of enterprise voice Fixed Mobile Substitution and VoIP: forecasts for the battle for mass-market voice The Telco Product Portfolio beyond 2010 The Telco Organisational Structure beyond 2010 The Business Case for Carrier Migration to VoIP Viable Business Models Point to Big Opportunities for Public WLAN Emerging Business Models in Voice: the impact of Skype and other private VoIP applications The Business Case for Broadband Entertainment Western European Fixed Telecoms Markets: forecasts Mobile Networks and Services Analysys Research Mobile Networks and Services online market intelligence service Making a Success of Mobile TV and Video The US Mobile Market: trends and forecasts Delivering Strategic Benefits with IP Multimedia Subsystem (IMS) The Future of MVNOs in the 3G Era The Western European Mobile Market: trends and forecasts Product and Service Opportunities from Shortrange Wireless Technologies: WLAN, Bluetooth, UWB and NFC Wireless Voice over IP: technical and commercial prospects The World s Top Ten Wireless Services Retaining Customers and Minimising Churn: strategies for mobile markets Pushing Beyond the Limits of 3G with HSDPA and Other Enhancements The Role and Impact of WiMAX and Proprietary BWA Making a Success of the Mobile Content Value Chain Billing and OSS Analysys Research Billing and OSS Markets online market intelligence service Billing for Mobility: strategies for convergent charging Emerging Charging Architectures for New Mobile Services: understanding and evaluating the available technical solutions Published by Analysys Research Limited St Giles Court 24 Castle Street Cambridge CB3 0AJ UK Tel: +44 (0) Fax: +44 (0) research@analysys.com Analysys Research Limited 2005 Printed in the UK by Victoire Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the publisher. ISBN
3 Contents 0 Summary vii 1 US telcos see IPTV as a key response to competitive pressures Competitive pressures and IP technology are renewing telcos interest in video Competition and market changes are squeezing incumbents revenues Incumbents see IPTV and triple play as a key response IPTV triple play has strengths but faces uncertainties 4 2 IPTV technologies and deployment are still at an early stage Telcos can choose from several IPTV delivery modes and service types There are divergent infrastructure options Major players are making a variety of early deployments 12 3 Telcos need strong IPTV business cases to lead in triple play The basic case for telco video is strong Potential roadblocks could affect the telco IPTV business case 21 4 Advertising and interactivity are key IPTV opportunities Conventional TV advertising is in long-term decline IPTV offers significant interactive capabilities IPTV could replicate the benefits of Internet advertising IPTV matches advertising trends Interactive TV is already being used Interactive TV is easier for telcos than cable operators The quality of interactivity will be crucial 30 5 Telcos must plan for diverse outcomes Telcos face six main hurdles in regard to IPTV Outcome 1: Telco IPTV becomes a niche product Outcome 2: Telco IPTV becomes a cable equivalent Outcome 3: Telco IPTV powers an interactive advantage IPTV will affect all pay-tv players 38 Analysys Research Limited 2005 Contents
4 iv IPTV: a breakthrough for US telcos? Annex A: overview of cable TV 40 A.1 Cable technology 40 A.2 Cable services 43 A.3 Regulatory issues 44 Market intelligence services from Analysys Research 46 Reports from Analysys Research 47 Custom Research: meeting your information needs 48 Analysys Consulting: advising on strategy and policy 49 List of Figures and Tables Figure 0.1: Key hurdles and plausible outcomes for US telco IPTV ix Figure 2.1: TV and video delivery modes 6 Figure 2.2: Fiber deployment options for telco IPTV 8 Table 2.1 Characteristics of chief forms of current DSL technology 11 Figure 2.3: DSL downstream capacity by length of copper loop 12 Table 2.2: Bell fiber and IPTV deployments 13 Table 3.1: Breakdown of cable operators revenues, Figure 5.1: Key hurdles and plausible outcomes for US telco IPTV 32 Table A.1: Typical frequency allocations for services in 750MHz-bandwidth HFC cable network 41 Figure A.1: Cable and circuit-switched telecom architectures compared 42 Contents Analysys Research Limited 2005
5 IPTV: a breakthrough for US telcos? v Authors Michael Kende is a Principal Consultant at Analysys Consulting, based in Washington, DC. Prior to joining Analysys, Michael was with the US Federal Communications Commission, where he worked on a wide range of policy analyses and regulatory decisions concerning Internet issues, broadband deployment, and market-opening conditions. At Analysys, Michael has worked on regulatory projects around the world, including Brazil, Mongolia, and Singapore. Recently he completed a wide-ranging study on major trends in VoIP for the European Commission. Ada Shulman is a student of Econometrics and Mathematical Economics at the London School of Economics. During her internship with Analysys Consulting in Washington, DC, she worked on several projects related to IPTV and IP convergence, including this report. She has held previous internships with the Fannie Mae mortgage company in Washington, DC, and with the National Weather Service in Virginia. Acknowledgements The authors would like to thank all those who assisted in the preparation of this report: Ross Pow and Rupert Wood, for useful discussions on telecom drivers and the issues they raise for incumbent telcos, and Mark Colucci, Tim Hills, and Catherine Viola, for editorial advice and production of the report. Disclaimer Figures and projections contained in this report are based on publicly available information only and are produced by Analysys Research Limited independently of any client-specific work within the Analysys Mason Group. The opinions expressed are those of the stated authors only. Analysys Research Limited recognizes that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalization. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Research Limited maintains that all reasonable care and skill has been used in the compilation of this publication. However, Analysys Research Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents, or any third party. Analysys Research Limited 2005 Contents
6 Market intelligence services from Analysys Research Analysys Research s online market intelligence services help you keep track of the latest developments in major telecom markets worldwide. All our services are regularly updated and include a sophisticated range of interactive search, benchmarking, and download tools. Analysys Research Fixed Networks and Services provides detailed analysis of all the major fixed network operators and ISPs in Europe, country reports for 30 European markets, detailed forecasts for key country markets, expert commentary on industry trends, and a dedicated broadband area covering penetration and market share of operators and technologies and broadband pricing. Analysys Research Mobile Networks and Services provides insight into the strategies and activities of key players worldwide, detailed country reports for leading mobile markets, 3G status reports, country market forecasts, and analysis of industry trends. Analysys Research Billing and OSS Markets includes a searchable contracts database, trends papers providing insight into the latest issues in billing and OSS, and profiles of both leading and up-and-coming vendors worldwide. World Telecoms Marketplace is a leading source of company and contact information, covering all major sectors of the telecom industry worldwide. Its thousands of records show data on company activities and products, key financial and operating data, and contact details for senior staff. Our Analyst Support package, which allows you direct consultation with our telecom experts, is an ideal complement to your chosen market intelligence service. For more information on our services or a guided demonstration, please contact our Sales and Customer Service team at +44 (0) , us at research@analysys.com, or visit our Web site at Market intelligence services from Analysys Research Analysys Research Limited 2005
7 Reports from Analysys Research Analysys Research s reports are designed to keep you up to date with industry developments and how they affect players in the telecom value chain from fixed and mobile network operators, to software and equipment vendors, and content providers and distributors. Our reports will help you: explore the factors that are driving market evolution understand how industry trends will affect your business define and evaluate your strategic options using decision frameworks and scenarios identify where opportunities lie for future growth find out which players are successful and why. Our publication program offers over 20 reports a year, covering all the key issues affecting the telecom industry and the latest hot topics. Recent reports have provided expert analysis of topics such as fixed-mobile substitution and convergence, voice over IP, enterprise voice, carrier migration to VoIP, broadband home entertainment, telco product portfolios, emerging wireless technologies, IMS, MVNOs, and mobile content services. Each report is accompanied by an Excel spreadsheet containing forecasts and other key data discussed in the report, presented in an easy-to-use format. All reports are offered with Analyst Support, allowing you direct consultation with the author. Shop online at or, for information about our report subscription packages, contact our Sales and Customer Service team at +44 (0) or by at research@analysys.com. Analysys Research Limited 2005 Reports from Analysys Research
8 Custom Research: meeting your information needs Analysys Research s portfolio of Custom Research services has been developed in response to demand for custom market intelligence, when more data is needed than is found in an off-the-shelf report or database, when there are complex questions about specific companies or markets that need to be answered, or when analysis needs to be tailored. Custom Research can deliver real value when an organization needs to answer specific questions about how it is positioned in the market, and how to optimize performance at various stages of the product or service life cycle. Market opportunities? Match to customer needs? Suppliers New idea generation Effective procurement? Costs? Pricing? Competitive landscape? Regulatory regime? Competitors and partners Company internal processes Regulators/ government/ legislatures Market and technology trends? Strategy Product or service Launch Marketing strategy? Channel strategy? Optimum efficiency? Market analysis? Optimisation Customers Customer satisfaction? Competitive positioning? Understand how your company is positioned Optimize performance in the product or service life cycle In answering our clients questions, we bring a wealth of understanding of markets, and of techniques and services including: desk research, data collection, and interpretation benchmarking services quantitative and qualitative surveys market sizing and forecasting competitor and partner profiling white papers, presentations, and workshop facilitation event and trend analysis procurement assistance. For more information on Custom Research services from Analysys Research, or to discuss how we could help you to meet your specific information needs, please contact our Custom Research team at +44 (0) or us at custom@analysys.com. Custom Research: meeting your information needs Analysys Research Limited 2005
9 Analysys Consulting: advising on strategy and policy Analysys provides strategy and management consulting, information services, and start-up support throughout the telecommunications, IT, and media sector. We help clients to: understand and manage business risk launch new market propositions develop and implement sustainable business improvement programs. We have developed unparalleled industry knowledge, techniques, and data sources over the last 20 years, giving us and our clients a head start in the search for competitive advantage. Clients retain Analysys because of our ability to combine rigorous analytical techniques with our deep industry awareness and market insights to address their key business challenges. Our services include projects that deal with: strategy and business planning investment appraisal, profitability analysis, corporate finance, and venturing regulatory and policy advice, procurement support, and major project implementation market sizing and forecasting litigation support. These are complemented by wide-ranging market intelligence, which informs customers worldwide on the issues, companies, and trends affecting the industry. Analysys operates through a network of global offices and has served clients directly from our US office since Our North American client base includes network operators and service providers, equipment manufacturers, investment and legal institutions, trade organizations, and international agencies. For more information about these services from Analysys Consulting, please contact Michael Kende at , michael.kende@analysys.com, or visit our Web site at Analysys Research Limited 2005 Analysys Consulting
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