[Satellite News 04-02-09] With many telcos now established as TV providers in their home markets, the question as to what impact this will have on the satellite sector was a prevalent one during SATELLITE 2009. “IPTV had been a success story for several telcos, while others are struggling,” John Krzywicki, partner at Analysys Mason’s U.S. Strategy Practice, said.
    In France, France Telecom (Orange) had 1.9 million TV subscribers at the end of 2008, and the United States, Verizon and AT&T had nearly 3 million direct subscribers for their Fios TV and U-Verse services, respectively, at the end of the year. However, other telcos have made a more circumspect start in the TV arena. BT Vision in the United Kingdom had less than 400,000 subscribers at the end of last year. While its subscriber numbers doubled in 2008, the operator has its work cut out in a digital TV market where BSkyB and digital terrestrial TV alternative, Freeview dominates. In Germany, Deutsche Telekom had less than 500,000 IPTV subscribers at the end of 2008.
    In Spain, Digital+, the satellite pay-TV platform, is one of the weakest in the main European markets, hovering around the 2 million subscriber mark for the last few years. At the same time, Telefonica has more than 600,000 subscribers for its IPTV service in Spain, meaning the gap between it and Digital+ is a lot closer than in other markets. In Italy, Telecom Italia had less than 330,000 IPTV subscribers at the end of 2008, meaning it was barely making a dent in the TV market.
    Tom Munro, CEO, Verimatrix, also cited TeliaSonera, which has reached 500,000 IPTV subscribers in the Nordic region. Munro said the killer aspect of this deal was offering the TV service free for the first year with a broadband subscription. Munro also mentioned the Netherlands as a good example of a market where IPTV could make a strong impact. With outlying areas of the Netherlands covered by KPN (the main Dutch telco)-owned DVB-T broadcasts, Munro says the operator “is in a great position to bring a hybrid set-top box which can seamlessly support broadcast via antenna, as well as offer video on demand and interactivity over a broadband IP connection.”
    Krzywicki highlighted France and Hong Kong as markets where telcos have made a stunning impact in the TV market. The keys to success, according to Krzywicki, are the content regimes in these countries, which made it possible for telcos to flourish. “In France, market leader Canalsat was not allowed exclusivity to key content, so therefore IPTV operators can therefore offer content on a par with satellite. Orange is moving up the value chain by acquiring proprietary content. In Hong Kong, there has been no regulatory intervention at regarding content access. This has meant that PCCW has been able to outbid incumbent cable operator, I-Cable on key foreign content and has built a very attractive content portfolio.”

Playing Catch-Up
There is more evidence of ever before of interesting telco strategies, although according to Tom Lattie, director of satellite and new media solutions for Harmonic, telcos are still playing catch up. Initially “the focus (for telcos) has been on building a strong foundation,” he said. “Building a video service is harder than it looks. Cable and satellite players have a significant head start.” Lattie likened the IPTV offerings of 2008 to cable offerings in 2005 in that they are focused primarily on reliably delivering video, and the service is about linear standard-definition and high-definition offerings, digital video recorders and some video-on-demand services .
    However, while telcos may be playing catch-up, Lattie believes telcos have some inherent advantages to exploit, such as offering multiple services. The operators have access to the “latest and greatest” technology, can use clever combinations of technologies such as 3G, Wi-Fi and wired broadband to deliver services. If telcos can leverage these advantages, Lattie believes they can be a threat.
    Steve Reinhardt, senior applications engineer, satellite distribution systems, Motorola, said many of the new IPTV operators were launching IPTV with MPEG-4 set-top boxes, which could give them a competitive advantage.
    Ian Tapp, senior vice president of business development, Tandberg Television Americas, also highlighted the next generation of IPTV services which will be available to customers, such as telcos being able to blend entertainment and communications, social networking and web media on the TV, and making the TV service more personalized.
    Kryzwicki said there were a number of compelling reasons for telcos to launch IPTV services. “IPTV opens up new revenue streams. It allows recovery of investments in next generation network. It enables multiplay bundling and increases customer stickiness as a result. It also protects telcos against cable operators in the broadband market. Cable players are now offering stiff competition in the broadband market,” he said.