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Home | Development | Arthur D. Little, Karim Taga
Karim TagaHybrid delivery of content for IPTV

Karim Taga, Marketing Director for Arthur D Little talks to Intercomms

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Karim Taga is Managing Director in the Vienna office of Arthur D. Little’s German, Austrian and CEE operations. He specializes in telecommunications and he is a member of the TIME (Telecommunications, Information Technology, Media and Electronics) practice. Besides he is leading the TIME practice in Austria.

His interests are primarily focused on three functional areas:

  • Business strategies and marketing concepts
  • Corporate Finance and business planning - Leading the global ADL competence center of technology economics

Karim Taga received a Master of Science in 1989 from the Ecole Supérieure de l’Energie et des Matériaux, Orléans France with a master thesis accomplishment at the University of California Berkeley. After his studies he worked as a research assistant at the Vienna University of Technology where he developed an infrared fibre optical sensor. He received his Ph.D. in 1992 followed by an MBA in International Business from the Webster University St Louis Mi in 1993.

Q: What are the big issues with IPTV coverage facing operators?
A: If you look at the development of IPTV, we see that the most advanced market in Europe is Belgium, where the incumbent has managed to get more than 25 percent of their broadband customers using IPTV. Other operators have four percent while KPN, France Telecom and telefonica have between 8-12 percent. There are two major reasons for that success; premium content and coverage.

Premium content is often not accessible, as it is already locked via exclusive contracts by payTV operators (satellite or cable operators). Hence, even if IPTV operators are ready to invest and acquire the rights, it takes time and operators have to wait until the exclusivity is lifted or bid for it when tendered again after a certain period of time (typically for Premier League Football rights every 3 years).

If you consider coverage, you find out that the operator is claiming IPTV coverage that isn't accurate. In the best case scenario they may eventually have 50 percent, but in reality they actually have 35 percent of households who can really use high quality IPTV services. Because the eligibility of the service is very limited, it cannot be considered a mass market service because it is depending on the quality of the local loop and on the broadband infrastructure that is available. This is mainly based on the quality of the copper and the distance to the client from the Central Office. You need to have both very high ADSL coverage and secondly the distance to the end user should not exceed 2-3 km, beyond that, you can't download 20Mbps and you can't offer multiple TV services.

Q: To what extent does the further move to HDTV complicate matters?
A: If you move on to HDTV service quality on which premium content such as football and Formula 1 is found, the ADSL footprint eligibility for triple play goes down to just 10-25 percent. About 90-95 percent of the market that is simply not eligible for HDTV as it stands. We believe that today in Europe, incumbent operators have to understand that with IPTV over copper, under normal economic circumstances it is not suitable for 100 percent coverage. Therefore, they have to think about alternative technologies like satellite that are already well deployed across the region, to complement the ADSL footprint i.e. offer nationwide via hybrid offers. Interactivity and video on demand services can still be supplied by DSL because, there the eligibility is 90-95 percent for broadband supply (guarrantying the interactivity and VOD push). Operators should be using high definition over multi-broadcast satellite channels that are already available "in the sky". The challenge operators have to use the available channels is first to negotiate the rights and license conditions and secondly integrate multiscript set top boxes to their existing infrastructure and deliver to their clients hybrid solutions.

Q: Why multi-script?
A: Because they will be using video on demand and interactivity with their own conditional access related to IPTV and the conditional access that will be licensed from the satellite provider. This is quite critical and we have seen already multiple operators, following that route. France Telecom has mentioned that they will provide satellite by the end of 2008 in four countries; France, Poland, Spain and the UK. Portugal Telecom has taken a similar decision and there are several others with whom Arthur D.Little are working with, who also plan to do so. The satellite cost per subscriber is much lower than IPTV offering much lower OPEX and CAPEX can be expected particularly in less dense areas. All of a sudden operators are able to compete with others offering HDTV particularly CaTV or Satellite operators, by offering a cost effective service and at an increased coverage.

Q: About the issue of content?
A: The second key factor is content. It is not about interactivity and making personalised TV services, the market is far away from that. It is much more about a lean back, couch potato mentality. You will not change the pattern of TV consumption and mindset of the consumer. What they want is good content and it seems that in each country, certain events like Football or Formula 1 are the most valued premium content by consumers in Europe.

The major point we shall realize is that the success of the early IPTV operators was not linked to interactivity or personalisation of the services, but mainly because of the coverage as well as because of the right content and aggressive promotion and bundling of packages. We should not over estimate the need for interactive platforms, the readiness of the user playing with interactive services, really she/he just wants to watch TV and view the right content.

Q: To what extent do operators understand this?
A: Operators are blindly coming in from diverse industries like mobile where the level of interactivity of the hand set is quite important or from online web services, where the user is also very interactive. You don't need that in TV. They tend to forget that TV is just a couch potato activity for over 90 percent of consumers (exluding VOD). Unless you are targeting the five to ten percent who do want interactivity, and it is relevant to them. It is not about having an online chat while you are watching TV. This is not yet being used, Video on Demand, is the first interactive service that has shown an attractive growth potential.

Q: Are there other reasons why these services are inappropriate?
A: First of all I believe that the mass market consumer segment that is targeted doesn’t necessarily want interactive services. The design of the interactive services is not based on a real need but eventually marketed as a diffentiation to standard linear-TV. Secondly the consumer that showed interest ininteractive services were disappointed, the initial platforms introduced didn't demonstrate a high quality user experience. It is an area were we have seen multiple offering postponements year on year.

Selling iTV services via the existing channels seems to be quite complex and the staff in the shops are not yet trained properly to sell sophisticated TV services. A further problem area lies in servicing the customers via call centers once users encounter problems with their STBs or remote control interacting with new services. If you start to interact with the TV service and something doesn't work, it becomes a real challenge for agents to support you remotely in fixing your problems at home. The current customer service agents are typically trained in classical telecommunication service i.e. used to understand how to change service plans, upgrade a service or activity or deactivate a service. How to deal with an interactive service, even with highly trained supervisors explaining why your voting button doesn't work in a middle of a show is critical, one shall not under estimate the cost of operations to provide services for iTV features, cost factor that is often revised upward.

There are several barriers to really exploit the upside on iTV. However operators are often blindly following recommendation from suppliers and failing totally in the realisation of the service in terms of personalisation and interactivity as well as servicing the services.

Q: What is Arthur D Little doing in this hybrid IPTV arena?
A: We are helping operators to do the right things, right. That is, focus on the basics, make sure that when you design a TV offering, it is competitive with that of cable and satellite operators and fulfils the basic needs of a consumer in terms of packaging, bundling and pricing. More than anything else the promotion aspects such as customer segmentation and service plans need to be compelling. Second, we look at the coverage area and most of all, realistic coverage areas and most of the time we find that there is a limited "real" coverage for IPTV (i.e. elligeable area). Therefore we look at alternative platforms and typically satellite will be the most appropriate one. We look at different operators to complement their infrastructure distribution and TV delivery by accessing satellite offers and infrastructure and we have been designing those solutions with multiple operators considering different business models.

Q: What are those models?
A: One is the service provider, reselling existing packages from satellite operators. The second is the virtual direct to home (vDTH) for operators who repackage services (TV channels) from the existing satellite provider, hence only investing in the simulcast set top boxes. The uplink, downlink and production of content are done by the satellite operator themselves who provide a white label service to the vDTH operator. A third option is DIY. Make an agreement with satellite operators - buy transponder capacity, invest in uplink and distribute your own TV channel. That is not very efficient, because the operator has significant costs in production, in the signaling transmission and getting the whole process in place. Its an entirely new a business for them.

Our recommendation is to assess all different players acting in the market, identify what kind of business model you can enter and have the operator make eventually a deal with the players. We have developed win-win value propositions considering partnerhips and new business models for the operator in several cases.

The third part of what we do is to support the content analysis. We look at the content, the right mix, the right distribution level and we assist operators to look at what they can acquire such as football rights etc. If that's not possible then support partnership models with existing players to get a complementary portfolio. We believe very strongly that the major differentiation will be with premium content. We understand how the market is structured and what kind of deal operators can strike in order to get that.

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