 Hybrid delivery of
content for IPTV
Karim Taga, Marketing Director for Arthur D Little talks to Intercomms
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.
For more information:
Email: taga.karim@adlittle.com
Website: www.adlittle.com
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