01.16.2007 08:00 AM
U.S. IPTV subscriptions reach 600,000

The start of a new year seems like the right time to take stock of where the IPTV market stands and is likely to go.

IPTV Update spoke with Bob Larribeau, principal analyst and founder of TelecomView and an analyst with Multimedia Research Group (MRG), to discuss his recent forecasts and assessment of the IPTV market.

Last fall, Larribeau authored "IPTV Global Forecast: 2006 to 2010" for MRG.

IPTV Update: Your "IPTV Global Forecast: 2006 to 2010" report released last fall identified small independent IPTV providers as driving much of the IPTV growth in North America, as opposed to Europe and Asia where large telcos are mainly responsible. What are the major reasons for the drive by small independents?

Bob Larribeau: The small independent telcos have pioneered IPTV globally. They started first, so they developed a lead. Their small scale does work in their favor as does their commitment to providing advanced services to a largely rural population. The government loans and funding that support them have enabled them to do this.

IPTVU: How do your findings square with Verizon's FiOS rollout and AT&T's U-verse launch?

BL: FiOS did much better than we forecast and AT&T did worse. FiOS has done quite well at signing up FiOS and FiOS TV subscribers. On the other hand, AT&T is behind. It missed its FTTN deployment target for 2006 by 20 percent. Its U-Verse introduction has been quite tentative. AT&T still seems to be in beta test mode rather than offering a fully scalable service.

IPTVU: The report identifies the IPTV sector not experiencing growth as being operators who have selected Microsoft software. Has that changed since fall in light of certain recent rollouts in Europe, such as Deutsche Telekom?

BL: Rollouts have started at AT&T, Deutsche Telekom and Swisscom since the report was released. There are reports that Swisscom now has 20,000 IPTV subscribers. This is good progress. There have been no announcements from AT&T or Deutsche Telekom, but I do not expect that their numbers will be very high.

When I did the forecast I went through a fairly arithmetical process of working with the spreadsheet, and I started plugging in numbers and looking at it. What I noticed was the results I was seeing for service providers around the world were at or exceeding the previous forecast and previous expectations. So, everything was going along nicely on the path we were forecasting.

The exception was the Microsoft accounts, and that had a big effect on Deutsche Telekom and also on AT&T and Bell South in the U.S. In Europe, the market was blank enough that the European market was still ahead of where I expected it to be based on results from other service providers.

North America was behind and I did not have solid information at that time about FiOS, and what Verizon was doing with FiOS, so I was pretty conservative with those numbers. So, I ended up dropping the North American numbers from the previous forecasts quite significantly. Just looking at that, it was obvious that the whole market was doing great except for the Microsoft accounts.

That was a first conclusion, and the more I worked on it, the more that conclusion held up. I had three discussions with Microsoft about it and they didn't dispute my facts. They maybe disputed my forecasts, but they didn't dispute any of the facts in my forecast.

IPTVU: What do you see for AT&T?

BL: AT&T's rollout is quite tentative, and it is not trying to acquire large numbers of subscribers today.

When AT&T was talking about introducing in 10 or 12 markets, I was thinking in terms of the San Francisco Bay Area being a market, Houston being a market. Now, what AT&T is saying is that in the San Francisco Bay Area, there are three markets, like the Cupertino, Saratoga and Fremont markets. They're not producing what I expected. I expected 10 markets to be San Francisco Bay Area, San Antonio, Los Angeles and San Diego — major metropolitan areas. In terms of what I have seen with other rollouts, that would not be unexpected.

The other thing with AT&T is at the end of the third quarter in September they said they had 3000 IPTV subscribers, which is a drop in the bucket. I don't expect them to do what PCCW in Hong Kong did, but PCCW signed up 200,000 subscribers in the first 10 weeks, and was installing them at about the rate they were coming in. So they were generating business at a much higher rate than AT&T. Hong Kong's only got 2 million families, and AT&T's territory is much larger, so the potential market is greater.

IPTVU: How will developments in Web video impact the acceptance of IPTV service, particularly because consumer electronics manufacturers are trying to make it easier for viewers to access Web video content directly from their televisions, and because younger viewers are moving to the Web?

BL: Web video does not provide a replacement for the multichannel IPTV or cable experience, so it is not a direct substitution today. It will compete with video on demand services from IPTV and cable companies as well as video rentals. I think that the IPTV service providers can take advantage of these techniques themselves and use them to enhance their businesses. This can well be net positive for the IPTV service providers.

The IPTV providers can also leverage the free, user-contributed content from sites such as YouTube. This content generally does not fit the TV very well, so it will probably not be significant for IPTV service providers.

IPTVU: How many IPTV subscribers are there in the United States today? What numbers do you project for the United States in 2010?

BL: We believe that there are about 600,000 IPTV subscribers in the U.S. today and that this number will grow to 1.4 million in 2010.

IPTVU: Is there anything else you would like to add?

BL: The real IPTV opportunities are in Europe and Asia. The North American market is already saturated by cable and satellite, so the IPTV providers will have to win over cable and satellite subscribers. Europe is very strong today and the majority of people in most countries are not using cable or satellite services, so the European market is much more open. The same is true in Asia, and China and India will become the two largest IPTV markets in the long run.

For more information, visit www.telecomview.info.

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