System.NullReferenceException: Object reference not set to an instance of an object. at DotNetNuke.Framework.DefaultPage.OnLoad(EventArgs e) in e:\websites\\public_html\Default.aspx.cs:line 791 OTT tipped to topple satellite broadcast | TvTechnology

OTT tipped to topple satellite broadcast

May 7, 2012

A 20-percent fall in the average cost of Content Delivery Networks (CDNs) over the next few years will change the economics of video delivery, making OTT cheaper than satellite.

This prediction was made by conditional access and pay TV software vendor Nagravision, part of the Kudelski group, at last week’s Connected TV Summit in London. CDN costs would most likely drop by 20-percent over the next few years according to Thomas Decieux, head of product marketing, multiscreen solutions at Nagra, which would approach a tipping point when OTT delivery to the home becomes cheaper for many broadcasters than direct broadcast satellite (DTH), depending on factors such as geography, density of subscribers and the number of channels involved.

Nagra has compared the cost of satellite delivery per home with OTT TV over a CDN. For a 250-channel bouquet delivered standard definition at an average of 4Mb/s per channel with 25.5 hours of viewing per user a week, and taking typical costs for each, Nagra found that when there are over one million users CDNs already work out cheaper than DTH. This was based on an assumption that the satellite transponder would cost $3 million a year and a CDN $0.044 per GB. At those figures DTH was still cheaper for larger numbers of subscribers since delivery costs are virtually the same, but Decieux argued that OTT would catch up for two million viewers soon and then become the most economical for progressively larger subscriber bases.

This would mean that while for the largest DTH operators such as DirecTV in the US, satellite would remain the most effective delivery for well over a decade, there are not many that big. According to Nagra’s figures, for CanalSat in France with five million subscribers, the tipping point would be reached in 2018, while for BSkyB in the UK, Europe’s largest DTH operator with over 10 million customers, it would happen in 2021.

So, while these operators can take their time and continue for now to treat OTT as a multiscreen extension rather than primary delivery mechanism, Nagra’s main argument is that new service providers should seriously consider delivering over CDNs from day one and not bother with satellite at all. And for smaller existing service providers with legacy bases of DTH customers, the proportion of the total channel bouquet that can be delivered cost effectively over satellite would diminish over the next 10 years. A point will be reached when it makes economic sense to deliver only a handful of terrestrial over-the-air channels over satellite, and all the rest by OTT over CDNs.

This presentation raised more eyebrows than most at the Connected TV Summit not least because Nagra has many DTH operators among its customers, which use its middleware, conditional access and user interface designs. However, Nagra would point out that its Federated Headend for multi-service delivery is agnostic to the mode of transmission and provides a single control point of control for satellite, cable and OTT content. Nagra, then, does not care whether operators use satellite, cable, IPTV or OTT. Indeed, the same economic argument will apply to cable and IPTV, which could also be overtaken by OTT.

The difference in those cases is that OTT, cable and IPTV all use a wired infrastructure and the distinction between them will become increasingly blurred over the next decade. It was significant then that Decieux also cited the case of a Nagra customer, the Spanish Telco Jazztel, which launched its OTT Jazzbox service late 2011 in partnership with Spanish pay TV operator Prisa TV. Jazztel went with OTT rather than IPTV partly because this extended the footprint and does not confine the service to its own broadband base.

But, as the CDN model evolves, with growing use of federated CDNs allowing services to span the globe, OTT will become increasingly indistinguishable from IPTV, and cable will just be one of various last mile options for delivery. OTT will succeed on the assumption that it will deliver full quality with service guarantees at a lower price than alternatives.

But, before we write off satellite, it is worth remembering that Nagra’s economic argument does not hold in areas of sparse population, and will not apply for a long while in regions where broadband infrastructure is poor. For this reason, satellite will continue to boom in regions such as Latin America and parts of Asia where at least one of these factors applies.

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