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11.01.2006
IPTV: A Success Story From Europe
IPTV was a hot topic at IBC this year, and for good reason: service providers are rapidly rolling out IPTV services to consumers all across the continent. Not every venture has been a winner, but there have been a number of successful deployments, and more are on the way.

Graeme Packman, of Understanding & Solutions, a consulting firm in Bedfordshire, England, gave a very interesting presentation on IPTV in Amsterdam, and provided additional data used in preparing this article.

One country where IPTV seems to be taking hold is in France. In the past three years, more than 300,000 subscribers have signed up for IPTV service from Orange (France Telecom).

Alternative ISP Free provides an IPTV service with more than 80 channels in a package that includes Internet access and telephony. Around two-thirds of Free's 1.9 million broadband subscribers are eligible for this package.

Other IPTV providers include alternative operator Neuf Cegetel, which recently acquired AOL France, Telecom Italia subsidiary Alice and T-Online's (Deutsche Telekom) Club Internet.

France has an estimated 25 million television households, with approximately 3 million CATV subscribers and 4 million satellite subscribers (in addition to the 1.5 million subscribers with IPTV service available).

IPTV POOL

According to London consultancy Point-Topic, France had 10 million broadband subscribers as of December 2005, so there are a significant number of potential future IPTV subscribers.

The success of IPTV in France has occurred for a number of reasons, some of which are specific to the French market, and some that may also be true for other locations. Let's take a look at some of the major reasons that I discussed with Mr. Packman.

Due to a very competitive market, the prices for IPTV services are low. Orange/France Telecom's basic IPTV service with more than 40 channels costs just a shade over $20 a month. Free's basic triple-play package that includes high-speed ADSL2+ Internet access, free voice calls to fixed lines in more than 20 countries, and IPTV costs about $38 per month.

VIDEO, SCHMIDEO

At this low price, many Free customers are happy purchasing the package just to get Internet and telephone service, and don't utilize the television services. Incumbent Orange has started to bundle its basic IPTV service, which includes more than 30 channels, free of charge with some of its broadband access offerings.

As mentioned above, the main alternatives to IPTV are CATV and satellite, both of which have penetration far below levels in other countries. In the case of CATV, up to a year ago, there were several cable operators who had not converted the analog base to digital as rapidly as in the United Kingdom without video-on-demand capability.

There have been a number of mergers between CATV operators recently, which should improve the competitiveness of these systems and further push the transition into digital, including the introduction of VOD services. In the case of satellite TV, penetration has been hurt by strict local planning rules that make it impossible for many potential subscribers to mount antennas on their homes. As a result, for many potential viewers, IPTV may be their only way to get digital TV services.

The channel offering of the two large IPTV suppliers is quite extensive. In addition to channels from all over France, both services offer basic-tier international programming from a number of other countries in Europe and the Middle East.

In addition, Orange/France Telecom offers more than 200 premium channels. Both operators have also partnered with media group Canal+ to offer premium content. While cost and selection may be paramount, HD content and VOD also may drive subscribers to IPTV.

The HD broadcast market in France is less developed than in the U.S. market. IPTV service providers in France are positioning to capture HD business when it emerges by deploying HD capable set-tops today.

In France, VOD also is not common, and IPTV providers are in practicality the first providers to offer VOD.

Other countries in Europe offer different pictures for IPTV. For example, the United Kingdom, a country with roughly the same number of television households as France, has twice as many digital satellite subscribers (over 7 million). NTL/Telewest operates CATV systems that pass half the homes in the United Kingdom and have 3.3 million subscribers.

Overall, the penetration of digital TV services in the United Kingdom is almost 70 percent of viewers, a much higher ratio than in France or many other countries in Europe.

As a result of these and other factors, the penetration of IPTV in the United Kingdom is much lower-only 30,000 subscribers as of a year ago, according to an article in The Register. U.K. levels are expected to stay below levels in France for several years at least.

The IPTV situation in the United States is also very different. With 110 million television households, IPTV has yet to make a significant dent-less than 0.5 percent of the overall market. The largest company pushing IPTV today, AT&T, has officially rolled out its IPTV service only in San Antonio so far. Another major U.S. carrier, Verizon, isn't using IPTV for its FiOS TV service-they are delivering a broadband (CATV style) video service over optical fiber.

One factor slowing IPTV rollout in the U.S. is that many DSL lines in the country span greater distances and use lower speed technology that is not well-suited for IPTV. Another factor is that more than half the U.S. broadband data users receive service from CATV companies, who have little incentive to roll out IPTV service to compete with their digital cable offerings.

VIABLE DELIVERY

IPTV is a viable new way to deliver content to viewers that, with the right conditions, can be successful in the marketplace. However, it always pays to remember that consumers care most about access to content; they don't care too much about how it is delivered.

Studies by Mr. Packman have shown that the dominant factor driving viewers to digital video technology is to increase their range of content. This is as true for IPTV as it is for previous digital video technologies.

Thanks to Graeme Packman for sharing his valuable data and insights. For more information on Understanding & Solutions please visit http://www.uands.com.




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