Why some Telcos are going OTT only

The conventional wisdom is that while OTT is fine for TV Everywhere service extensions, core pay-TV will continue to be delivered over dedicated walled garden networks for the foreseeable future.

But, there are one or two operators flouting this’ wisdom’ and perhaps giving us sight of the future by going all OTT now. This is usually because of some special circumstances pertaining to their own infrastructure or competitive situation and this was certainly the case for Irish triple-play operator Magnet Networks, whose Aertv service is pure OTT.

One factor was Ireland’s unique stance of including OTT linear TV within its broadcasting act in 2009. Most countries’ broadcasting legislation predated OTT or sometimes even IPTV and including it makes deployment for full blown linear services much easier.

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The other factor was the Irish property collapse in 2008 just before the new act came into force, precipitated by the global credit crunch compounded by a failure to restrain the property bubble that had become far too large. Magnet’s strategy had been built around IPTV over FTTH (Fiber to the Home) in new housing estates, which had been going up rapidly, at a time when ADSL over copper was deemed to lack the capacity or reliability to deliver premium linear content. This strategy was derailed by the property collapse and then Magnet found itself unable to compete over its own HFC (Hybrid Fiber Coax) footprint against the might of two powerful competitors, Sky and Liberty Global’s Irish operation UPC. While Magnet still offers its IPTV service over its footprint, it regards OTT as the future.

The rights issue has retarded Magnet’s Aertv OTT service so far. Some premium sports content can only be delivered over the managed IPTV network, but the operator has secured open distribution rights to some niche sports popular in Ireland, such as field hockey, which supports its strategy of attracting subscribers abroad from the country’s extensive expatriate community. For that, OTT is really the only option apart from multiple distribution arrangements with other regional operators.

The Magnet situation was replicated in some respects in Spain where Jazztel, with around 1.3 million broadband customers, is also a relatively small Telco competing against a single powerful rival, in this case incumbent Telefonica. Jazztel was early into IPTV, launching in 2006 but then wilted under competitive pressure from Telefonica’s Imagenio IPTV service, which had accumulated over 700,000 subscribers by 2010. Jazztel only had an uneconomic 11,000 and so closed its IPTV service, then re-emerging with Jazzbox as an OTT only offering.

One difference between Jazzbox and Magnet’s Aertv is that the former requires a set-top while the latter does not. The only way to connect a TV to Aertv, at present, is therefore via a PC or some other connected device, which precludes it as a mainstream pay TV competitor. It is not clear whether a set-top version of the service will emerge, but at the moment. the lack of need for a box is highlighted as a selling point, with a low subscription between €4 and €8 a month depending on the package, lower than Jazzbox prices.

In both cases, the OTT route has succeeded in extending reach to most potential customers in the country, as well as outside in Magnet’s case. Aertv requires a minimum of 1Mb/s, which is available to over 90 percent of Irish households. What is not yet clear is whether OTT-delivered linear TV can compete full on with the major players for premium services when the operator has no control over the crucial access network. It also looks like it will be impossible to deliver OTT without a set-top.