Telcos continue to expand in pay TV

Telcos accounted for 25 percent of the total $113 billion global TV service revenues in 2011, and will continue to expand on the back of continuing IPTV and increasing OTT deployments, according to a report from UK analyst group Ovum. The surprise for some will be Ovum’s finding that IPTV still accounted for less than half of total Telco TV revenues in that year, owing to a substantial legacy of cable services in the Telco sector in countries such as Australia, Denmark and South Korea. Furthermore, in some other countries, including large parts of Latin America, Telcos have deployed cable and satellite services to overcome regulatory constraints prohibiting them from distributing TV signals over their existing infrastructure.

However, as legacy fades away and these regulatory constraints are lifted, Telcos will swing more to IPTV, which will account for 60 percent of their pay TV revenues by 2016, according to Ovum. OTT will also account for an increasing proportion of revenue by reaching users beyond operators’ existing closed networks, as well as extending the range of devices that can access the service for all customers. At the same time, the use and maturation of Content Distribution Networks (CDNs) will reduce and eventually eliminate the distinction between IPTV over dedicated, closed, end-to-end infrastructures, and OTT, where at least part of the video distribution is over third party networks.
By its definition, Ovum expects the number of IPTV households to double over the next five years, from 54.5 million in 2011 to 116 million in 2016. At the same time, non-IPTV services, as well as current hybrid Telco offerings involving satellite or terrestrial, will gravitate towards all-IP as the relevant CDNs and broadband infrastructures gain the required scale.

Despite being relatively saturated for IPTV in some of its markets, Europe will continue to account for its share of this projected IPTV growth, according to another survey by broadband research specialists Point Topic. While this survey singled out Asia and especially China for the fastest growth, IPTV will continue to gain subscribers in the leading European markets, notably France, partly because the services have greater resources and better established content deals.

Currently, France has around 12 million IPTV subscribers, almost a quarter of the world’s total, so there is limited room for much further growth, even though the sector is continuing to pinch customers from cable and satellite. But, European IPTV figures will be boosted by Russia where it is booming and set to continue doing so there, according to the country’s leading DTH provider, Tricolor TV. The company has indicated that the number of IPTV homes in Russia will treble from 1.74 million in 2011 to 5.71 million in 2016. Although, geographically, well over half of Russia is in Asia, the vast majority of the pay TV subscribers lie in the European portion of the country.

It is worth noting that all forecasts and even current assessments of the pay TV market in general should come with health warnings, since there are wide discrepancies between them. For example Ovum’s estimate that Telco TV services accounted for $28.3 billion in 2011, and that this was 25 percent of total global TV service revenue, indicates a total market size of $113 billion for that year. But Digital TV Research counted the market at $155 billion a year earlier in 2010. Given such wide variations in estimates of the pay TV market today, it is unwise to rely on any single survey as a guide to future strategy.