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Telcos & TV: Will Going Everywhere Take Us Somewhere?

Aditya Kishore
Heavy Lifting Analyst Notes
Aditya Kishore
11/3/2010
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Today, tens of millions of households around the world receive pay-TV services from their telco – an accomplishment on which service providers can congratulate themselves.

IPTV is projected to grow steadily over the next few years, largely at the expense of cable operators. However, in order to do so, service providers must find ways to pull customers away from their existing pay-TV operators. This means finding the right services, features, and packages that can tempt customers to switch providers.

The annual TelcoTV event is coming up next week, and US service providers will have an opportunity to review their progress so far and look to what comes next. The theme of this year's show – "Profiting in a Multi-Screen World" – offers some insight into current pay-TV trends.

US cable operators' efforts to offer video content over the Internet have garnered plenty of press of late. In fact, these efforts have been motivated by over-the-top (OTT) providers such as Hulu LLC , taking over what pay-TV operators see as their role. Service providers around the world now offer some quantity of video content online (and where they have mobile arms, on mobile devices as well). In a recent Heavy Reading survey of service providers, nearly 80 percent saw it as important to their business to offer video across multiple devices.

OTT video isn't just a competitive challenge for pay-TV operators. Given that most are also Internet service providers, it's also a network management challenge. Video traffic on the Internet is exploding, and forecast to grow fivefold. Network operators are watching the dramatic increases in network traffic with a wary eye. They are also seeing an impact on their operational costs in many cases, as well as potential deterioration in end-user QoE. Creating new online video distribution services of their own will only adds to this challenge. Operators are looking for ways to manage and potentially monetize OTT video. They are also looking for ways to integrate these OTT services into their pay-TV experience for their customers.

Another challenge is protecting content as its leash becomes increasingly longer. Content owner negotiations are difficult enough without concerns about content security. New mechanisms that protect content across devices are required, coupled with authentication and authorization capabilities across devices.

The increasing complexity of the home is another issue. Apart from the issues involved with provisioning, activating, and setting up a new IPTV home, now operators must contend with multiple devices and networks – MoCA, WiFi, HPNA, 3G/4G, etc. – that may be involved with video delivery. The technological requirements are complex, but service assurance and support will be a challenge in itself.

But perhaps the biggest challenge operators confront is figuring out what comes next. What will be the next big thing, the next "killer app" that will drive adoption and revenue? What new service or functionality will consumers look for from their provider that could define success or failure in the coming years?

We at Heavy Reading will be offering some insights via our annual TelcoTV pay-TV subscriber survey, presented on Wednesday, November 10 at noon in the Titian Room. As in previous years, the survey explores consumer attitudes toward their pay-TV providers, their satisfaction levels, additional services they are getting from their pay-TV operator, and their potential for churn. This year, we will also be looking multi-screen issues, examining consumption of online video, mobile video, interest in 3DTV, multi-screen video services, place-shifting, and targeted advertising.

— Aditya Kishore, Senior Analyst, Heavy Reading

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