The recent announcement that Verizon Communications Inc. (NYSE: VZ) will integrate social-networking applications and Internet video content with its FiOS TV service underscores the need for service providers to differentiate their TV services from cable and satellite competition. (See Verizon Adds Twitter, Facebook to FiOS.)

Verizon will be offering access to Facebook and Twitter Inc. content to FiOS TV customers via a "Widget Bazaar," which will be expanded over time to enable third-party application deployment via an open development platform. Similarly, the company is looking at expanding the range of Internet video options beyond the initial set of partners, Blip.tv , Dailymotion , and Veoh Networks Inc. (Note: Only FiOS' VoD service is delivered over IP. Its broadcast channels are offered using a cable-like RF architecture. Still, Verizon faces the same business issues as any "pure" IPTV provider.)

It's important that IPTV providers around the world continue to innovate in this way. In most regions in the world, they are entering fairly mature pay-TV markets where they will need to steal subscribers from existing pay-TV providers. To do so, they must offer a substantially different service.

IPTV certainly has grown around the world, eclipsing the 20 million subscriber mark in 2008. Most major incumbents in North America and Western Europe offer IPTV, and increasingly operators in Eastern Europe and the Asia/Pacific region are following suit. Even in Latin America interest in IPTV is high, but regulation restricts deployment in some of the largest markets today.

However, the initial promise of IPTV is still unfulfilled. Compared with established cable operators' offerings, IPTV still offers a fairly similar experience. The expectation that an all-IP, all-digital platform would enable a steady stream of innovative value-added services, and successfully pull away from cable and satellite services has not been justified so far.

The recently published Heavy Reading study, "IPTV 2.0: Delivering the IP Promise," examines the growth of IPTV around the world. The study found that a set of key applications is being deployed or will be shortly, by a number of leading providers around the world. These applications are seen as bringing in the next-generation of IPTV. Some of those key applications are:

While there are significant differences across regions, IPTV providers in general are looking to new applications to differentiate themselves from other pay-TV providers. At least in theory, the all-IP network should be able to drive faster innovation and expose the limitations of cable and satellite. That's potentially good news for consumers who will be offered converged entertainment, communication, and interactivity, seamlessly delivered to any device of their choice.

— Aditya Kishore, Senior Analyst, Heavy Reading