& cplSiteName &

Report: IPTV Competitors Are Over-the-Top

Light Reading
News Analysis
Light Reading
6/28/2007

Internet video hasn't taken over the world, but network operators may find it's a tough competitor if they don't quickly add it to their own IPTV offerings, according to a new report by Heavy Reading.

The report, Internet TV, Over-the-Top Video & the Future of IPTV Services, says that while telcos are investing heavily in their networks in order to offer IPTV services, the growth of Internet video -- a.k.a. over-the-top (OTT) video -- traffic could cause carriers to miss a significant revenue opportunity.

First, the good news: While the amount of OTT video traffic is growing rapidly, over the next five years it will be outweighed by the amount of IPTV traffic running over carrier networks. James Crawshaw, analyst at large with Heavy Reading and author of the report, estimates that "all U.S. residential wireline telecom traffic totalled 5 exabytes in 2006," which "will grow to nearly 80 exabytes by 2011, due mainly to IPTV and Internet traffic."

Similarly, the overall revenue opportunity for OTT video will continue to be small compared with that from traditional media. Crawshaw notes that Apple Inc. (Nasdaq: AAPL)'s iTunes "sold around $100 million of video content in 2006; compare that to global TV industry revenues of more than $300 billion and movie industry revenues of $35 billion."

The largest revenue opportunity from online video will come from advertising, the reports says, but even that will capture only a fraction of overall advertising spend. Crawshaw estimates that "the revenue opportunity from online video advertising could reach $4.4 billion in the U.S. by 2011," but that compares with about $44 billion spent on television ads in 2006.

Even though revenues from OTT video services will pale in comparison to those from new IPTV service offerings, they still represent a missed opportunity for service providers. This is especially true because OTT video will compete with more IPTV services, and over the same networks as carrier offerings.

Deep packet inspection (DPI) vendor Ellacoya Networks Inc. estimates that Google's YouTube Inc. alone makes up more than 20 percent of all Internet traffic today. But for all that traffic sent to end users, carriers don't see a penny of the advertising revenue that Google (Nasdaq: GOOG) collects. With new high-quality, ad-supported video services being launched by companies like Babel Networks Ltd. and Joost , there will soon be even more competition for the attention of end users. (See Ellacoya Studies Web Traffic, Babelgum Launches Public Beta, and Joost Launches Commercially.)

So what's a network operator to do?

One option is to block or limit OTT traffic in favor of a carrier's own service offerings. However, Crawshaw writes that "throttling OTT traffic controversially violates 'net neutrality' principles, and as such could lead to intervention by government regulators, just as service providers caught throttling OTT VOIP providers have been prosecuted in the past." (See Vonage Spreads the Blame and FCC Fines VOIP Villains.)

A better path for operators would be to find a way to insert themselves into the relationships OTT providers could be forging with their customers. One way to do that would be to charge for content delivery and use DPI to guarantee quality of service for certain types of OTT traffic. This could be paid for by either the content provider or the end user.

Another option is to open up a carrier's IPTV platform to OTT content, essentially making OTT services available as a separate channel. This would allow service providers to bring in extra revenue, while also collecting data on consumer viewing habits.

Ultimately, this may be the model that wins out in the end. In a survey of telecom operators, Heavy Reading found that more than 50 percent think Internet video will become widely available in IPTV deployments, while fewer than 10 percent reject the notion.

For more information on the report, click here.

— Ryan Lawler, Reporter, Light Reading

(6)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Mark Sullivan
Mark Sullivan
12/5/2012 | 3:05:57 PM
re: Report: IPTV Competitors Are Over-the-Top
It's interesting to me that the telcos have laid claim to the term IPTV. I think in 2 years "OTT" will be called IPTV and the U-verse and FiOS walled gardens will be called "lame." That is unless they open up to things like Joost and VeohTV. My two cents.
rjmcmahon
rjmcmahon
12/5/2012 | 3:05:57 PM
re: Report: IPTV Competitors Are Over-the-Top
It's interesting to me that the telcos have laid claim to the term IPTV.

Yeah it sure makes communications difficult when terms are hijacked. Here are just a few that come to mind:

o ethernet != carrier ethernet
o broadband != FCC broaband
o IPTV != internet tv
o competition != free market competition

So whenever someone starts using such terms they can be saying the exact opposite of what one is interpretting them to say. Seems a bit Orwellain to me.

The loose definition of the term and the often poor correlation between the real life situations people describe as Orwellian and his own dystopian fiction leave the use of the adjective at best inexact and frequently politically inaccurate. In his essay Politics and the English Language, Orwell derides the use of clich+¬ and dying metaphors, which "even think your thoughts for you, to a certain extent" and goes on to say "But if thought corrupts language, language can also corrupt thought."
opticalwatcher
opticalwatcher
12/5/2012 | 3:05:56 PM
re: Report: IPTV Competitors Are Over-the-Top
"It's interesting to me that the telcos have laid claim to the term IPTV."

Actually I posted a message on Light Reading over five years ago how IPTV was coming to mean television from Telco's, and that WebTV (I think I called it Internet TV) was therefore a better term for any non-Telco television over IP.

English, unlike some languages, has no 'official' dictionary (despite some people who like to deputize themselves as language police).

So who knows--as pipes get faster and faster, so anyone can offer a high-definition television experience, maybe IPTV's definition will begin to shift again.
zwixard
zwixard
12/5/2012 | 3:05:56 PM
re: Report: IPTV Competitors Are Over-the-Top
Telcos can offer their IPTV with QoS. Others' must compete for the remaining bandwidth. When speed and quality matters, I am sure others will be called "TipTV" for Turtle IP TV.
MorningWd
MorningWd
12/5/2012 | 3:05:53 PM
re: Report: IPTV Competitors Are Over-the-Top
I agree with one of the later paragraphs mentioning that carriers will potentially enter into the OTT fray. This would be very easy for them to do, and they would then have the ability to make it easy for the end user to access it. Who would rather watch this type of content on a PC versus a TV? Who better to bridge the gap between the tech-savvy creators of the content and those who aren't "plugged in" to today's world? Enabling Grandma and Grandpa to easily see their grandkids football game on their TV is a powerful advantage that the carrier has for increasing the relevance of OTT content.
niblick
niblick
12/5/2012 | 3:05:52 PM
re: Report: IPTV Competitors Are Over-the-Top
I think Telco TV is toast if they simply offer walled garden content similar to Broadcast/Cable TV. Youtube and other web video sites have changed the rules. I think content is not king anymore, it is convenience and context which are the king. Already services like moowee.tv on game consoles such as Wii and PS3 enable users to conveniently access any content, create 100s of channels, and share with anyone.
Featured Video
Upcoming Live Events
September 17-19, 2019, Dallas, Texas
October 1-2, 2019, New Orleans, Louisiana
October 10, 2019, New York, New York
October 22, 2019, Los Angeles, CA
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events