PCCW: IPTV Demands Innovation

SINGAPORE -- IPTV World Forum Asia -- IPTV service providers need to focus on service and marketing innovation if they're to prevent their broadband content service becoming stale and uninteresting, Ted Hsiung, head of business development at Hong Kong carrier PCCW Ltd. (NYSE: PCW; Hong Kong: 0008), told attendees here today.

During a presentation Thursday, the executive said competition from other TV providers and network operators - plus consumers' constant demand for new content - means IPTV players need to continually refresh their service offerings, in terms of how services are packaged and presented. And they must make use of the latest technology, in order to expand their subscriber bases and generate increasing average revenue per user (ARPU) numbers.

"IPTV is a defensive play for most telcos, but this can be made into an attacking play through innovation," Hsiung said.

Innovation involves risk-taking, of course. Appropriately, the Hong Kong carrier launched its IPTV strategy with a gamble back in 2003, providing broadband customers with a free set-top box and a free basic set of 23 TV channels as a starter pack.

That gamble paid off. PCCW quickly grew its Now TV user base -- by the end of 2004 it already had 416,000 customers for the TV-over-broadband service -- and that attracted more content owners, increased broadband service uptake, and reduced broadband churn by half to less than 1 percent, Hsiung said. PCCW now delivers more than 160 channels to its customers over VDSL and fiber-to-the-home (FTTH) broadband connections.

The carrier, one of the biggest IPTV operators in the world, also developed its own content protection platform that, unlike other digital rights management (DRM) and conditional access (CA) technologies, is housed in PCCW's local exchange infrastructure, and not in the customer's set-top box. That way, stated Hsiung, PCCW can guarantee content owners that only the right customers are accessing their content. PCCW brags that piracy is nonexistent on its network. (See Top Ten: IPTV Carriers.)

PCCW also turned its attention to service innovation, looking well beyond the technical capabilities of personal video recorder (PVR) and video-on-demand (VoD) applications. The carrier focused on securing some unique content -- namely, English Premiership soccer -- and developed some IPTV channels of its own, including multiple sports channels and a business news service.

PCCW also created interactive services, such as sports betting, theater ticket booking, and online directory services, and it began letting customers access their bills online or add new channels using their remote controls. (See PCCW Picks ICTV.)

PCCW also made sure to feature local content relevant to its customers' daily lives, and it's been developing opportunities for user-generated content. High-definition services were launched earlier this year. (See PCCW Uses Harmonic for HD and Taking IPTV Out of the Silo.)

In addition, PCCW has developed a range of interactive advertising models, including opt-in video ads and split-screen presentations.

And while much of the talk in the IPTV community these days is centered on "three screen" (TV, PC, and mobile device) delivery, PCCW goes one further by allowing its content to be viewed on a fourth screen -- a mini screen housed in the carrier's fixed-line home phone unit.

That level of innovation has enabled PCCW to grow its IPTV subscriber base to 932,000 by the end of September 2008. Of that total, 264,000 take the basic content package that comes with their broadband connection, while 668,000 pay monthly fees to buy additional channels or IPTV packages.

It has also enabled PCCW to consistently grow its IPTV customer ARPU. "If you have the right content, including exclusive content, then people will pay," stated Hsiung.

"IPTV is a significant value-added service to broadband service providers, and provides an opportunity to create additional revenues, but you have to innovate, not just with technology but with services and marketing. You have to keep the IPTV product fresh in customers' minds, and to do that you have to innovate to make sure your services don't go stale," said the PCCW man.

So where is PCCW looking to innovate next? With the local market having only limited growth opportunities -- more than 30 percent of Hong Kong homes have the Now TV service -- the carrier is looking to export its IPTV as a service to other operators, and has registered success in Indonesia. (See Carriers Team for IPTV.)

It's also looking beyond the set-top box and further into the user's home. "Our new goal is to offer home networking services. FTTH will give us the bandwidth to develop services that, we hope, customers will pay for -- but we need the bandwidth first," said Hsiung.

— Ray Le Maistre, International News Editor, Light Reading