& cplSiteName &

Report: IPTV a Potential Goldmine

Light Reading
News Analysis
Light Reading

Who’s going to make some serious cash in the IPTV market?

According to a new Light Reading Insider report, “IPTV: Where the Money Is,” technology vendors, and especially the likes of Alcatel (NYSE: ALA; Paris: CGEP:PA), stand to make a killing.

”We believe that technology vendors stand to gain the most from IPTV,” reckons the report's author, James Crawshaw, “given the demands for new capital investment it requires.” Carriers, though, "are unlikely to be the main winners from IPTV [in direct financial terms]. We see it more as a defensive strategy aimed at reducing customer churn than as a significant new source of profits." (See IPTV's Economic Realities.)

There are significant drivers forcing telecom operators to adopt those defensive strategies, most notably the increasingly intense competition they're facing from ISPs and cable and satellite operators. As a result, the IPTV market is set to explode in the coming five years and beyond, finds the report.

By 2010, IPTV will have captured 65 million subscribers worldwide, predominantly in North America, Europe, and Asia. To deploy the systems needed to deliver those services, carriers will spend a total $21 billion in the 2005 to 2010 timeframe.

It's that capex pot vendors such as Alcatel and Siemens AG (NYSE: SI; Frankfurt: SIE) are eying. Alcatel looks particularly well placed, according to the report: It has strong positions in many of the key IPTV-related system sectors, including broadband, optical transmission, systems integration, and overall project management for IPTV implementations, where it is already gaining critical experience. (See Mais Alors! Alcatel Bags $1.7B SBC Deal .)

“Alcatel stands out as the dominant supplier of access infrastructure for IPTV rollouts,” finds Crawshaw. “We expect Alcatel to retain a 30-plus percent share in broadband access, with other vendors fighting over the remaining share.”

That strong position in the IP DSLAM market, its additional IP capabilities built around technology from its Timetra acquisition, the vendor's optical equipment portfolio, and its strategic relationship with Microsoft Corp. (Nasdaq: MSFT), all make it a very attractive IPTV systems supplier for major telecom operators, according to the report. (See Alcatel Eyes Video Market, Alcatel, Microsoft Confirm IPTV Deal, IP DSLAM Revenues Jump 20%, Optical Hardware Up, and Alcatel Serges on Triple Play .)

But there are other options. Siemens beefed up its IPTV capabilities with the acquisition of Myrio, and Crawshaw believes Lucent Technologies Inc. (NYSE: LU) may make a similar move on its IPTV middleware partner, Orca Interactive Ltd., now that its previous relationship with Microsoft has dissolved following Alcatel's intervention. (See Siemens Snaps Up Myrio, Siemens Boasts IPTV Success, and Lucent Sees IPTV Opening.)

But while vendors battle to land their share of some potentially lucrative spoils, the service providers must “compete on features and content” just to hold on to their customers. And IPTV won't have a great impact on operator ARPU (average revenue per user) or margin levels, finds the report, especially when compared with other services.

Table 1: ARPU for Triple Play Services

Service Monthly ARPU Incremental Gross Margin Incremental Gross Profit per User per Month
Line Rental $16 94% $15
Voice Calls $22 82% $18
Broadband $30 97% $29
Basic Video $20 50% $10
VOD $12 75% $9
DVR $10 80% $8
HDTV $10 80% $8
Total $120 81% $97
Source: Light Reading Insider

Whereas voice and broadband services incur no additional content costs, telecom operators will have to pay for the content at the heart of their IPTV service offerings, and that will cut deep into profit margins.

For the service providers to make any headway at all, finds the report, they will need to develop unique and compelling applications and invest in exclusive content. The report notes that telecom operators are best placed to combine TV services with broadband data applications, such as instant messaging, and mobile phone features, such as caller ID. This unique kind of integration, in turn, will help retain customers and attract new ones, according to the report's findings.

Sourcing attractive and, if possible, unique content will also help the IPTV brigade, which is good news for content producers, as the introduction of telco TV services broadens their potential market significantly. But carriers should avoid the trap of believing they can create their own unique content, warns the report.

— Joe Tuzzo, special to Light Reading

The report, IPTV: Where the Money Is, is available as part of an annual subscription (12 monthly issues) to Light Reading Insider, priced at $1,350. Individual reports are available for $900. For more information, or to subscribe, please visit: www.lightreading.com/insider.

For more on this topic, check out:

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
12/5/2012 | 2:52:49 AM
re: Report: IPTV a Potential Goldmine
Has Lucent and Riverstone's joint IPTV solution gained traction anywhere else other than Telefonica's 130k subscriber deployment?

I believe Telefonica is the world's second largest IPTV deployment behind PCCW's 500k subscribers, correct?

Featured Video
Upcoming Live Events
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, 2019, New York, New York
December 3-5, 2019, Vienna, Austria
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events
Partner Perspectives - content from our sponsors
Edge Computing, the Next Great IT Revolution
By Rajesh Gadiyar, Vice President & CTO, Network & Custom Logic Group, Intel Corp
Innovations in Home Media Terminals for the Upcoming 5G Era
By Tang Wei, Vice President, ZTE Corporation
All Partner Perspectives