CAMBRIDGE, Mass. -- Successful IPTV is more about selling broadband than about selling television, argues Pyramid Research's report "Transforming Telcos With IPTV." Telcos are leaders in the broadband space, but remain novices in the pay-TV market. It is arguably more profitable for telcos to maintain their position in the broadband segment than to become a leader in the pay-TV space, as TV is only one of the many revenue-generating applications that can be carried over broadband.

"IPTV is not a silver bullet for telcos, but service bundling is and IPTV is the missing piece of the bundling puzzle" comments Pyramid Research Senior Analyst Ozgur Aytar. In competitive broadband markets, IPTV can be a powerful revenue preservation tool by enabling operators to replace their fading voice business with a growth business. "The IPTV set-top box extends beyond just TV and creates a platform for telcos to penetrate the home and offer a wide array of broadband services," adds Aytar.

A TV-driven proposition will face substantial competition in the pay-TV market, drive up costs by emphasizing content, and, further, drive telcos away from a strong core competency built around enabling voice, data and video. IPTV carriers must at least match the competition's basic TV package and tap into the capabilities of IP to deliver more value-added services. Video on Demand (VoD) will be important to IPTV margins, but a VoD only business model will not attract subscribers.

Pyramid Research