Video in Demand

Whether it's via FTTN or FTTP, service providers need video to compete

November 4, 2004

3 Min Read
Video in Demand

A funny thing happened on the way to the services triple-play (a suite of voice, video, and data services from one provider) – service providers figured they had to add an entire video network (see Verizon Says, 'Hello, Moto', Vendors: Cable Clouds Are Clearing, SBC's IPTV Still up for Grabs, and Mais Alors! Alcatel Bags $1.7B SBC Deal ).

On paper, this seems like a no-brainer: Hey, triple-play! We just plug a DVD player into an optical network, right? But here's the gotcha – video systems are not easy to deploy, and many RBOCs are finding that there is a steep learning curve to deploying a carrier-class video delivery system for their FTTP systems, given that their organizations generally have very little experience with video.

Then there's the stuff they need to buy: optical line terminals, set-top boxes, satellite receiving stations, video servers, ad-insertion devices, and other video gear that would be common to FTTP, DSL, hybrid fiber/coax, or any other access architecture. Yes, there's the architecture, too. BPON? EPON? RF video overlay or pure IP video? Will it get to the customer over copper or fiber? Does it have IGMP? So many acronyms, so little time.

The good news? The stuff's getting cheaper. The video component of an FTTP network adds between $100 and $500 per subscriber, according to the latest Light Reading Insider report, FTTP Success: It's the Video. But then there's the incremental revenue possibility: Service providers could expect to generate $60 per month in incremental revenue by adding video, according to the report. That means they could pay off the video investment in six months.

These numbers seem a tad optimistic to me, but the bottom line is that service providers have no choice but to go after this revenue stream, and the video component is likely to determine whether FTTP is a success or a failure in its goal to compete against the mounting competition from cable. Triple-play without video is only a double play, and that won't get the RBOCs out of the inning.

So the big FTTP question for 2005 is: Can the big RBOCs, along with nearly 130 small telcos and municipalities also committed to FTTP, make video work better over FTTP than over any alternative access medium? After that, will such developments result in customers flocking to the full package of video, high-speed data, and voice services? Buyers and sellers agree that anything short of massive penetration of triple-play cannot justify its expense.

The latest Insider also assesses how video plays into the U.S. FTTP market prospects for 2005. Here's what we found: that the RBOCs have a shot at success, if only because the cost of IP video equipment is falling, and that an IP-based video system has the potential to be more powerful than legacy systems.

Bottom line: Video – especially IP video – is a pretty good market to be in if you are an equipment or software vendor. Taking a step back, you can only imagine that spending on video gear is going to spike in the next few years as RBOCs divert a large portion of their capital spending toward beefing up their video infrastructure in the war against cable.

On the consumer side, the potential services available via video over IP are mouth-watering. Imagine having a menu of thousands of movies, sporting events, or TV shows that could be cached or delivered to you on your own terms, rather than being subject to the whims of cable and TV producers. Imagine being able to tell your cable provider, "Hey, there's another service out there, it has more choices, and it's cheaper."

Will it work? It has to work. If ever there was something to violently shake up the future of telecommunications networks, it's IP video. Video has become the table-stakes weapon of choice for service providers to battle cable providers, and they have no choice but to ante up.

— R. Scott Raynovich, US Editor, Light Reading

This report, FTTP Success: It's the Video, 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.

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