Smaller operators are using IPTV to deliver a richer palette of services, but it’s not easy.
Tier 2 and Tier 3 communications service providers (CSPs) have been riding the migration of video toward IP in order to bring advanced services to less densely populated areas in the U.S.
With IP-based video technology maturing, there is a growing number of smaller companies able to provide subscribers in their typically exurban-to-rural areas with services and features that include larger packages of top-ranked channels (with more of those channels in HD), multi-room DVR, TV Everywhere-type services and hybrid features like Caller ID on TV.
The issue is the rate of the transition, and under what circumstances, which include myriad variations in network type and architecture, network gear, customer premises equipment (CPE), and services offered and other business strategies.
There is nothing even vaguely homogeneous about the circumstances of Tier 2 and Tier 3 CSPs, but if there is one factor that provides a neat division into two categories, it is provenance in either the cable or telco side of the business (with the over-builder experience frequently similar to that of the telcos).
Many former phone companies have jumped straight to IPTV, defining “IPTV” as having an IP-based network transmitting everything, including video, in IP format. AT&T U-verse is the most extensive example, but there are scores of others whose networks range from DSL-based networks like AT&T’s to fiber-to-the-home (FTTH) systems.
It turned out that as a class, telcos ended up with a fairly large share of broadband stimulus money. The program was aimed at extending the availability of broadband services in areas that are more remote and/or less affluent, but for the telcos that are adding to existing IP networks or that are migrating to an IP network, those services can naturally include IPTV.
On the cable side, no big U.S. MSO has gone the full-on IPTV route yet, and the number of Tier 2 and Tier 3 cable operators that have tried it remains small.
The difference is economic. Cable companies already have video delivery networks – networks that don’t easily support IP. Scrapping their HFC networks and writing off that investment is not an option.
Of course, cable companies have parallel DOCSIS networks that constitute a means to migrate to all-IP, and they are being used for that purpose. Broadband customers started using cable operators’ IP-based DOCSIS channels to access streaming video sources such as Amazon and YouTube. MSOs eventually began to offer streaming on-demand and to support delivery of video to mobile devices.
Over-the-top (OTT), TV Everywhere and multi-screen services are IP TV. Of course, the battle to maintain the space between “IP” and “TV” when describing those services was lost before it began. From technologists’ perspective, the distinctions between IPTV and different types of IP TV (with a space) are significant, so the term always threatens to be a source of confusion, but look at it from the consumer perspective: It’s all video, and few subscribers care about the delivery details.
IP drivers
The shift to IP is being driven by two major trends: the rapid increase in the consumption of video on mobile devices and the need to find efficiencies from infrastructure/delivery.
On the plus side, IP has been around for so long and has become so intrinsic in networking that the cost of running an IP-based network keeps dropping, and IP networking is certain to be around for many, many years to come.
On the down side, IP was not designed to support video, and progress in IP video networks has been fitful. On the telco side, evolution has been gradual.
On the cable side, operators are finding there simply isn’t a good IPTV solution available yet. Buckeye CableSystem put out an RFP for IPTV systems, and that was the conclusion it drew, noted Ken Wright, principal of Wright Solutions and technology advisor to the National Cable Television Cooperative.
The NCTC has long helped its members leverage their combined numbers to negotiate programming contracts. In the past year or so, the organization has added a focus on providing a similar service, only with technology procurement.
“For an incumbent cable operator with the typical cable plant, IPTV is difficult,” Wright said. “Cable operators will have to move to all-IP in a very controlled manner.”
That starts with several possible options, including active support of over-the-top, or a TV Everywhere-type service, or supporting multi-screen delivery.
How those services are implemented – or in what order, with what business strategy – is different from one cable operator to the next.
Some companies rely on their equipment vendors to build such systems. On the other extreme, Wright noted: “Massillon built its own TV Everywhere, with its own authentication platform. It doesn’t have all the bells and whistles, but it works, and other companies have adopted it.”
A middle approach, he observed, would be to deploy hybrid gateways – CPE that can take MPEG video and convert it to an IP format for distribution to a second TV, or to PCs or mobile devices in the home.
“A lot of vendors will pitch the whole system, from ingest to transcoding to packaging, encryption and DRM, CDN, all the way down to the player and the middleware – they’ll pitch an end-to-end solution, and it looks good to some of the smaller guys,” observed David Helfrick, a principal consultant with IBB Consulting. “But then it goes back to one of their number one requirements of not wanting to be locked into a single vendor, not wanting TV in a box. There’s always that battle.
“With IP delivery, a lot of these components can be purchased individually and integrated, particularly on the application side. There are so many moving parts in the set-top – tuners and conditional access and hard drives – all those components have to be integrated to create an application to deliver a UI, an EPG. But in the IP world, it’s more like a single device, it’s all very standardized, and it’s not as complex. There are companies trying to create one environment; it might be a browser based on HTML5,” Helfrick added.
The typical arc of technology development is likely to apply here too, however, Wright suggested. “Everyone gets in, then choices begin to narrow, and we get down to a set of deployable solutions.”
Ten years ago, telcos encouraged the development of an open architecture for IPTV, with multiple vendors contending to provide best-in-breed components. The approach derived in part from a desire to avoid what happened in cable, where a duopoly developed that dominated the industry.
The approach compelled almost every company to evaluate multiple products from multiple vendors and then integrate disparate systems themselves, or with help from their vendors, with two or three choices in each area, with the result that nearly everyone was creating a near-custom network.
At the outset, IPTV afforded the ability to provide linear TV and VOD and Caller ID on TV.
Those that did embark on that path found that IPTV was challenging to deploy and also to manage. Further, smaller companies may or may not have the wherewithal to take on all of that work themselves.
“In the last few years, the pendulum has swung the other way – toward end-to-end systems,” said Tony Stout, CTO at Palmetto Rural Telephone Cooperative (PRTC). “With Microsoft, you don’t have any real choice, per se. You use their VOD servers, their encryption, and you do have choices on set-top boxes, but all the back office is run under the Microsoft architecture. There are obvious pros to that; one vendor is responsible end to end. The negative is, you lose some choice, but I think we’ve seen with AT&T, in particular, it’s hard to scale open systems. We’ve never seen one of those systems scale to millions of subscribers like you’ve seen AT&T do with U-verse.”
Over the last two or three years, IPTV system vendors have introduced other features, such as whole-home DVR, remote DVR (the ability to control a DVR remotely via a mobile device) and call disposition (the ability to forward calls).
PRTC relies on its middleware provider, Microsoft, and on its system integrator, Alcatel-Lucent (which also serves that function for AT&T and other IPTV companies), to develop applications.
“It can be nice to be behind AT&T because they’re driving a lot of innovation,” Stout said. “Things like Xbox. I couldn’t call up Microsoft and say, ‘Hey, we’d like to integrate an Xbox console with our video solution,’ but AT&T can. They can push those sorts of things through.”
Get ’er done
This year, multi-screen capability is being developed.
The ability to add features can be critical, especially features that can stitch together the constituent elements of the bundle (e.g., Caller ID on TV), increasing the value of each.
Building and then maintaining an IPTV video service is not cheap; it is a capital-intensive process. Program costs tend to be high. Ultimately, for many smaller IPTV providers, video is not a big money-making proposition, which is why the ability to create and add features is so important.
“There’s not a lot of margin in IPTV,” Stout said. “Tier 3s know going in it’s a break-even business, if that. Content costs are outrageous. Equipment costs can get outrageous when you think about headends and set-top boxes and everything else. If you can win some broadband customers or keep some voice lines, that has a way of helping the financials.”
Another potential way to make more money on IPTV is with targeted advertising. Cable has developed means to extract information about what its customers are watching and when, but that’s an inherent capability with IPTV, where the operator sends only the programming each customer wants to see.
“On the telco/IPTV side, we know what subscriber’s tuned to what channel and if the customer is changing channels; the network is aware of that,” Stout observed. “That opens opportunities not only for targeted advertising, but also real-time advertising. It gives us better granularity as far as getting to the street level, even the home level, and you start to be able to see patterns, and you can match that with demographic data. It’s like Google: They know who you are. IPTV has opened up that realm of the network being more intelligent and knowing about your viewing habits and being able to leverage that from an advertising perspective.”
Motorola believes that no matter who is providing services, or how, it will be absolutely critical for the success of the service to have a consistent user interface that can support whatever services and features are added. The company believes that a UI based on HTML5 is the most effective, universal way to go: In part, it is an IP technology.
IPTV companies – those with all-IP delivery networks – have some advantage in having boxes natively capable of supporting new IP-based features and services (think of things like Caller ID on TV), but the UIs will make them accessible and ideally easier to use, explained Bill Brown, general manager of the Converged Consumer Solutions group at Motorola Mobility.
Conversely, cable companies have a disadvantage on that measure, in that most have to be able to support legacy set-tops that don’t support IP video. Of course, new boxes are coming out that will provide support for those types of services and those types of UIs.
