October 31, 2007
Canalys: Growth Ahead for IPTV, But for Now it Remains a 'Defensive Strategy' for Most Providers
Telecom operators are very eager to boost their average revenue per user and fight back against competition from triple-play providers. One way to do that is by offering IPTV services, which consumers are adopting at a fast clip.
In a new report out this week, Canalys predicted that there will be 39.6 million IPTV (News - Alert) subscribers worldwide by year-end 2010, an increase of more than tenfold over a customer base of fewer than 4 million in 2006.
Canalys noted in its report that the biggest chunk of IPTV subscribers live in the Europe, Middle East and Asia (EMEA) region; this area will remain the largest IPTV market through 2010, the research firm predicted. By the end of this decade, it is expected that subscribers in EMEA will make up 38 percent of the worldwide total.
In EMEA, France is leading the way when it comes to IPTV, Canalys analyst Allesandra Fitzpatrick said. That country had 1.3 million IPTV subscribers at the end of 2006. Why? Fitzpatrick said France’s success with IPTV can be attributed to the prevalence of cheap IPTV services bundled with broadband/phone, low broadband prices and limited cable operator competition.
Not all markets are so lucky. Competition from other types of TV services is the main roadblock for IPTV providers. Better quality of service and lower prices remain the primary ways for IPTV providers to differentiate their offerings.
“IPTV providers will have to compete on price in the short term,” Fitzpatrick said in the report. “As a result, deploying TV services may not prove to be a significant revenue generation opportunity, although establishing a position in this emerging sector will be crucial for service providers seeking to protect their positions as prime providers of communication services.”
Things are looking up for IPTV subscriber growth in North America, thanks to fast growth from Verizon (News - Alert) and AT&T moving beyond the development phase of its IPTV offerings. Canalys predicted that, by 2010, North American IPTV customers will represent 31 percent of all subscribers worldwide. Asia Pacific remains a promising market as well, but for the time being regulatory hurdles are curbing development.
For most service providers, offering IPTV at present is a defensive strategy, Canalys said in its report.
“While telcos have aspirations of creating new, profitable revenue streams, the key short-term driver of market development is improving customer loyalty and reducing churn levels,” Fitzpatrick said. “IPTV will be a financial loss leader for many providers over the next five years when the costs involved with rolling out and evolving services are factored in, but if telecom operators are to retain their position as primary providers of consumer communication services, this may be a price they need to pay.
Fitzpatrick added that, in the near term, it is difficult to see how most IPTV providers will generate significant profits from the service since they’re competing largely on price.
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Mae Kowalke is an associate editor for TMCnet, covering VoIP, CRM, call center and wireless technologies. She also blogs for TMCnet here.