Strategy Analytics has just released a new report titled Global IPTV Forecast: Homes, Users and Subscribers. The research firm believes that total number of IPTV
households will grow dramatically over the next five years, rising from just under six million homes worldwide in 2006 to more than 80 million in 2011
However, the percentage of subscribers who will actually pay for IPTV (News - Alert) services will comprise just 51 percent of the market by the end of 2011.
According to the findings, many subscribers will not pay directly for TV programming or services, but will use IPTV technology for free as part of a bundled services suite.
“An intensely competitive consumer communications market is making deployment of new services, like IPTV, a critical objective for many service providers,” comments Martin Olausson, Senior Analyst from the Strategy Analytics Digital Consumer Practice. “The traditional pay-TV definition breaks down in an environment in which multiple IP services (broadband, VoIP
and IPTV) are paid for by a single fee, and in which a growing share of TV programming will not be paid for via subscriptions.”
In order for the market to grow, however, providers need to stay focused on not only customer acquisition, but they need to stay on top of the technology needed to deliver a quality experience to consumers of the service.
Last week, the Wall Street Journal reported that AT&T was facing some deployment delays with their U-Verse IPTV service. The report laid blame at the feet of the Microsoft (News - Alert) middleware
, or software that powers the service.
The Journal quoted AT&T (News - Alert) chief financial officer Rick Lindner who said that AT&T has… “decided against heavy marketing of the TV service because it doesn’t want demand to increase until the problems are solved.”
The service is only available in 11 markets, which falls short of the 15 markets that AT&T had originally targeted as part of their rollout.
To further explore how Microsoft is progressing in the IPTV space, I reached out to independent research firm MRG and got a hold of Gary Schultz, Principal Analyst/President of MRG and Len Feldman, Director of IPTV Analysis, who were kind enough to answer my questions.
GG: How is Microsoft faring in the IPTV market as we begin 2007?
[Gary/Len]: Right now, they are quite far behind the competition in Europe and the U.S. Effectively, they are still in expanded trials. It is especially obvious at AT&T, where the delays are going into a second year, and they have now have an expanded trial in about 5,000 homes across several markets. We believe their recent move to first-generation SOC chips in set-top boxes is not a permanent fix, due to some fundamental problems.
We also think that 2007 will be Microsoft’s “make-or-break” year. If Microsoft customers can successfully deploy in hundreds of thousands of homes rather than just hundreds or thousands, Microsoft can make up for lost time. Otherwise, service providers will have to start looking elsewhere for their software infrastructure. They simply can’t afford to lose another year.
GG: There have been some high-profile hiccups with Microsoft’s IPTV rollout over the past several years; how has this affected their market share?
[Gary/Len]: Simply, they have not been able to deploy due to the software architecture which requires far more servers than the competition, as we point out in our report “Mega Scale IPTV Networks: How to Create Very Large IPTV Networks.”
There are some other architectural problems that also will create the need to throw more ‘Mips and Memory” at the problem for the unforseen future. This, we believe, will create much higher capital expenditures than are normal for the industry, requiring service providers to continuously upgrade their set-tops (and servers) as competition grows. Other middleware companies don’t have this problem, which relates to the fact that the Microsoft OS has inherent overhead requirements not suitable to the “real time” demands of video unicast and multicast systems
We believe the middleware for an IPTV middleware solution has to be designed from the ground up to meet the unspeakably high demands that multicast and unicast video places upon the network that are not present in normal data networks. So we believe the architecture used by Microsoft, while ok for data networks, is fundamentally not suitable for the brutal scaling requirements of an IPTV network supporting hundreds of thousands and millions of customers with growing needs for video and related services in a cost effective way.
So much of the potential for success in this space obviously has to do with a solution’s ability to scale to meet the needs of the carrier who is deploying the service. I asked the folks at MRG about some of the “smaller” competitors playing in the space, and how their solutions are answering carriers’ needs. MRG told me that Myrio’s solution (deployed at Belgacom) is known to scale, as is the solution from Thomson (deployed at France Telecom, serving over 250,000 subscribers). Lucent-Alcatel (News - Alert), which by no means can be considered a “small” player, has middleware deployed at Telefonica serving over 100,000. MRG told me that the Cascade middleware, deployed at PCCW in Hong Kong, scales to over 600,000. And, Espial (News - Alert) has over 700,000 subscribers deployed globally with over 200,000 deployed at NTT (Japan). The team at Espial tells me they also have had tremendous success in the interactive entertainment space as they have realized over two million interactive TV deployments such as OnCommand and LodgeNet.
In closing I asked Gary and Len about the recent trend of consolidation, and what effect they believe this will have on the smaller players.
According to the team at MRG, they believe that, "Smaller players will have to do one of two things: Expand services and functionality while maintaining the ability to interface well with other vendors in the value chain (providing "best of class" to match the unique needs of the service provider); or merge with larger or other companies.
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-Greg Galitzine is editorial director of TMCnet.
Internet Protocol Television (IPTV) | X |
| IPTV delivers a digital television service to subscribers
via the Internet Protocol over a broadband connection....more |
Voice over IP (VoIP) | X |
| A real-time communications system that converts voice into digital packets containing media and signaling data that travel over networks using Internet Protocol....more |
Middleware | X |
| Application Service Programs such as Microsoft .NET platform use an infrastructure of components based on a client-server computing/network architecture with enhanced use of internet services called m...more |
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