Viodi View - IPTV Hurdles/On the Floor

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Viodi View Newsletter - July 26th, 2006

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IPTV Hurdles/Heard On the Floor

By Ken Pyle
[email protected]

IPTV Hurdles
Heard on the Floor

The business case for video is difficult to prove in 2006 for independent telcos. MPEG-2, IPTV solutions work, but it is difficult to prove-in for small operators due to the high costs associated with the headend and middleware. Add in uncertainty about standards and vendor longevity and it is easy to see why many telcos are waiting for an MPEG-4 solution. Of course, MPEG-4 has its set of integration issues and competing agendas from behemoth players, such as AT&T and Microsoft.

This was one of the reasons the panel was pretty unanimous in their call for a “CableLabs” organization to take the lead in ensuring standards AND interoperability. Deller explained how Comporium, a relative large independent telco with a 140,000+ access lines, tested a number of encoders over a period of months to determine the best for their application. He said the test was done in real world conditions, with employees testing the picture quality at home. He suggested that the old adage about getting what you pay for is true with encoders, as the more expensive encoders performed better than the less expensive encoders.

Deller also made an interesting observation that with IPTV, the decision is an inward-out decision, meaning one starts with the middleware and that determines what features can be provided. The decision as to what features can be part of a Digital RF solution is typically outward-in, where the set-top box drives the purchase of the control system. He also provided their analysis of an IP versus Digital RF approach and found would be less costly for them than all Digital, two-way RF solution (although a one-way RF overlay would be cheaper that an IPTV solution). His analysis didn't appear to consider a hybrid IP/RF solution, like what Verizon is implementing.

Melinda Crawley of MS Communications had some good tips on how to motivate an independent telco’s employees to be the ambassador’s for its offerings. She called the employees, “the middleware between your customer and your service.” She had done an informal survey of some of her clients and found that they had penetrations of between 30 to 55% and that most were on target with regards to their business plan.

She suggested that telcos have their Customer Services Representatives examine their competitor’s offering and have them “self discover” for themselves the advantages of the telco’s service versus their competitors. She suggests doing this in structured workshops. Using this technique the CSRs internalize the differences and can be more effective sales people. She also suggested www.myrateplan.com as a good resource for up to the minute competitive information on satellite providers’ offerings.

Crawley also called for a consortium to acquire content for the independent telcos. With NCTC’s temporary ban on new operators, this is necessary. NRTC, with its cooperative structure, and Auroras TV, with its investment by 3 Rivers, are probably the closest things to answering Crawley’s plea.

Allen Hoopes talked about the painful lessons they have learned as they have moved towards an IPTV future. They went with a shared-headend and, even so, it took about six months for them to get contracts with programmers. He cautioned that independent telcos need to understand what level of control they have in a shared-headend situation.

He also suggested that an independent telco should get non-employee friendlies to test the system, as employees won’t necessarily provide the critical feedback necessary to create a quality product. It is critical to provide a quality product in the entertainment realm, as customers might not by other products from the telco. He also suggested that it is important to understand the cost structure of the existing telco versus their subsidiary that might be providing the service.

Hoopes have also found VOD challenging. On the plus side, Silverstar found a way to get the community involved in the creation of local content. They hired a local retired newspaper editor to teach calls on media and broadband.

Heard On the Floor:

The impromptu meetings in the hallways and tradeshow floor are one of the best things about a conference like OPASTCO. The one-on-one conversations are often more revealing than the panels. Here are some of the tidbits I picked up on the floor:

One friend I talked to suggested he was pessimistic regarding the long-term future of the independent telcos because the legislation that is being proposed is somewhat piecemeal and not true telecommunications reform. He suggests, as do several others, that, to truly compete, the independent telco must essentially truly have a regulatory regime that allows it to run its business in a competitive environment.
Lots of grumbling about NCTC and their ban on new members. Apparently, NCTC has some concerns about anti-trust and the onslaught of applications from telephone companies and new operators. The admission of new members is till up in the air. One person, who is with a telco, indicated that a CTAM chapter had basically uninvited them because their parent company is an independent telco. .
In a similar vein, the lack of middleware integrated onto MPEG-4 set-tops are slowing the implementation of new IPTV systems. I heard of a couple of instants where people from independent telcos said they wish they would have chosen the Digital RF route instead of IPTV, because of the standards issues.
One person from a telco with an HFC system suggested that his customers are not demanding “200 channel” systems. Thus, they have not been able to justify the build-out of a digital RF solution or an IPTV network for that matter.
Another Viodi View reader, who I met for the first time, and who facilitates deals for the purchase of independent telcos, suggests it is a “sellers market”, as there are more companies seeking independent telcos than there are sellers.

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