IPTV in India will take time to catch up

Low broadband penetration, low disposable incomes of households, lack of telco content expertise will act as a dampener for the roll out of IPTV in India’ says Neha Gupta, Senior Research Analyst with Gartner.

In an interaction with Idhries Ahmad of CIOL, Neha Gupta, sheds light on the market factors driving IPTV deployments and major trends witnessed in IPTV deployments across continents.

CIOL: How do you analyze the market deployments in India with reference to developments in IPTV space globally?

Most of the IPTV deployments are undertaken by fixed line service providers whose main stream of revenue had been voice. With most subscribers shifting to mobile networks for their voice need and with increased competition from cable operators that offer voice there is great pressure on the fixed line incumbents to foray into new areas to expand their revenue stream.

IPTV gives one such opportunity to these telcos.

Such a trend has been observed in India as well. With some fixed line companies planning to foray into IPTV. MTNL has already launched its services in Delhi and Mumbai under the name `Tri-Band.'

MTNL has a captive broadband base of 3.3 lakh broadband subscribers which it can leverage. BSNL, Reliance Mobile and Bharti Airtel are also contemplating IPTV services.

CIOL: For a market like India where IPTV is still in infancy what will be drivers that will drive or hamper IPTV deployments?

There are mainly four factors that affect IPTV’s deployments; broadband penetration, level of competition, market maturity, income levels and government regulations.

The primary driver of IPTV penetration is broadband. A comparison of broadband penetration and IPTV penetration in various regions point out to this fact. The low broadband penetration rate in India is the biggest factor hampering growth of IPTV.

Two secondary, but still important, factors affecting IPTV penetration are competition and market maturity. Western Europe being a more competitive market for IPTV operators has a higher penetration rate than North America even though the latter has a higher broadband penetration.

It also has a more mature IPTV market in that services have been around longer and more people know about them. So, there is time before IPTV catches on in India. Another factor, which will hamper growth in India, is the low disposable incomes of households.

CIOL: Though market is relatively nascent, do you see any trends we can talk about in Indian market with analogy to trends in IPTV deployments globally?

The IPTV market is immature but growing fast. There were only about 3.5 million IPTV customers in a world as of end 2006 with more than 350 million cable TV subscribers and 2.5 billion TV sets.

IPTV is being deployed all around the world. The major trends will be IPTV service providers emulating cable and satellite TV, rather than delivering advanced interactive services or an improved viewing experience.

Content owners are pushing for innovation, because they want IPTV to increase the total market for content, rather than cannibalize existing pay-TV services.

Vendors are pragmatic, helping telcos take their first baby steps into the world of media.Customer experience will be a major differentiator, as content and price become similar across services.Regulatory barriers and a lack of clear return on investment are hampering broader rollout.

CIOL: How do you foresee Indian telecos venture in the IPTV space? How does it stand to existing competition in to traditional broadcast mediums?

For Indian telcos, IPTV is an opportunity to increase their revenue stream. It is only rational for the telecom players to diversify to triple play so as to ensure new revenue streams and ensure return on investment on their fixed lines.

But the initial costs of IPTV are not insignificant. So some telcos are skeptical about venturing into it.

While their basic network is in place, there are costs involved in aggregating content and making sure it is in the format to be distributed. The Web’s highly distributed network of servers and routers are currently ill equipped to handle the stringent requirements of video transmission. So there are costs related to buffer video locally until enough of the data is on hand to present a smooth picture.

Also, Indian telcos face stiff competition from cable and satellite operators that puts a risk on IPTV returns’ and remains unproven potential of incremental revenue streams. Operators have to deal with lack of awareness and interest in IPTV services by Indian consumer. Lack of access to differentiated content and lack of telco content expertise also is a dampener.

CIOL: How do see IPTV moving in the future? How are different countries progressing in the IPTV space globally. Who are the countries that are taking major initiatives in the space

A selection of IPTV deployments in Asia Pacific includes PCCW, Hong Kong Broadband (China/Hong Kong), China Netcom and China telecom (China), KDDI in Japan etc. Europe, Middle East and Africa include Fastweb (Italy), Free, France Telecom and neuf cegetel (France), Telefonica (Spain) etc. Carriers in Asia/Pacific and Western Europe are at the leading edge of the IPTV rollout, whereas carriers in the United States and Japan are lagging.

In the future, Gartner expects that the more-successful players will be the big incumbent carriers like BT Group, Telefonica, Deutsche Telekom and Verizon.

This is because the incumbent operators have the financial resources to build high-capacity networks. They have the marketing clout to re-brand themselves as entertainment providers, and they have the expertise in the service call centers that can handle the problems that will inevitably arise.

Most critically, they have the strategic imperative. They believe they absolutely have to succeed in this in order to survive.

CIOL: And who does Gartner see are the big players in the IPTV vendor space

In terms of technology vendors, the IPTV market is highly fragmented. Specialist companies provide several key parts of the overall ecosystem.

Middleware: The current middleware leaders, in terms of enabled users, are Thales (owing to success at France Telecom), Kasenna (mainly thanks to Fastweb in Italy) and Orca Interactive (due largely to Chunghwa Telecom in Taiwan). Alcatel remains a leader because of its legacy contracts.

Access systems: Alcatel is well positioned as the clear leader for DSL access equipment. In addition to Alcatel, NEC, Lucent Technologies and ECI Telecom are leaders in terms of enabled IPTV users.

In Headends: Tandberg and Harmonic are the most prominent headend vendors.

And Aggregation technology: Cisco Systems.