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Internet TV gets running start in large Asia markets

Posted: 01 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Mike Clendenin? Internet Protocol TV? IPTV? ABI Research?

When HBO's popular series "Rome" came to Hong Kong, the racy bits that had made it the talk of the town stateside had been edited out in deference to local sensibilities. Luckily, Paul Berriman had Internet Protocol TV (IPTV).

"On one channel, we had the version that had been censored so it could be broadcast across much of Asia," said the longtime city resident, "but we had set up another channel so that someone with parental controls could watch the original DVD version." Such tailored offerings "are things we can do that help differentiate us," said Berriman, who heads strategic-marketing development at PCCW, operator of the most successful IPTV service in Asia.

Indeed, in the space of about three years, PCCW has transformed itself from traditional telco to dynamic "convergence player," offering wired and wireless voice; high-speed data; and, most important, video and broadcast TV on its network. So far, it has persuaded more than 500,000 of its roughly 850,000 broadband customers to sign up for its NOW Broadband TV service, which uses MPEG-2 to deliver nearly 90 channels, with video-on-demand (VoD) coming soon.

"Hong Kong is a supercompetitive market, so we have had to quickly move away from just offering traditional services," Berriman said. "We are now one of the leading convergence players in the world."

In Hong Kong's cutthroat market, IPTV has helped PCCW flip a long trend of customer loss into one of customer gain for its fixed-line telephone service, while reducing churn by half for its broadband offering. To stay competitive, the operator is already moving quickly to upgrade its lines to 8-25Mbps in preparation for an HDTV service rollout based on MPEG-4.

Around the region, other telcos are eyeing PCCW and trying to figure out how they can replicate its success in their home markets. With some of the largest markets in the world at their disposal, operators have high hopes for IPTV in Asia. According to a recent report from ABI Research, the global subscriber tally for the service is expected to exceed 110 million by 2010, with the Asia-Pacific accounting for more than 50 percent of those subscribers.

Much remains to be done, however, before that target is hit. Already, Asia's telcos have discovered that copying PCCW's NOW formula may not be doable. The Hong Kong service's popularity has largely been driven by two ingredients missing in neighboring markets: availability of a blend of local and foreign TV channels, and an established, pervasive web of high-bandwidth broadband lines.

"We couldn't do IPTV like PCCW because we don't have that type of good content," said Li Huaiyi, a senior executive at Shanghai's SMG Broadband Television, the only company in China that holds a license for IPTV services. "There is nothing like HBO in the residential market!only at the hotels!and the local content is not enough to support IPTV. So we need to use interactivity as a selling point."

Roadblocks are also spoiling the rapid advance of IPTV in other Asian markets. Some of the hurdles are technical, such as the fragmented and immature IPTV supply chain, but most of the holdups have little to do with the technology.

There is, for example, the licensing turf war among government agencies in China. In Taiwan, dominant cable operators have been able to freeze local telcos out of content agreements. Then there's the need for a low-cost middleware platform that can deftly handle 20 local dialects in India.

And in Japan, said Katsushiko Ogawa, the director of NTT's Cyber Solutions Lab, "we simply need more subscribers."

After PCCW, the leaders in IPTV rollouts in Asia are Taiwan's Chunghwa Telecom, with about 80,000 subscribers, and Japan's Yahoo BBTV, with about 55,000. In China, most of the activity is in small-scale field trials and exact numbers on participants are unavailable. What is known is that China Telecom is running 23 field trials and China Netcom, 20. The largest of the Netcom trials is in the northern city of Harbin, where more than 40,000 users have signed up in six months, attracted mostly to the VoD service. China Netcom said that it will work with SMG Broadband to introduce another large-scale IPTV rollout in Shanghai soon.

Industry players are watching China carefully because, as in just about everything, it has the potential to be the largest market for IPTV. Earlier last year, market watcher Analysis International predicted 17 million IPTV users in China by 2009. But those estimates will probably need some downward revision because the only thing equaling China's potential as a huge market for IPTV is the number of challenges it faces in getting there.

For starters, regulatory gridlock is retarding the licensing process. Although the government has talked a good game about "convergence" among networks, cable and telecom industries have powerful patrons at the ministry level who have inhibited such evolution. Thus, only one license has been issued!the one allowing SMG Broadband to team with telcos to offer IPTV services. There is talk that another may be issued soon!to the nation's lead broadcaster, CCTV!but no timetable has been announced.

China also faces the technical challenge of insufficient bandwidth. Many of its ADSL lines have bandwidth ranging from 523Kbps to 1Mbps!not enough to run MPEG-2 streams reliably. Consequently, SMG and the telcos are looking at selectively upgrading line speeds to 2Mbps or more and using MPEG-4 technology, though they are wary of its higher cost.

SMG's Li rattled off a checklist of items he believes must be addressed if IPTV is to grow in China, including less-expensive middleware and trustworthy content-protection systems. Possible solutions, he said, are for China to develop an open-source platform for middleware and support local companies in an effort to devise homegrown content security platforms.

Whether this is feasible or not, industry players understand the conundrum. "They want it, but at a cost at which we're not willing to provide it for," said Noel Matthews, business development director at video-compression specialist Tandberg Television, which has about 30 IPTV deployments globally.

One reason Li of SMG is so keen on containing cost is that his cable competitors offer dirt-cheap rates. In the world's largest cable market, with some 120 million subscribers, fees can drop to as low as $1.50 per month for analog cable. That makes it hard to compete, especially when content is as severely limited as it is in China.

China Netcom's Harbin deployment, however, offers a glimpse of what the market could be. A joint effort among China Netcom, SMG Broadband and UT Starcom, the commercial trial appears to be going well. In just a few months, it has ramped up to about the same level of subscribers as the digital cable provider competing in the same service area. "Compared with cable, the price is high, so growth is slow," said Li. "But we have had positive response on time-shifting and VoD."

Yet China's cable operators are well on their way to offering similar services. Because China's cable network is unidirectional, it cannot offer VOD. But in the southern city of Hangzhou, a local cable company is using a bundled coax and Ethernet pipe to feed an STB capable of decoding digital cable TV broadcasts and IPTV signals.

The service, which charges about $6 a month for basic access, offers time-shifting, VoD and basic information services, but no Internet access. In about a year and a half, it has attracted 100,000 users. "More than a dozen other Chinese cities are thinking of following the Hangzhou model, especially in new buildings," said Hou Ziqiang, chief technical adviser to China Netcom. And because the rollout will probably be heavily subsidized by local governments, cable operators may still be able to keep their costs low.

Despite all the challenges, IPTV suppliers in China say they are in it for the long haul. "All of the big system guys are pushing hard there," said Matthews of Tandberg, "because if it breaks open, it will break big."

Another market with big potential is India. But the country faces nearly as many hurdles as China does. They include limited authorized content, an uncertain regulatory environment and a relatively limited number of broadband telephone lines relative to the number of cable connections, said Sreeram Chakravarthy Gomadam, project leader for the introduction of IPTV services at Bharti Televentures Ltd, a private telco in India with 1 million landline subscribers.

Of great concern to Gomadam is the fragmented nature of the IPTV industry. "We need an end-to-end solution, from the headend to the client. There are still too many people just offering one part of the chain and that has delayed the rollout," he said. "But we are starting to see consolidation and that is good."

If the barriers to implementation were lowered, Gomadam said, India could have as many as 10 million IPTV subscribers by 2010.

At the moment, PCCW's lead in the Asian IPTV market looks solid. But even that company must grapple with such problems as high costs associated with attracting and retaining subscribers. For all of the NOW service's outward success, PCCW is still losing money on the venture and it has yet to disclose a timetable for breaking even.

- Mike Clendenin
EE Times

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