Ovum’s new multichannel household and revenue forecast predicts steady growth overall, with newer IPTV and digital terrestrial distribution platforms spreading much faster than their mature cable and satellite counterparts.
To more accurately indicate the distinct opportunities for telecom and broadband operators we have added a telco TV dimension to the forecast, comprising projected numbers of connections and revenues from pay-TV services provided by telecom operators over all platforms.
Our findings show that telcos have a substantial share of the multichannel and pay-TV markets, one that is much larger than the IPTV segment with which they are typically associated. An additional line item estimates the number of homes with consumers viewing long-form video content over the Web. This reveals the potential for hybrid service developments that might create opportunities and expand the competitive playing field for both telcos and “traditional” pay-TV operators.
A preoccupation with the development of IPTV as a viable non-traditional business opportunity for telecom and broadband network operators can distract us from the fact that additional avenues are open to telcos seeking a foothold in the pay-TV market. It is important to remember that many operators already have significant experience in delivering TV via other platforms.
Our forecasts show an estimated 114 million global telco TV connections in 2011, rising to 163 million in 2016, with 54.5 million IPTV households in 2011, rising to 116 million in 2016. Telco TV offerings generated $28.3 billion (€21.9 billion) during 2011, which accounted for a quarter of all global TV service revenues. However, IPTV accounted for less than half of the 2011 total, and this share will rise only to 60% by the end of the forecast period.
Today, a handful of sizeable legacy telco cable operations are still in existence (in Australia, Denmark, and South Korea, for example). Meanwhile a significant number of cable and satellite deployments have arisen in less-developed markets, where IPTV implementation has faced either financial constraints, as in Hungary and Romania, for example, or regulatory obstacles, as in South Korea and much of Latin America. This has delayed its development as an alternative TV platform, and driven telcos towards the established alternatives.
It is no secret that IPTV deployment has presented challenges for many telcos, particularly in terms of the cost of implementation, but also with regard to consumer demand, operational expenses, and return on investment potential. This has caused several operators to rethink their TV strategies, with many retrenching their IPTV rollouts in favor of a more pragmatic approach using alternative platforms.
Operators such as Orange and Magyar Telekom are taking a multiplatform route, using DTH to fill their IPTV network coverage gaps. Others, including BT Vision and FastWeb, offer hybrid services that provide an entry-level basic access offering via DTT, with higher-value interactive and VoD services delivered over IP.
The changing mix of telco platforms over the forecast period is indicative of an anticipated gradual shift from a varied landscape, characterized by some large deployments over cable, satellite, and DTT, towards a more homogeneous environment, increasingly dominated by IPTV. Ovum expects most dual-platform and hybrid telco TV offerings to migrate over time to all-IP, as NGN broadband and IPTV network infrastructures gradually achieve scale. As telcos build TV customer market share over whatever distribution platforms work best for them, the business case for full IPTV rollout over DSL and fiber starts to make more sense.
Ovum’s multichannel forecasts also project a substantial rise in internet TV adoption, although growth rates will vary substantially between geographic regions, with uptake so far driven mostly by over-the-top (OTT) VoD services such as Hulu, LoveFilm, Netflix, and BBC iPlayer.
However, operators are also embracing web-based distribution through multiscreen pay-TV offerings. We’re still a long way off an all-IP distribution environment for network-based multichannel TV. However, just as telcos have explored diversity in platforms to gain a foothold in the TV market, so traditional pay-TV operators are looking to IP as the logical next step in distribution technology choice.
Most cable operators have a long-term roadmap towards IP migration, but players such as BSkyB, Time Warner Cable, and DirecTV are looking at hybrid options. This means using connected STBs as well as retail CE devices as a means of providing Internet TV, multi-room, and off-net services via OTT, web-based delivery.
In fact, the hybrid OTT approach is not confined to the “old school”. Several telcos, including Telstra and Telecom Italia, are rolling out such solutions as a cost-effective alternative to closed-network IPTV. Ovum expects to see many more such deployments as penetration of connected home video devices (smart TVs and tablets in particular) grows exponentially in the coming years.
Jonathan Doran is a principal analyst within Ovum's consumer research team. For more information visit www.ovum.com/