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Successful IPTV deployments are more about selling broadband than about selling television. While telcos are leaders in the broadband space, they remain novices in the pay-TV market. Therefore, it is arguably more profitable for telcos to maintain their position in the broadband segment than to become a leader in the pay-TV space, as TV is only one of the many revenue-generating applications that can be carried over broadband.
For decades, voice services have been the bread and butter business for wireline operators. However, over the past decade, telcos have seen their voice revenues decline significantly, primarily, due to fixed-to-mobile substitution. For example, Verizon reports a 4% per-year loss of traditional phone lines to wireless and broadband. Similarly, Telefónica’s estimates for wireline revenues in Spain show voice declining from 49% of overall revenues in 2004 to 35% by 2008. With declining voice revenues, broadband has become a key source of revenue for telcos. However, to sustain revenue growth and to differentiate their offerings, telcos must move beyond being just a provider of Internet access. They need to leverage their network capabilities and provide enhanced services – essentially monetizing the broadband network further.
IPTV is not a silver bullet for telcos, but it is the first significant broadband service to emerge from the telco broadband network. It is the missing piece in the telco triple play bundle, necessary in today’s competitive markets, and it could be a powerful revenue preservation tool by enabling operators to replace their fading voice business with a growth business. Moreover, the IPTV set-top box extends beyond just TV and creates a platform for telcos to penetrate the home and offer a wide array of broadband services.
Any TV-driven proposition will face substantial competition in the pay-TV market, drive up costs by emphasizing content, and further drive telcos away from a strong core competency built around enabling voice, data and video. Carriers in more developed pay-TV markets, like the US, face a sharper competitive challenge and must create a catalyst for convincing subscribers to switch pay-TV providers. It will therefore be difficult for them to differentiate if they simply match what is offered by the competition. Telcos can look to differentiate with superior content or lower price for similar content or a dramatically superior video experience.
IPTV carriers in less competitive markets must at least match the competition’s basic TV package and tap into the capabilities of IP to deliver more value-added services. Video on Demand (VoD) will be important to IPTV margins, but a VoD only business model will not attract subscribers.
The new report Transforming Telcos With IPTV: Business Models, Competition and the Content Challenge highlights pay-TV competition and identifies some key “sweet spot” markets worldwide. Additionally, this report includes 10 IPTV Carrier case studies, IPTV demand forecast, and analyzes IPTV business models and positioning.
Learn more about the report Transforming Telcos With IPTV: Business Models, Competition and the Content Challenge or purchase a copy in our online store.
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