IPTV Aiming To Beat Cable At Its Own Game

Telcos and Overbuilders Set To Deliver on “Triple Play” Promise

Internet Protocol (IP) television, that is, the much-hyped method for delivering video signals as data packets over a broadband connection that can be viewed on a PC or a TV set with a set top box, offers the potential that cable TV promised years ago: diversity of content and a broad spectrum of service offerings.

The difference today is that players in the space have virtually unlimited bandwidth, allowing them to offer more channels, better quality high-definition television (less compression) with true 5.1 surround sound, as well as high-speed Internet access and telephone service.

Heretofore, the IPTV sector has seen more than a few trials with limited success. Now, however, with the easy availability of privately held fiber optic networks that in many cases extend directly to the home, a maturity of IP products and systems based on off-the-shelf IT components, and the required content distribution deals in place, the future for delivering video via IP looks bright.

Technology aside, however, government franchising regulations - which allow a company to serve a local community with video - have been tough to crack, but there are signs in various states that telcos and other new media companies will be allowed to deliver video service into communities now served by cable TV companies (who pay a franchise fee) sooner or later.

In fact it could be sooner, as the U.S. Department of Justice recently announced it supports federal regulations that would bar local governments from prolonging cable-franchise negotiations with phone companies and others that want to compete with cable providers. For its part, the Federal Communications Commission has proposed rules that would impose a deadline on local governments to act on cable-franchise applications, which have tended to lag for months or even years.

The reason IPTV is becoming a viable reality, according to most experts, is due to three main market conditions that have changed over the past 12 months. The first is that content owners and the commercial broadcast networks have finally figured out the type of language that will go into the IP distribution and transport agreements, which took about 18 months.

The other big hurdle has been conditional access and digital rights management. With content owners fearful of video piracy, every IPTV provider has had to invest considerable resources to ensure that the content will not be copied and shared without the proper consent. Without this insurance, an ESPN or a Turner movie channel will not make its content available. As several of the failed trials thus far have learned, the right content makes all the difference.

Thomas Wendt, founder of the Optical Entertainment Network (OEN), said that IP services are now auditable, so he can prove to Disney or Turner that the conditional access technology they require is in place. “We now have a process to prove that content is secure,” he said. “Before this, content owners were not going to make their most popular shows available to us. Now we have the content we need to be competitive.”

The final piece to the puzzle is the deployment of set top boxes. This sluggish, costly, yet critical step has been held up due to a lack of HD silicon chips necessary to decode IPTV streams in the subscriber’s home. Supplies have been limited at best, delaying more than one IPTV launch.

In the past six months the industry has begun to see the availability of new integrated chipsets with graphics cards and everything required, giving IPTV providers access to a two-chip set top box that costs about the same as a traditional digital cable appliance and reliable enough to deploy. Meeting the set top box demand often means partnering with more than one supplier to get timely shipments. For their part, service providers have done little to bring down the cost by ordering small numbers of units while waiting to see if subscribers sign up in large numbers.

“They are still a bit more expensive than a cable TV box, but we’re getting there,” Wendt said, adding that his company has made deals with several providers, including Amino (based in the UK). “If we can get some volumes built up over the next 12 months, eventually they will; be cheaper than a cable box, which is the goal.”

This fall, the OEN is launching its FISION service, to about 5,000 subscribers initially. To get started, the company purchased a 4,500 pre-existing platform that it is converting from RF insertion to IP, which, according to the company, is very easy to do.

The OEN developed its own digital specifications for sending video via a fiber-to-the-home (FTTH) architecture using gigabit Ethernet technology. Video programming is converted to IP once it leaves the satellite and, without any further compression or encoding, travels directly into the subscriber’s home over a single strand of fiber. The FISION signal is digital the whole way.

Real World Deployments

While IPTV deployments are much more prevalent in regions outside of the U.S., especially Asia, there are several American services already in place, totaling about 200,000 subscribers, according to ZDNet.com research. [The number of IPTV subscribers, worldwide is predicted to reach 53 million in 2013 from about 2 million as of end of last year, according to market researcher Dittberner Associates Inc.]

These U.S. deployments include AT&T, in markets across the country; Consolidated Communications, in Illinois; SureWest Communications, in California; Verizon, in 24 communities across several states; Ringgold Telephone Co., in Georgia; and SmartTel Communications, in Alabama and Florida.

For most IPTV providers, partnerships are critical to fast deployment. OEN has partnered with Phonoscope, owners of the largest privately held metropolitan fiber network in the world, to provide these services to 1.6 million homes over their fiber network in Houston. All homes are within 500 meters of the fiber network and half of them already have fiber-to-the-curb (FTTC) access in place. OEN will simply install connections to specific neighborhoods, allowing the service to be deployed relatively quickly.

The fiber network is using terminal equipment from Motorola, as well as IP headend transmission technology from Tut Systems, Minevra and conditional access gear from Irdeto Access. They’re also installing optical network equipment from Alloptic, for gigabit bandwidth capacity, and Nexans’ fiber optic cable and components.

The key for OEN and any IPTV provider is to ensure that it has enough bandwidth to satisfy customers requesting the same content simultaneously. When it debuts, FISION will have 400 channels of video (both SD and HD), as part of a “triple play” of video, high-speed data and telephone service. This includes video on demand, pay per view and network-based PVR services. OEN will also offer 10 to 100 Mbps of symmetrical Internet access, local and long distance IP voice services and other innovative applications including home security, videoconferencing, gaming and Telemedicine.

“I think the biggest advantage of IPTV is the fact that we’ll have an unlimited channel capacity, which gives us a big leg up on cable,” Wendt said. “Also, most of the digital cable boxes currently deployed can’t really handle HD. We run everything directly from the headend at the exact same bit rate we get it from the network. So, we’re not bandwidth-constrained in any way; like cable is.”

Satisfying the Niche

This large amount of bandwidth includes a 40 GBps core throughout the fiber network and a 1 GBps FTTH connection. This enables OEN to offer a broader range of program choices, catering to niche geographic areas and demographics. For example, FISION will offer programs in 16 languages, with over 55 channels of Hispanic programming alone. There will be a basic tier, mid-range and premium tier to address one million Hispanic households in the Houston area.

“This is a very big deal for us, because Time Warner, the local cable competitor, can offer eight channels at best,” Wendt said, revealing that meeting the underserved demand for foreign language programming and other niche markets will be key to success. “If they want to offer more, such as more capacity for cable modems or VOD, they have to cut something else. We don’t have to make those types of compromises.”

HDTV (with true Dolby Digital 5.1 surround sound audio) is another area where IPTV providers will play a big role, as the number of HDTV sets sold to U.S. households (3.4 million DTV sets were sold during the first quarter of 2006 alone, according to the Consumer Electronics Association and flat panel displays saw a 201 percent increase over the first quarter of 2005) Not only will they offer the traditional lineup of HD offered by cable and satellite, some are even establishing their own production divisions to create content.

OEN, for example, has established its own OEN Studios to fill the seemingly insatiable need for more HD content. Glen Fulce, executive vice president of OEN Studios, is tasked with feeding the pipeline. They’ll use a variety of MPEG-2 encoders and servers to develop a totally tapeless workflow at its main studio facility. All HD production being captured with JVC GY-HD100U camcorders, but content will be distributed in SD and HD on TV, Internet, iPods and to cell phones. The strategy to do this is still being worked out.

“We’re currently in negotiations with a number of different vendors to put our content out into the world, on a variety of platforms,” Fulce said. “We’re originating everything in HDV in order to future-proof it.”

Also important is custom software development to keep the network up and serving subscribers. Any company that deploys an IPTV platform has to be prepared to do a lot of custom or proprietary work, to minimize customer churn. Most telcos have a dedicated team of software developers on staff.

Long channel changing times, something that has plagued some IPTV trials, and has to do with how the network is configured and how the various pieces of equipment communicate to one another, is another technical issue that is still being worked out. OEN said their service is about equal to a satellite TV box.

In this new era of personalized TV and multi-platform strategies, the customer has the upper hand. With the proliferation of these new IP services, the consumer will have access to more affordable video packages, more channel choices and, eventually, the ability to pick and choose only those channels they want (e.g., a la carte); and it’s all bundled with a highly competitive phone and Internet bill. The question remains, can providers like OEN deliver on the promise of a better TV service?

“If we’ve learned anything from DirecTV and other program providers is that you must have a better product in order to be successful with customers,” OEN’s Wendt said. “IP is the only way to truly get there cost-effectively under today’s cost structure. Our service has to be faster, more responsive, more intelligent, more user-friendly, with a better user interface and more channel choices, or we won’t win.”