As Telcos lose ground, will IPTV save the day?
Joy Ghanekar, MBA1
Issue date: 3/13/06 Section: Technology
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This past Friday, our MAP team -spread out over different cities-held a conference call with our sponsor in Ireland using Skype-the free P2P telephony software program. In the bottom of my window was displayed a number-5,500,236 users online. Telephone companies ("telcos"), have seen almost every aspect of their local and long distance business hurt in the past few years. Profit margins have been shrinking and revenues have dropped steadily. According to a Forrester Research report, monthly long distance spending has dropped from $18.95 in 2003 to $12.33 in 2005 and local spending has shown similar declines. Even the lucrative yellow pages business has been eroded with the advent of online search.
Telcos have three key factors to blame for their misery. Firstly, cable companies are offering digital phone service over broadband lines. Secondly, VoIP providers have matured their business models and seen accelerated growth due to increasing broadband penetration. Thirdly, wireless carriers have made it unnecessary to own a phone at home. In 2004, roughly 5% of U.S. households dropped their landline in favor of a mobile phone.
But there is another stream of revenue that the telcos are placing their bets on - video, or more specifically, IPTV. By offering bundled services of voice, video, and data, also known as triple play services, telcos are hoping to increase revenue and reduce customer churn. In fact, a recent Light Reading study showed that with triple play services, telcos can increase their ARPU to $120. So what is IPTV anyway?
Although IPTV can be easily confused with watching TV over the Internet, the two are distinctly different.
IPTV - An Overview
IPTV refers to the delivery of video- broadcast and stored-over an IP (Internet Protocol) based network. Broadcast video services are identical to the baseline offerings of the cable providers. They are comprised of national channels such as ABC, NBC, CBS, and others including national and regional sports networks, special interest channels and international channels. Telcos would also offer consumers the ability to view the content in High Definition (HD) or Standard Definition (SD) format. Stored video services, a key service differentiator, would allow users to acquire video content on demand, store it locally or within the network, and perform functions such as the ability to pause, rewind, and stop. The stored content can viewed multiple times over a fixed period of time. Over time, telcos hope to deliver additional features such as online gaming, voice and Internet integration services such as incoming call notification, conferencing, TV e-mail, and TV Web Browsing.
Telcos have three key factors to blame for their misery. Firstly, cable companies are offering digital phone service over broadband lines. Secondly, VoIP providers have matured their business models and seen accelerated growth due to increasing broadband penetration. Thirdly, wireless carriers have made it unnecessary to own a phone at home. In 2004, roughly 5% of U.S. households dropped their landline in favor of a mobile phone.
But there is another stream of revenue that the telcos are placing their bets on - video, or more specifically, IPTV. By offering bundled services of voice, video, and data, also known as triple play services, telcos are hoping to increase revenue and reduce customer churn. In fact, a recent Light Reading study showed that with triple play services, telcos can increase their ARPU to $120. So what is IPTV anyway?
Although IPTV can be easily confused with watching TV over the Internet, the two are distinctly different.
IPTV - An Overview
IPTV refers to the delivery of video- broadcast and stored-over an IP (Internet Protocol) based network. Broadcast video services are identical to the baseline offerings of the cable providers. They are comprised of national channels such as ABC, NBC, CBS, and others including national and regional sports networks, special interest channels and international channels. Telcos would also offer consumers the ability to view the content in High Definition (HD) or Standard Definition (SD) format. Stored video services, a key service differentiator, would allow users to acquire video content on demand, store it locally or within the network, and perform functions such as the ability to pause, rewind, and stop. The stored content can viewed multiple times over a fixed period of time. Over time, telcos hope to deliver additional features such as online gaming, voice and Internet integration services such as incoming call notification, conferencing, TV e-mail, and TV Web Browsing.
