Service now key differentiator for IPTV

Telcos in the IPTV business need to focus on providing better service in terms of user experience and applications instead of relying on content, said the executive of a company that makes Internet-optimized television hardware.

In an interview with ZDNet Asia, Christophe Aulnette, managing director of French firm Netgem, said that in the past, content was king; but now, it is service that is king. Applications, the quality of the user interface, and delivering content seamlessly are what will make the difference for the service provider, he pointed out. His company has 2.5 million HDTV set-top boxes in place worldwide.

"Some telcos have tried to differentiate on content, but it's very expensive because [they] have to require the content rights from Hollywood and so on," he said. "[That said,] if you are [a big telco] like [Australia's] Telstra, you can do it."

In Singapore, the local authorities have already mandated that pay TV providers can no longer carry exclusive content as of March 2010, and must instead cross-carry content.

Competition from other players
While some market observers have argued that telcos have no place in IPTV because they do not understand the content market, and should instead focus on developing their networks, Aulnette believes otherwise. He feels telcos should cash in on IPTV to avoid becoming commoditized by other players and ending up being "dumb pipes" for the Internet.

Aulnette's sentiments echo those of Frost & Sullivan industry analyst Adeel Najam, who noted in a report that Internet service providers "must offer services like IPTV to maximize revenue potential and return on investments", especially after fiber-optic deployments.

According to Aulnette, telcos face competition in three areas in the delivery of Internet TV. One of them comprises Internet players such as Google with its Google TV. "[Internet players] want to develop innovative devices, which assume [the] Internet is there and aggregate content for free, making money [from] advertisement-funded features," he said.

Rivalry also comes in the form of TV manufacturers building Web-enabled TVs. He pointed to LG, which reportedly said it is "deliberating" plans to work with Google on Google TV to avoid being labeled a hardware manufacturer only.

For TV makers, the Web-connected TV is their "great hope" as they aspire to imitate the "Apple iPhone phenomena", where users pay for content on the Cupertino firm's iTunes and App Stores instead of to the telco, said Aulnette.

The third threat comes from the PC industry, he said. PC vendors, whose products are already in consumer homes and the server marketplace, desire to move up the value chain to be able to deliver TVs to users, he said, adding that they are probably ahead in the content sharing space with the assets they have.

Microsoft, for one, has an IPTV platform dubbed Microsoft Mediaroom, which is deployed by SingTel in its IPTV mio TV service.

"It's a worldwide battle and it is a commoditization game where each wants to build customer relationship on top of the other," he said.

Apart from Singapore, Netgem hopes to expand its offerings to other parts of Southeast Asia by using its Telstra account win as a reference.

Asked if connection speed will be a problem in delivering IPTV, especially to areas with low bandwidth, Aulnette said the company's hybrid TV is able to function at 1.5Mbps bandwidth, compared with pure IPTV, which requires 6Mbps through to 8Mbps for HD (high-definition) TV delivery.

He explained that the company's hybrid TV combines broadcast over-the-air, which does not require Internet access, and IPTV delivery via the Internet. While most of its IPTV interactive services do not require a high bandwidth, the company uses two technologies--progressive download and adaptive streaming--to ensure a smooth broadcast even in environments with 1.5Mbps bandwidth.

For video-on-demand, the progressive download mechanism loads the first 7 percent of the show onto the set-top box's hard drive and continues downloading while the user watches the show, he explained.

Adaptive streaming adapts the quality of the image to the bandwidth available, he explained, adding that this is the "next stage" for the company.