Global Trend

The Age of Watching Anything, Any Time, Anywhere Finally Dawns

Back in the early 1990s, a company called Tele-TV tried to launch a new service: television programs delivered over telephone lines. The first problem was that their technology wasn’t ready for prime time. It was still pretty much dream-ware in 1993.

The second problem Tele-TV faced was that the television networks wouldn’t allow it to transmit programs on terms that it could live with. By 1996, Tele-TV, which was a joint venture of three Baby Bells, had sunk more than $300 million into the deal and was being asked to pay cash up front ? and lots of it ? for content.

In some cases, the content owners simply refused to license popular programs at all. By the end of the year, Tele-TV, including partner U.S. West, was history, and the dream of delivering television programs, Internet access, and telephone service ? all over the same network ? went back to the drawing board.

In the meantime, this movement, called Internet Protocol Television, or IPTV, began to take hold in Europe, where a number of factors coalesced to make the technology more feasible and the audiences more receptive to the service, according to an article published by Primedia Insight.

While penetration in Europe was less than 1 percent in 2004, researchers predict that this business, with an estimated market capitalization of $62 million last year, will explode during the next five years. It reached $262 million in revenues this year and is expected to bring in $2.5 billion in 2009, when penetration will reach 6 percent of Western European households via DSL phone lines. France, Italy, and Spain are expected to be the leading markets.

Now, after retreating to the labs and watching the progress overseas, American engineers are set to unleash a torrent of television programming in the U.S. that will be available through telecom connections and will reshape the TV and entertainment world to create entire new industries. And this revolution is already underway.

Typical households with cable or satellite connections can receive a possible 7,000 hours of programming each day, or almost 3 million hours a year. But, that’s just 10 percent of what’s available out there, with some 31 million hours of possible programming available each year.

To put that in perspective, if you had started watching television when Columbus discovered America and had watched 24 hours a day since then, you’d still have another 3,000 years’ worth of television programming to watch just to get through one year of what’s available today.

Where will it all go? How will you sort through it? Who will deliver it? And who will make new fortunes from it?

The best minds in the business are scrambling to answer those questions in a free-for-all that’s not likely to be sorted out for years to come. But one conclusion is becoming clear: The winners will be those who can solve the two big problems plaguing IPTV in the U.S. today:

The first problem is providing the bandwidth over existing lines to deliver clear video that doesn’t skip or experience delays.

The second problem is to deliver this technology at an affordable price.

There is no question that the Internet is taking over in every area. Already, more music videos are watched on AOL than on MTV. Procter & Gamble has severely cut back its TV ads in favor of on-line efforts. TV Guide is even trimming its TV listings. At the same time, according to a recent article in Wired, the content wars have begun, with CBS fighting for its life against giants such as Google and Yahoo!

Yahoo! is partnering with SBC and Microsoft on a project called Lightspeed to deliver everything from video-on-demand to music. Its Media Group just opened a new $100 million facility in a 230,000-square-foot building that was once headquarters for MGM in Santa Monica. That’s right in the shadow of HBO, MTV, and Universal, sending a very clear message of what’s to come.

Media insiders are already referring to Yahoo! as “the fifth network.” But it’s still an open question whether the four traditional television networks ? ABC, CBS, NBC, and Fox ? will even exist in recognizable form a few years from now.

In fact, the companies that are going to compete to deliver the content are already raiding the networks and entertainment giants for talent. Yahoo! recently hired the head of ABC television. The CEO who hired him was a former Warner Brothers executive. In addition, the company recently snapped up execs from Fox, NBC, and CBS. Just as quickly, Yahoo! is gobbling up all the content it can find.

The bandwidth problem is a formidable one, but giants like Verizon are tackling it head on. According to an article in Electronic Engineering Times, Verizon hopes to be able to feed TV signals at up to 100 megabits per second to 3 million households by next year. And there are already 5 million set-top IPTV boxes being tested in homes.

One of the big problems comes from the nature of Internet protocol itself. It is a system in which data of any sort is broken into packets. It sends those packets in no particular order and waits for a signal that they have arrived. If they get lost, it sends them again until they all get there. At that point, they’re reassembled on the other end. This normally happens so fast that, if a packet is lost, users don’t notice the delay in the delivery of small amounts of information, such as a text message sent by e-mail.

But when it comes to video, all that changes. A lot of packets are lost, especially on notoriously noisy DSL connections, and video can’t wait. This makes the picture stall or jump, or even freeze. As the number of users accessing the system increases, the problem intensifies. So scaling this technology for mass audiences is a nightmare.

Several businesses and organizations are scrambling to create, simultaneously, a new Internet protocol standard, the hardware to handle it, and the software to manage it. The Internet Streaming Media Alliance is trying to set the specifications, while the Society of Motion Picture and Television Engineers is working with Microsoft to get the protocol to work on a Windows platform. Then all the content, from high-definition TV and standard-definition TV to phone service and Internet access, has to be squeezed into the bandwidth of a DSL line or fiber optics cable.

Cisco Systems is currently the leader in developing systems that are likely to work with IPTV, especially its so-called “IP NGN” (Next-Generation Network) architecture. Looking down the road, it appears that it’s going to be difficult for anyone to be in the IPTV business without Cisco and its long history of leadership in the technology of switches and routers.

In addition, the all-important set-top boxes are currently too expensive, costing about $225 each. The target is $100, but the chip set that’s required is putting that goal out of reach for the time being. Motorola is working on that problem and new chip sets should be introduced next year.

Meanwhile, Yahoo! is developing an automated system for categorizing the content. It is using a model developed by Google, which depends on following and analyzing the way people access shows to decide who will like what content.

In light of this trend, we offer the following five forecasts:

First, despite the daunting challenges that companies face in bringing IPTV to market, the intense competition now underway will ensure that those problems will be solved. As with so many other new technologies, such as video recording, one of the big battles will be waged over the setting of standards. Unlike some of the previous high-tech wars, the new IPTV standard is likely to be an open one and not a Microsoft-like model of market domination. Within the next five years, this standard will set the stage on which all entrants will compete.

Second, in that same time frame, coaxial cable will start to become obsolete as cable service is replaced by optical fiber, DSL, or wireless delivery systems. There will be a huge battle for those displaced cable customers, and the existing cable companies that can make the switch early enough, and convince their subscribers to stay on through the transition, will survive and thrive.

Third, within 10 years, television networks as we know them will no longer exist. Some may move aggressively and make the transition to the IPTV environment. But others will simply become part of history, as new companies or existing telecom players become the main sources of delivering all content and all digital services.

Fourth, by 2015, there will be no traditional telephone companies left, as companies such as SBC transform their infrastructure into broad entertainment and communications networks. All services will flow through one monolithic infrastructure, from HDTV to data, voice, games, entertainment content, news, and so on. With $6 billion committed to its Lightspeed project and 30 million customers, SBC is apt to be among the leaders, but there’s likely to be a massive “market shakeout” in which anything could happen. Expect a three-way battle involving telcos, cable companies, and satellite delivery systems such as Direct-TV.

Fifth, as IPTV becomes the norm, the entire dynamics of these services, their customers, and the providers will change. What was an advertiser-driven system will become a user-driven system in which customers pull the content they want ? and only that content ? onto their screens. The era of force-fed content will end. An increasing share of the revenue will come from consumer payment for content. The challenge for advertisers and marketers in that environment will be mainly one of how to know all of their customers well enough to be invited into their virtual domains.

References List :
1. Broadcast Engineering Online, September 1, 2005, “IPTV Services to Reach 6 Percent of Western European Households by 2009.” ⓒ Copyright 2005 by Primemedia Business Magazines & Media. All rights reserved. 2. Wired, September 2005, “The Super Network,” by Josh McHugh. ⓒ Copyright 2005 by Conde Nast Publications, Inc. All rights reserved. 3. Electronic Engineering Times, May 9, 2005, “IPTV Supporters Hoping for Better Luck in Reruns,” by Rick Merritt and Loring Wirbel. ⓒ Copyright 2005 by CMP Media LLC. All rights reserved. 4. For information about Cisco Systems’ accomplishments in delivery of video/IPTV services, visit their website at: newsroom.cisco.com/dlls/2005/prod_090905b.html