Telecom Italia has begun free trials of an IPTV service in more than a thousand households in four Italian cities ( Rome , Milan , Bologna and Palermo ). The service, which offers a range of TV programming and video content in high-quality format over ADSL access lines, is in advance of commercial service being rolled out this autumn, initially in 21 cities across Italy (Rome, Milan, Bologna, Palermo, Bari, Naples, Padua, Cagliari, Genoa, Florence, Alessandria, Modena, Venice, Verona, Turin, Trieste, Catania, Brescia, Biella, Sondrio and Reggio Emilia, if you’re interested). As well as traditional programmes offered by a selection of TV broadcasters, a catalogue of video on demand (VoD) content is available during the trial phase. Once trials have been completed, says the Italian incumbent, over 4mn Italian households will potentially have IPTV coverage.

Telecom Italia is the latest in a long line of operators and ISPs to strike off down the telco TV trail. A non-exhaustive list of other actual and would-be TV/video star-struck players includes Finland’s Alcom, Bell Canada, Belgacom, BellSouth, India’s Bharat Sanchar Nigam Limited (BSNL)/Atlas Interactive partnership, Swisscom ISP Bluewin, BT, China Netcom, China Telecom, Taiwan’s Chunghwa Telecom, Fastweb in Italy, France Telecom, Free in France, Iceland Telecom, PCCW in Hong Kong, SaskTel in Canada, SBC, Telefonica and Verizon.

If industry rune readers are correct in their IPTV rune reading, you can readily see the commercial appeal of the deal. For example, The Multimedia Research Group’s ‘IP TV Forecast & IP TV Global Forecast Update’ calculates that subscriber numbers will grow from 1.9mn in 2004 to 25.3mn in 2008, and also forecasts IPTV subscriber revenue will grow from $635mn in 2004 to $7.2bn in 2008.

In their favour as they attempt to cash in on IPTV and VoD services, telcos are supposed to know all about tricky things like scaling networks and customer billing, and have a wealth of customer data which TV and VoD marketing departments can exploit. They also own the dedicated links to the customer base.

At the same time IPTV and video constitute the third leg of the famous telco triple-play strategies (quadruple if you happen to have a wireless network to hand) being prosecuted worldwide by operators aiming to tap into new revenue streams and lock in customers through bundled service offerings. Again in their favour, telecommunication service providers are often seen as a more natural provider of bundled services than other types of entity.

Interestingly, several sources suggest that established triple-player Fastweb has one of, if not the, highest average revenue per user (ARPU) ratings of any European service provider. According to the UK-headquartered Ovum consultancy, operators (and vendors) in this general market space should now be asking themselves if they have missed the bus. “IPTV and triple-play are hot stuff”, say senior Ovum analyst Charlie Davies and research director Mike Cansfield.

Or, at least, that’s the conclusion Ovum contends you might draw from the recent flurry of industry activity relating to IPTV and video. As well as operator and service initiatives, a slew of product and contract announcements have been made by well known and less well known vendors, a small selection of which includes Agilent, Alcatel, Espial, IBM, Linksys, Microsoft, Minerva Networks, Nortel, Operax, ORCA Interactive, SeaChange International, Siemens, Spirent, Symmetricom, and Tandberg Television.

Over on the standards front the US-based Alliance for Telecommunications Industry Solutions (ATIS) announced the creation in March of an industry exploratory group that would assess the technical and operational opportunities and challenges surrounding deployment of IPTV. “The effective, robust and interoperable deployment of IPTV technology is vital to service providers,” says Balan Nair, chief technology officer of Qwest. “The ATIS IPTV Exploratory Group is tasked to create a consistent industry definition for IPTV and identify technical and operational issues surrounding the implementation of IPTV - quality of service, interoperability, inter-carrier billing, and the like”. The following month members of the Broadband Services Forum (BSF) selected IPTV as its priority work item for 2005. 

That’s the upside. The downside is quite well-populated too.

First and most obviously, the TV marketplace is already well serviced by non-telco and non-ISP players, and some cable companies have been offering VoD products for a number of years. As Davies and Cansfield note in a recent commentary: “Competition is stiff - from existing TV players and new digital incomers that are offering more ‘free’ channels”.

From a technical point of view IPTV and VoD are probably much easier to say than actually do. A number of organisations tried and abandoned VoD in the 1990s. It could be argued that the technology wasn’t mature enough at that time. The same could now be said of IPTV. According to ‘Evaluating IPTV Vendor Strategies’, a new report from The Diffusion Group (TDG), would-be operators still need to be very careful in their choice of technology vendor and solution. "A number of recent announcements have served to illustrate the importance of initial vendor selection in rolling out IPTV services in a seamless fashion", says Hervé Utheza, TDG director of IPTV research. "Telstra, Swisscom, and SBC have all delayed their IPTV service rollouts due to technical difficulties with their chosen vendor solutions. In each of these cases, system stability, while making great strides, still has much room for improvement".

"A key reason for these difficulties is the early stage of IPTV system development. Unlike cable or satellite TV solutions, IPTV uses technology that hasn't been in the field for years", adds TDG president Michael Greeson. "In fact, many of the technologies used in today's IPTV solutions are being tested during real-time deployments. It is hardly surprising, therefore, that initial eployments are encountering such difficulties".

In practice there are likely to be degrees of difficulty, depending on the scope of the services being proposed and the ambition of the particular service provider. It’s been suggested that BT opted for a combination of over-the-air broadcasting and VoD, eschewing the idea of delivering broadcast TV programming over broadband due to the technical challenges involved. The BT line is that its chosen option makes commercial sense. “Our approach of over-the-air broadcast and broadband-delivered video-on-demand, interactivity and enhanced support is the perfect solution and complements existing TV propositions already in the UK market”, claimed Gavin Patterson, group managing director of BT Retail, at the announcement of the former monopoly’s selection of  Microsoft’s TV Internet Protocol Television (IPTV) Edition software platform to deliver its UK services.

Ovum has some other reservations about the actual hotness of IPTV and triple play. While acknowledging that there is no shortage of content, and that the supply chain is coagulating, Davies and Cansfield make the following points:

·        in many cases, the home domain is still horribly complex for mass markets users (who owns this? who manages it? who will pay for it?); and

·        a thriving digital market place where IP is truly exploited is still some way off, not least because bargaining with big content players is tough, concerns around digital rights management (DRM) remain, and a large amount of content remains unexploited.

However, the biggest challenge in Ovum’s view is the most basic. “How can service providers (and not just telcos) exploit digitisation and IP delivery to actually grow revenue in the digital content arena, rather than simply taking existing Pay TV or music or video market share?” wonder Davies and Cansfield. “And then there are customers - many will love it, but not all will adopt it".

Distinctly mixed signals, then, for telco TV prospects.
John Williamson