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Carrier Services
Accenture Fires IPTV Warning
“Aim For Basic TV Service in the Short Term”
by Ken Wieland
At his keynote address at the Broadband World Forum Europe
event in Paris, Arjang Zadeh, managing partner with the
Accenture consultancy, had some stark words of warning for
telcos embarking down the IPTV road.
“It’s going to take a considerable time to get IPTV right, and
that’s just for a ‘me too’ service that replicates what the cable
operators are doing,” he said. “IPTV is an order of magnitude
more complex to launch than TV over traditional broadcast
networks. IP was never designed to deliver TV in the first
place.”
Zadeh’s advice for telcos is first to choose what their IPTV
objectives are. “Telcos need to know what business they are
in,” he said. “Are they trying to create a completely new,
innovative product to generate lots more revenue or are they
trying to improve their business model incrementally – adding
a basic TV product to their service bundle – in order to reduce
churn? What they should not do is try and do these two things
at once. They need to choose.”
According to Zadeh, speaking to Telecommunications®, the
incremental, basic approach is far wiser given the technical
complexity of IPTV. “The revenue and margin from interactive
services are minimal. The killer application for IPTV is normal
TV,” he said. “Let’s not beat around the bush.”
And by electing to go for a ‘straightforward’ TV service,
operators – said Zadeh – should focus on keeping it simple
with emphasis on providing an intuitive EPG (electronic
programming guide). “That’s what customers want,” he
said, “as well as having useful information about the
programmes. Together, this will create a huge amount
of ‘stickiness’.”
Given that the single biggest potential infrastructure cost is
providing STBs (set-top boxes) to customers, less
functionality within the STB could bring costs significantly
down. This also has the bonus, said Zadeh, of giving what the
customers actually want. They don’t want, in his view, the
bells and whistles functionality associated with interactive
services – at least in the short term.
Telcos must also focus on quality of service, said
Zadeh. “People sometimes say that content is king but I say,
for the service provider, because it doesn’t own the content, it
can never be king. Quality is king. And quality is addictive for
customers. Lack of quality causes churn and if the IPTV
quality is not good, there is a high chance that customers will
churn from the whole of the bundle, not just the TV part.”
But if operators do prioritise churn reduction, Zadeh warns
telcos that ROI will be long term. There will still be some
revenue uplift with an IPTV service – it adds value to the
bundle so operators will be able to charge more – but the
margins will most likely be wafer thin once the content owners
take their cut. It will take a long time before operators can
generate significant profit. “If you look at the average
broadcaster, it took years before they became profitable or
cash-flow positive and they had to build up millions of
subscribers,” he said.
Despite Zadeh’s warnings that operators should keep their
IPTV proposition simple, there is strong evidence that
operators envisage drumming up lots of revenue –
through ‘innovative’ interactive IPTV services – in the near
term.
According to a survey conducted by EIU earlier this year, and
which was commissioned by Accenture, the overwhelming
majority in the IPTV value chain thought that IPTV would be
a ‘significant’ revenue generator within three years.
“I think this is way too optimistic,” said Zadeh.
And according to the results of the Telecommunications®
Global Broadband Access Survey, it’s clear that many fixed-line operators –
particular incumbents – are going ahead with their IPTV
investment with the main priority to increase revenue per
subscriber. This carries the implication they are looking to
innovate with new services to create new revenue streams.
But it’s a dangerous philosophy, as far as Zadeh is
concerned, as the risk of making news services ‘stick’– which
may not even work to a satisfactory standard over an IPTV
architecture that is relatively immature – is incredibly high.
“I’ve seen telcos trying to do everything at once and much,
much too early,” said Zadeh, without naming names. “My
advice to them is they should try and walk before they can
run.”
Zadeh argued that telcos should offer a ‘me too’ service and
run that for 18-24 months before considering the addition of
other, more interactive services over their IPTV platform. “In
that way, telcos can learn about the business and understand
the economics much better.”
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