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Carrier Services
SES AMERICOM kills IPTV service
Cites weak demand for its IP-Prime wholesale offering
by Doug Allen
Here’s an interesting counterpoint to AT&T’s recent announcement of reaching the one millionth IPTV customer for its U-Verse initiative: IPTV wholesaler SES AMERICOM has decided to discontinue its IP-PRIME IPTV transport and programming service, targeting small and midsize U.S. telcos, on July 31, 2009. That gives SES customers about seven months to look for another IPTV provider, as SES returns to its core markets, such as cable, providing programming feeds and uplink services.
So far, there has been no word on a possible sell-off of the IP-PRIME program.
This is particularly surprising given recent investor conference comments by an SES executive painting a fairly optimistic picture of the IPTV market and SES’s near-term outlook, citing many service provider customers with long-term contracts and the belief that demand for TV service would remain strong despite the ongoing recession.
SES claims it’s fully funded through 2010, and that 70 small telco customers under long-term contract thus far with IPTV signal deliver agreements, about 37 of which have begun commercial roll-outs (see Rural telcos getting IPTV ). One rule of thumb allots about 300 customers for each small telco offering IPTV.
But last week, SES reversed that guidance, citing “slow adoption” of IPTV among small and medium U.S. telcos in general, and a weak market for the service in the near-to-mid term. Rob Bednarek, President and CEO of SES AMERICOM-New Skies, said, “with a subscriber base of less than 10,000 at the end of November and after more than two years of service, the consumer uptake is insufficient to justify continuing operations.”
By comparison, key IPTV wholesale competitor Avail Media claims secured contracts with 115 customers, 73 of which subscribe to video services, passing more than 400,000 homes; it’s video on demand offering passes more than 1 million homes.
Some observers speculate that some telcos may sniff the prevailing ill wind for IPTV and opt to forego an IPTV rollout and move straight to broadband content delivery by partnering with media content companies such as Vudu.
“SES AMERICOM’s announcement is bad PR for the overall IPTV industry, which is still searching for proof points that there is a viable business model for IPTV,” writes Yoav Schreiber, a senior analyst at Current Analysis, in a recent intelligence report. “However, given the competitive imperative for the triple play bundle — of which video is a key component — the end of IP-PRIME says more about the delivery model of IPTVC as a wholesale offering, and in particular, SES AMERICOM’s instantiation of that model. As a result, the decision should embolden SES AMERICOM’s rivals (i.e., Avail Media, EchoStar, and Falcon IP/Complete) who are targeting the same space with differentiated approaches, but it should be an alarm bell for companies that relied too heavily, and somewhat exclusively, on IP-PRIE as their channel to the IPTV market in the U.S.
“Evidence points to laying the fault on SES AMERICOM. In an online survey of independent/rural local exchange carriers (ILEC/RLEC) in the U.S. conducted by Current Analysis, roughly 15 percent of respondents answered that they contracted with a content aggregator and managed service provider for their IPTV service. Interestingly, all of these respondents had fewer than 40,000 subscribers, with IPTV adoption rates ranging from below 10 percent, and between 25 and 50 percent. And these IPTV adoption rates were not dissimilar from those cited by respondents who manage their own IPTV delivery infrastructure. These survey results imply that sufficient demand for IPTV does exist among ILECs and RLECs, many of whom are able to grow subscriber adoption.”
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