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HDTV and IPTV (part two)

In my previous blog on this subject I indicated that HDTV primarily revolves around flat screens and motion picture studio efficiency. In fact, flat screen TV systems are not purchased for their claimed HDTV capabilities but for esthetic reasons: Flat is Cool. Few of the flat screens are compatible with the true HDTV (1920 x 1080) format. The current quality improvements are based on the use of “DVD-quality” signals in digital format via the air, via satellite, or via cable networks. Given the low replacement ratio (in the range of ten years) for the 1.5 billion TV’s on earth, not much will likely happen with “HDTV” for the consumers in the coming years.

Now compare the quantity of TV’s with the 800 million PC’s and 1.5 billion mobile phones that are out there. We’re used to replace these items every three years, so this is the area where fast changes can happen. The 2006 UK regulator Ofcom report shows, that young adults now watch less TV than their parents. Computer games, chatting, and other internet activities are successfully competing with traditional television, and TV programs are watched selectively rather than passively. The end of the couch potato era is in sight! Taking the TV to the PC and the mobile phone is a logical step, and potentially a killer application. The format to do this is IPTV.

The Focus Group of the International Telecommunication Union (October 2006, Korea) defines IPTV as  “Multimedia services such as television/video /audio /text / graphics delivered over IP-based networks managed to provide the required level of QoS/QoExperience, security, interactivity and reliability”

Each line of business positions to get a piece of the potentially very rich IPTV cake: Equipment manufacturers advertise the IPTV capabilities of their routers; Local telecom providers focus on the quality aspects to compete with the cable companies and fill the gap of the ever reducing voice revenue; Cable companies see in IPTV a new way to move towards two-way services and offer video on-demand (VoD) via set-top boxes; Coffee companies advertise that their beans enrich IPTV viewing, and so on. They all plan to incorporate IPTV in their service offering as a new ‘triple”, or “quadruple” play subscription package. They all hurry to state that IPTV is not to be mistaken for free open Web TV.

Of course, Web TV is exactly what we’re heading for on our PC’s and mobile phones. The plans to offer IPTV as subscription service with set-top boxes are, at best, interim solutions that will fail to generate profitable revenue. Today’s PC users (connected either via DSL, Cable, WiFi/WiMax) are rapidly getting used to high-speed internet connections in range of 3 Mbps to 30 Mbps. These internet users are the early adopters of Web TV. The other internet users will join them as soon as their internet access connection allows for the speed, which is a matter of time. Compression technology improvements have resulted in the ability to view TV at data speeds of 500kbps – 750kbps.  Modern internet connections support watching different TV channels on multiple PC’s.

But what about the Quality of Service, you may ask?
Since 2000, various proprietary and open source codecs have been created that allow an acceptable display of TV programs, both for linear TV as well as for canned motion pictures.
Besides the H.264 standards that were agreed upon by the ITU members in the past decade, multiple open-source MPEG-4 codecs evolved to fulfill the market need. Codecs such a DivX, 3viX, and XviD were created, with additional services, such as subtitles, included in new container structures like OGM and Matroska. Simplified versions have been made for the mobile phone, such as 3GP. Check out the Doom9 site for guides and version details. No need to worry about all these new codecs: The PC or SmartPhone media player will detect the required codec and automatically fetch it from the internet in a matter of seconds (except when you’re tied to a proprietary set-top box, of course).

Today, computer and mobile phone users are enjoying mp3 audio on their phones and iPods. This highly compressed  music format has effectively taken over from the high quality audio CD. The same is happening with video. Consumers have embraced free “low-Q” video sites such as YouTube and Google. In the past year, free linear IPTV / Web TV services have seen explosive growth. Dozens of generic TV-portals are now offering free access to thousands of TV channels. Examples are Channelchooser and wwiTV. This number of portals will likely grow two orders of magnitude in the coming year.

Also for the mobile phone side there are TV standards, such as T-DMB. The free air to TV model, introduced in South-Korea late 2005, allows buyers of a T-DMB (Terrestrial Digital Multimedia Broadband) handset to watch TV without requiring a subscription. This is the way to boost the solution! In Germany, the mobile provider Debitel initially charged a fee for the TV service, which resulted in minimal growth. To boost sales, they are now offering a 6-month free introduction. T-DMB is not restricted to mobile phones. Also PDA, portable TV devices, and car navigation systems can make use of this service.

We’re slowly moving away from the Napster days. Consumers are getting used to pay for mp3 downloads via iTunes and its competitors. The same is bound to happen with TV (and games). Viewers will become used to pay a fee for on-demand motion pictures.  VoD is the reason that all providers are rushing towards IPTV. New anti-piracy tools, such as the video watermark system introduced by Philips this week, will help to protect (at least for a while) VoD material and revenue.

What will be the effect of IPTV on the ISP’s, Cable companies and other transport providers?
A recent Gartner report predicts that almost 50 million households will subscribe to IPTV service by 2010.
My perspective: Why subscribe to IPTV if you can get it for free via your regular internet connection?
In Europe, France leads the way: Companies such as FREE are including linear (terrestrial) TV channels in their package at no extra charge, focusing on new revenue via VoD services. According to a recent WorldBusiness article, PCCW in Hong Kong has highest local IPTV market penetration number,  but a fast ROI seems unlikely, especially if consumers can also watch TV via free web portals.

Similar to the music industry, where music producers and artists are bypassing the record companies by posting their music directly on the internet for a moderate fee, we will see traditional TV transport providers being bypassed by the content producers.
Most linear TV stations already serve their audiences with program replay and extended broadcast services over the internet. Best-in-class example is probably the BBC, offering a wealth of on-line information around their programs in over thirty languages, not only for their TV audience but also for mobile phone users.
Motion picture distribution will be done directly by the studios in cooperation with dedicated storage and on-line servers hosted by internet content providers such as Google, and/or via P2P download options.

In the coming years, I expect to see many local "legacy-based" TV distribution / metropolitan cable companies losing their business to the content and internet providers. A shake-out in this area is unavoidable.
For global IP-based network owners and service providers such as Global Crossing, I see only positive effects: Global IP traffic and capacity will increase even faster that it is doing today.

So what's next in the HDTV/IPTV theater? More about that in my third (and last) blog on this subject.
Gert Nieveld 2007/4/17


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