Despite the fact that many small telcos already see IPTV as a "bottomless pit of expense," as Robert Saunders, president and co-founder of Skitter, put it, they still must bite the bullet and incorporate an over-the-top video element into their video service mix.
That opinion was driven home by Saunders and fellow vendor Bob Shallow, senior vice president of sales and marketing for Rovi's service providers and portals business, during a panel session at TelcoTV 2012 in Las Vegas.
Of course, neither Saunders nor Shallow was suggesting the smaller operators do it themselves; they were instead offering their respective companies' expertise to blend online video into an existing services mix.
Both, too, sympathized with small players who had big capital expenses when they added video to their broadband and voice services.
"The cap ex involved with doing IPTV is astronomical," Saunders said, proffering Skitter as an "equal partner" that would "turnkey it to remove that cap ex… and split the profit."
Profit, of course, is in the eye of the beholder. From Shallow's perspective, the question to telcos "comes down to what you are looking at to generate your returns." The Rovi business model, which is less a partnership than Skitter, "is not a one-year model; it really is a multi-year model."
The partnership model, rather than the onerous do-it-alone model that many followed into the IPTV space, is attractive the smaller the operator gets, said Derrick Bulawa, general manager of BEK Communications, who said his experience with IPTV suggests that systems with 5,000 or fewer lines are the "breaking point" where a partnership or other vendor deal becomes the most cost-effective way to proceed to OTT.
"Those companies that are smaller, pay attention to these guys," Bulawa said.
Small telcos do have some advantages over their competition when it comes to providing OTT: Their local ties provide some rich troughs of localized content that can be differentiators.
Bulawa, for instance, said when his North Dakota-based company was invaded by a Comcast subsidiary, it took a grassroots local approach to telling its customers to hold tight.
"We started with a strategy of, we either succeed or we die," he said.
The strategy worked; the competition "chose to leave and we continue to grow the [IPTV] product," he reported. "It's all about being on the ground."
Local, too, means local content that can be delivered OTT, and that requires some system integration, said Shallow. This is so the disparate pieces of content--whether local or national--can be placed within a consumer's easy reach and the operator can use it as "a key supplement to what you're trying to do with VoD."
Without successfully tagging and identifying all the content, search and discovery becomes too difficult for subscribers, he said.
"Your application platform has to be very, very flexible" and the service provider needs "to be able to plug in a range of services into the platform," he said.
In the end, though, it pretty much comes down to cost and whether a small telco can afford to go the extra step and incorporate OTT into an IPTV play.
"It's a misnomer to ask if you can make a case for over-the-top," said Brandon Zupancic, vice president of operations for Canby Telecom. "You have to."
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