Challenges like the cost of implementation, sometimes-soft consumer demand, operational expenses and questions about ROI potential have been roadblocks to IPTV expansion around the globe as well as in the United States.
But research company Ovum released a report last week that said those hurdles are expected to disappear as next-gen broadband and IPTV networks gradually achieve scale.
Ovum points out that telcos currently have some 114 million pay-TV customers across the globe, but that only 48 percent of them--some 54.5 million--currently are using IPTV. The majority of the telco-delivered services are either satellite based, or, in countries including Denmark, Australia and South Korea, are delivered across legacy cable systems.
The issues with IPTV, specifically ROI and the relatively high cost of entry, has caused some telcos around the globe to look at other options, hybrid systems and alternative platforms.
In Europe, Orange and Magyar Telekom are using DTH to fill their IPTV network coverage gaps, Ovum said. BT Vision and FastWeb, offer hybrid services that provide an entry-level basic access offering via DTT, with higher-value interactive and VoD services delivered over IP.
In the United States, the high cost of doing business has led some companies, like Georgia independent Ringgold Telephone Co., to get out of IPTV. The company last year decided to offer a hybrid of Dish Network's (Nasdaq: DISH) service and is looking to offer its customers a number of OTT alternatives--a free Roku box, for example, along with an HD antenna to pull in over-the-air signals--if they'll sign up for broadband. It's IPTV business, which it had offered since 2003, just wasn't profitable.
"This business just doesn't scale, not as long as a local provider can stick a gun in your ribs and say, 'Give me all your money,'" said Phil Erli, Ringgold's EVP.
But that, Ovum wrote, is starting to change, especially as next-gen network broadband and IPTV network infrastructures gradually achieve scale.
And, as telcos build TV customer market share, the business case for full IPTV rollout over DSL and fiber starts to make more sense.
By 2016, Ovum reports, IPTV will account for about 60 percent of global telco TV revenue; it forecast that IPTV subscriber numbers are likely to increase to 116 million, about 71 percent of the total 163 million telco TV customers expected in 2016.
Pay-TV services from telecoms, meanwhile, last year accounted for $28.3 billion in revenue, about one-quarter of all global TV revenue. Ovum's report said IPTV counted for less than half of the telecom total. That's projected to increase to 60 percent by the end of the forecast period.
Ovum said traditional pay-TV operators, too, are migrating to IP delivered TV services.--Jim