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IP-Prime's fall raises further questions
Does the upcoming demise of IP-Prime cast a negative light across an entire market, or is it just a reflection of one company's inability to realize adequate returns from that market's opportunity? Is it an indictment of a business model, or an indication of how much competition has developed among companies with similar business models? And, does the planned end of IP-Prime in a way illustrate how healthy a business opportunity over-the-top video could be for small telcos?
The answers to all of the above may be "yes."
Question 1, Part 1: SES Americom's plan to end the much-touted IP-Prime wholesale service, coming just a month after the U.S. IPTV industry sought re-assurance at TelcoTV 2008, does cast a negative light on the small telco TV market amid a very challenging economy. It may take a few months to sort out whether or not any telcos will need to shut down IPTV services or kill launch plans because of IP-Prime's closure. SES Americom is giving those customers plenty of time to look for other options, but satellite may have been the best or only option for some. The company's statement that end user adoption was slow could convince some telcos that a branded, separate TV service just isn't worth it.
Question 1, Part 2: Still, SES Americom's announcement that it will end IP-Prime pretty clearly communicated that IP-Prime didn't meet the company's own ROI goals for that particular offering. It said it still believes in IPTV over satellite. Perhaps some small telcos still will use satellite, but will have different partners for content or systems integration purposes.
Question 2, Part 1: Wholesale IPTV offerings have looked especially attractive in recent months as telcos have become more threatened by landline losses, but also more cautious about the costs of investing in a new service. TV seemed to be both a customer loyalty and revenue answer, but maybe the failure of IP-Prime to collect enough usage illustrates that there are just not enough customers in this particular part of the market to support wholesale operational costs.
Question 2, Part 2: But, don't dismiss wholesale on a, well, wholesale basis. Avail Media and Falcon in particular have pressed into the market with an array of technology partners, many of whom are the biggest names globally in IPTV and video capabilities. On a related note, major network equipment suppliers also are expanding their outsourcing capabilities for the telco market. These companies certainly are armed to make wholesale IPTV work, and the fact remains that IPTV is still too expensive for many telcos to build out on their own. Yet, they must do something to offset voice revenue losses. At another level, there are locally-focused firms like Midwest Video Solutions looking to helped the smallest telco avoid the high costs and complications of providing TV service.
Question 3: If you don't think the rest of the debate is compelling, then fast-forward to the notion that IP-Prime's demise is just another reference point highlighting the increasing and somewhat surprising viability of OTT video as a component of telco broadband offerings. A Vudu executive may have been the interloper during last month's TelcoTV opening keynote session, especially sandwiched between telco TV mac-daddies AT&T and Verizon Communications, but he pointed to a business model that seems to make a lot of sense as OTT video continues to explode: Why create a cable TV-like service and then figure out how to integrate OTT video when you can skip the build-out costs and partner with a device company that can bring very un-cable-like content and additional value to your existing broadband connection. If voice is moving to broadband connections and more video is traveling over those connections, maybe the market is trying to tell you something.
For now, it is safe to say that TV and video continue to be an opportunities for small telcos, but that questions remain about the best ways to deliver and maximize those opportunities.
-Dan
Related articles
SES Americon said this week it would end the IP-Prime program
Midwest Video Solutions launched in May of this year
Avail Media emerged in 2006 after a merger
Falcon is a former Fierce 15 Emerging IPTV Player
More stories about Telco TelcoTV IP-Prime SES Americom Avail Media Telco Tv Tv Service Falcon rural IPTV Midwest Video Solutions
Comments
Posted by Dale M | December 16, 2008 - 1:30pm
Dan,
I believe Over The Top Video will soon out-pace all viewing habits. IPTV was a great idea 10 years ago, but HDTV and DVR's have increased the complexities in IPTV to the point where it is almost impossible, or at the very least, unprofitable. OTT Video has the potential to offer all the features of Cable, Satellite, IPTV, DVD's and DVR without any of the hassles. As OTT Video matures over the next 3 to 5 years, I have to ask, why would a consumer subscribe to a $100 cable or IPTV package when they can watch anything (almost) they want when they want it, and only pay for what they watch?
There are only three things inhibiting OTT Video today. I think soon there will be none!
Posted by Pete Pifer, CEO ETI Software | December 18, 2008 - 3:20pm
SES had a great concept, modeled after the sucessful HITS [Headend In The Sky] service offering in the cable industry. However, there were two major differences. HITS was designed and backed by TCI[now Comcast]primarily for the use of its own small TCI systems.
HITS was then offered by TCI to the small cable market because it brought in incremental revenue streams to TCI, and because Dr.Malone, then CEO, cared for the small operators and saw the importance of their survival.
These cable systems in many cases already had built out the last mile and were hurting because of bandwith issues and the industry move from analog to digital.
The satellite headend was the big expense they couldn't afford to do without HITS. Once HITS was available, they could move ahead with digital, but only thanks to TCI.
TCI also required everyone top use the same STB's and Middleware operating system, namely Motorola. This was an important move to standardize the process and bring the deployment risk down.
In the telco market the last mile or ADSL/VDSL/FTTH access portion hasn't yet been built by amny of the small telcos, and IPTV was new; subsequently roll out has been slow. But the SES IP Prime initiative didn't have the backing of a Tier 1 operator to pay for the basic break even operating expenses of satellite delivery. Further, NRTC and SES attempted to satisfy the requests of the Telcos for multiple vendors of STB's,CA and Middleware, futher diluting the business volume and standardization that the industry badly needed.
There are many options available in the works to some degree or another for the transport of video to small operators. But without a Tier 1 telco or multiple Tier 2 telcos backing the project, the going will be difficult for the smaller operators. Just as in building a large shopping mall or office building, a keystone tenant is needed to build the solution around, so that the small tenant can build their business at their own pace and at an affordable price.
There are some non MPEG standard video solutions in the works that offer the promise of knocking the bandwidth down, and they potentially offer major relief for those willing to buck the standards. However, they must be embraced to the point of allowing vendors to reach the necessary revenue level for profitable business.
Posted by Anonymous | January 7, 2009 - 6:59pm
Falcon teamed up with SES recently. Dascom does site buildups for SES as well. burning the small customers really sucks. actually, burning any customer does.
Posted by JET | January 28, 2009 - 1:59pm
This whole stampede to IPTV has largely been driven by the widespread panic related to the cable companies' assault on the telephone industry(and access line decline in general). Unfortunatley, the knee-jerk competitive response was short sighted and will have cost millions in unrecoverable investment.
The way we receive and consume video content is already changing and the metamorphasis will continue as innovators continue to find ways to bypass the traditional channels. In ten years, "cable" will just be one type of "pipe" that delivers the broadband connection to homes. Everything else; voice, data, audio, video will be OTT.
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