Arthur D. Little: Opportunity For Telecoms Providers to Increase Triple-Play Coverage with Hybrid Solutions

Thursday, August 21st, 2008
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As competition from cable operators and online players increases, a new insight by Arthur D. Little urges telecoms operators take advantage of the opportunity offered by Hybrid TV services

LONDON — Telecoms operators across Europe are being urged not to delay any further in their move into the television content business. According to the new report launched today by Arthur D. Little, telecoms operators must also be conscious that within the next two years, opportunities to gain market share could be lost forever.

The new report “Taking Advantage of the Best of IPTV and SatTV“, prepared by Arthur D. Little’s Telecoms, Information, Media & Electronics (TIME) Practice, predicts that it will not be long before linear TV is replaced by an on-demand, ad-hoc consumption model, brought about by consumers’ growing familiarity with Personal Video Recorder (PVR) and on Demand (TVoD or VoD) services. Telecoms operators, according to Arthur D. Little, have an opportunity to gain a share of the content market by playing the role of content aggregator and offering an on-demand service that allows consumers access to a variety of programming, while at the same time increasing coverage with hybrid Direct-to-Home (DTH) solutions.

The service solution

Given that many telecoms operators are already supplementing their IPTV offer with DTH TV services, Arthur D. Little’s new report identifies an IPTV/DTH hybrid as the most cost-effective and market-ready option for telecoms providers to bring to market. The report identifies a flexible range of potential scenarios for bringing so-called “Hybrid TV” to market, highlighting how the initial investment required for satellite TV roll-out compares favorably to the cost per subscriber necessary to further develop pure IPTV services.

The disadvantage of pure DTH solutions is the lack of the back channel allowing interactive services. By combining the advantages of providing a low Capex broadcast solution through DTH and at the same time providing an IP back channel for interactive services with low bandwidth requirements, interactive services could be offered with close to 100% coverage.

“Hybrid TV” solutions, according to the report, will require the development of new customer-premises equipment, or a so-called “hybrid set-top box,” which offers the functionality to decode satellite TV as well as provide an IP interface for connecting to the internet. Arthur D. Little predicts telecoms operators should be prepared to make an initial investment of €80 – €200 per unit in the development and production of the equipment, and an additional €1 million per year for developing the content and infrastructure necessary to offer on-demand services.

“With the tremendous popularity of video on demand services such as YouTube, we believe that the opportunity for telecoms operators to offer value-added services will drive the growth of Paid TV revenues as consumers increase the demand to access content regardless of time, location or type of device,” reflects Karim Taga co-author of the report and Director at Arthur D. Little’s Telecoms Information Media & Electronics (TIME) Practice. “We believe telecoms providers have the technical capability and available routes to market to take advantage of opportunities to develop this service over the next two years, and even earlier in certain markets. At the moment, the opportunity still exists for telecoms providers to get a foothold in the content market, but the case will not remain this way indefinitely.”

According to Arthur D. Little’s report, if telecoms operators are able to integrate critical DTH components into their core IPTV strategy, there is a good chance that they will be able to successfully challenge cable operators’ dominance in the content business.

“Moving quickly is critical to outdoing the increasing competition from both cable operators and web players, but should they act now, telecoms operators will avoid being reduced to pure access providers,” says Jürgen Morath, co-author of the report and a Director of Arthur D. Little’s Telecoms Information Media & Electronics (TIME) Practice.