Home >> March 2009 Edition >> INSIGHT: NSR Executive Briefing
INSIGHT: NSR Executive Briefing
Satellite IPTV Pragmatism

by Carlos Placido, NSR

Technology pragmatism is clearly a stamp on today’s competitive television environment. Much focus is often given to cross-platform moves made by last-mile distributors. However, the current situation of content abundance and bandwidth bottlenecks also has implications for wholesale players, some with satellite-based advanced offerings that intend to bring efficiencies to the food chain at the B2B level. In this category we find a number of players including Avail Media and EchoStar in North America, as well as those with regional scope in Latin America including IPTV Americas and Telefonica.

The Retail Picture
With TV digitization, PC-TV convergence and growth in HD screen penetration and services, it is no secret that television is going through the single most profound transformation since the arrival of color TV in the 1970s. As Internet pressures build up and consumers begin to take back their attention from traditional media, it could even be argued that the long-term impact of the mass-personalization forces transforming television is rather on the league of the impact experienced in the 1950s, with the arrival of broadcast TV itself.

Content owners realize that multiple distribution channels are the only way to reach the largest distributed audience, and are thus relying on a mix of technologies and approaches. Best examples can be found in U.S. broadcasters, who in order to regain eyeballs going to cable TV and the Internet are increasingly putting their content online as well as planning free digital mobile TV offerings. Another, perhaps even surprising, example is CNN that is now relying on a mix of client-server and peer-to-peer (P2P) distribution for their live video feed at CNN.com. The company providing the P2P plug-in to Flash video players is reportedly also working with European broadcasters exploring P2P distribution.

Pushed by both content owners and consumers seeking “liquidity” to find one another through multiple means, Cable MSOs, telcos, and DTH operators are all adopting pragmatic strategies across traditionally competitive platforms. Such strategies have the objective of keeping and expanding their user base while containing competition from bundled offerings as well as from emerging over-the-top (OTT) providers, which squeeze the net neutrality Internet principle to offer services without ownership of last mile resources.

This platform-agnostic competitive situation leads NSR to believe that platform-bounded service competition is ending. Examples abound, but the following iconic cases can be highlighted:
  • Orange (Europe’s largest IPTV player) and Telefonica (world’s most international telco) both rely on satellite (DTH) for extended TV coverage for their triple-play offerings.
  • Major U.S. MSOs including Comcast and Cox are exploring wireless alternatives and united under “Project Canoe” to fence off Google from the lucrative national TV ad aggregation business.
  • EchoStar launched a telco-friendly HITS platform while also developing Sling-enabled HD-DVR and Tru2Play set top boxes for the cable industry.
  • Telmex acquired cable and WiMAX operations for the last mile in Latin America.

The Wholesale Picture
Recently, a number of developments highlight that technology pragmatism is the name of the game even in wholesale offerings. While the U.S. sector is still recovering from the news of SES dropping its IP-Prime linear satellite IPTV offering, both Avail Media and EchoStar believe they will succeed through a more converged approach.

Avail Media has adopted a service model that combines linear and non-linear delivery service. It has recently reached 1 million non-linear IPTV subscribers helped by its acquisition of VOD content distribution company ViewNow. Avail Media is also pitching both small telcos and cable operators to use its services. It is able to do so with their existing service by performing edge processing adaptation, so that the IP-encapsulated service can be used both by telcos in IP native format across their DSL plant, as well as by cablecos via “transmodulation” to QAM for last mile digital cable distribution.

EchoStar, on the other hand, is pushing forward a platform-agnostic multi-screen strategy via a combination of moves that could at times look “spasmodic” or unrelated but that are aimed to converge over time. These include launching a telco-friendly parallel IP satellite lineup called VipTV targeted at small U.S. telcos, despite possible cannibalization implications for some Dish Network DTH subscribers. EchoStar is also on the path of integrating DVR technology with Sling Media, effectively taking both the time and place tyrannies out of TV distribution. Its developments around the recently announced Sling-loaded HD-DVR, the 700 MHz spectrum acquisition being vacated by broadcasters, and manufacturing devices for the cable industry (including Tru2Play set top boxes and HD-DVRs) clearly places the company in a platform-agnostic path.

The Latin America Case
In NSR’s forward-looking assessment of trends in IPTV via satellite titled “IPTV via Satellite, 2nd Edition” (released in 2007), it was stated:

“Despite operators’ need to diversify their business, satellite IPTV in Latin America is expected to grow slowly due to obstacles including existing legislation, low broadband penetration and competitively-priced cable TV offerings. Lack of local-loop unbundling legislation in countries such as Mexico further deters competition. In the short-term, telcos will rely on DTH partnerships to offer bundled triple play, while continuing with pilot IPTV projects. NSR expects that either Telefonica or IPTV Americas will make use of satellite capacity to effectively distribute content as broadband access spreads into lower density cities.”

Fast forwarding to 2009, such assessment in early 2007 could not paint today’s reality better, as both IPTV Americas and Telefonica are now moving in the anticipated direction. In January 2009, IPTV Americas announced a partnership with SES New Skies to provide a wholesale IPTV distribution via satellite in Latin America. Almost simultaneously, in November 2008, Telefonica announced at NexTV in Buenos Aires that it intends to use its DTH platform for white-label wholesale distribution to small and medium-sized operators in the region.

IPTV Americas initially attempted to offer a wholesale IPTV service to major Latin American telcos by hosting its “super-headend” at the NAP of the Americas in Miami, Florida, and distributing such pre-packaged service via submarine and terrestrial fiber to major telcos in the region. Such an approach implied that it would only be able to reach “fiber-reachable” major cities in the region, which were clearly in the hands of major PTTs such as Telefonica or Telmex, who can build their own TV headend systems. Reaching the more fragmented cable and small to medium-size telco market geographically distributed across the region and without advanced terrestrial backhaul infrastructure would require the use of satellite distribution. This is what IPTV Americas now intends to use, possibly gearing initially toward the more fragmented and TV satellite-receptive cable sector.

Telefonica knew that replicating its DSL-based Imagenio IPTV service from Spain would involve new challenges in Latin America. While IPTV pilots have taken place, the large geography in the region, coupled with language and content commonalities, moderate-to-low ARPU and less developed DSL broadband infrastructure clearly facilitated the case for a DTH approach with regional scope. Telefonica currently has around one million DTH subscribers across the region in countries like Brazil, Chile, Venezuela and Peru. In Chile, Telefonica has even been able to capture almost 20 percent of the pay TV market after just two years. More recently, it decided that it could tap into the existing consumer-packaged DTH service to also service at a wholesale level telcos introducing IPTV and cable operators digitizing, although clearly not on a non-discriminatory basis whenever this means competition to itself.

Clearly, NSR anticipated specific events with regional impact that started to materialize 20 months later. Such anticipation did not come from insider information; as the report was written possibly well before the companies even planned for such offerings, but rather from a holistic regional analysis of the forces shaping the business involving factors such as players’ power balance, pay TV penetration, cable play and broadband penetration.

Holistic Analysis
As stated in other articles and research studies, NSR strongly believes that the business of television can no longer be analyzed without looking into the convergence forces shaping the business. While this holds particular relevance in developed markets with high Pay-TV penetration and churn-fighting contexts, such an approach has also proved to be effective in predicting industry behavior in regions such as Latin America where pay TV has plenty of room to grow. Technology pragmatism is the rule of the game in the new converged services area, a context clearly influencing the decision of major players at both retail and wholesale ends of the TV distribution spectrum.

Information for this article was extracted
from the NSR report entitled:
Mobile TV and Mobile Video, 2nd Edition