By Adrian Pennington
It’s no secret that telecom operators are making significant moves into the TV industry. Indeed, telcos now provide around a fifth of pay-television subscriptions worldwide. According to figures from Ovum, operations owned or controlled by telcos accounted for 140 million retail pay-TV customer connections globally at the end of 2014. This rose to 177 million during 2015, which is 19 per cent of the total pay-television subscriber base.
Ovum analyst Jonathan Doran comments: “The growing share of ‘traditional’ TV platforms within the telco TV base reflects a recent shift towards a global consolidation of pay-TV operations, in which telcos are playing a significant part.”
Following a number of false starts in Western Europe, IPTV homes are now viable platforms. With growth of 30 per cent expected between now and 2019, IPTV subscribers will outperform both cable and satellite which will see a decline in subscribers of 9 per cent and growth of 6 per cent respectively, finds FutureSource Consulting. In the US, IPTV households reached over 12 million at the year of end 2014, representing 13 per cent of pay-TV households with an expected rise to over 15 per cent by 2019.
The staggering $49 billion acquisition of satellite television provider DirecTV by AT&T last year is proof of telco power. At one swoop it became the U.S' largest pay TV provider, with more than 26 million total subscribers (20 million from DirecTV and about 6 million from AT&T’s native U-Verse service).
Rival Verizon operates America's largest 4G LTE network and is betting on video to drive its business. It paid $4.4 billion to acquire broadband infrastructure from AOL and launched mobile-only video app Go90 fuelled by content including multichannel (youth oriented) network Awesomeness TV for which it paid DreamWorks $159m for a 24 percent stake.
Telcos are taking large chunks of the pay-TV market, becoming MVPDs [multichannel video programme distributors]. It’s easy to see why. Consumers are now streaming more content on demand than ever before, enabled by superfast broadband and 4G. Consumers are streaming more on-demand TV series and programmes , watching six hours of premium shows a week, an increase of 121 per cent since 2011, according to Ericsson Consumer Lab.
That research also found that 61 per cent of consumers now watch video content on their smart phones. If service providers are smart with their bundled propositions, this could prompt an ever-increasing usage of data.
UK quad play
Bundled propositions are the name of the game in the mature European markets where traditional and telco media are jockeying to offer the quad mix of TV, mobile, broadband and landline in an effort to increase customer loyalty and spending. Orange, T-Mobile and Telefonica are all making moves in their respective key markets to offer quad play services. Arguably, given the trend to TV everywhere, it is mobile which will prove to be the most important of these services.
In the UK, BT, Sky, TalkTalk and Virgin Media are bidding to offer quad play. BT, the former state-owned telecoms provider, has spent the last few years investing heavily for a connected and converged future. It is spending $8.6 billion upgrading mobile and broadband speeds over its fibre to the home network following its $2.8bn merger with mobile operator EE last year which saw it take on 25 million customers. It also spent more than $2.8bn on sports rights – mainly for English Premier League and UEFA Champions League soccer – to entice subscribers to a BT Sports TV package. It launched the world's first 4K live channel a year ago and is reportedly preparing to expand into original drama and documentary content.
Unlike BT, TalkTalk does not own expensive rights to TV content. It rents access to BT’s broadband network and space on O2’s mobile network and offers TV via YouView, the set top box platform co-owned by BT and major UK broadcasters like ITV and the BBC.
The third major UK telco prepping quad-play, Vodafone, is primarily a mobile group but is pumping billions of pounds into an infrastructure upgrade and is tipped to launch a pay TV package by the end of this year. Vodafone's operations in Spain have already scored great success with over 1 million TV subscribers signed up.
The UK's telcos are competing against legacy cable company Virgin Media and satellite-centric Sky whose main aim is to push TV to as many platforms as possible. Sky owns the most content, and has millions of customers signed to its broadband service. It has mobile applications, like Sky Now, for viewers to pay smaller fees to access Sky packages and plans to launch a mobile contract to complete the quad-mix later this year. Virgin arguably has faster broadband speeds , up to 200Mbps in some areas , but can't compete with Sky on content.
Cloud to keep ahead
Given the obvious synergies, what should these service providers keep in mind as they move into the world of anywhere, anytime TV? A succinct answer is cloud.
In order to match the heightened consumer expectations for TV everywhere, most service providers have Cloud technologies on their roadmap. Rollout is uneven, hampered in many cases by existing investments in legacy on premises equipment, copyright and legislative issues and some technical nuts which have yet to be cracked.
“Moving to an IPTV/cloud environment makes true multi-screen TV significantly easier for operators, while also helping them to compete against the OTT players,” says product marketing lead, content discovery and access services, Broadcast and Media Services, Jennifer Walker.
“What’s important about the cloud is how it helps operators to break free from the bounds of the set top box and use software for development,” says John Carlucci, president, Alticast.
For example, Parks Associates highlights the total number of Cloud DVR subscribers worldwide will total 24 million by 2018. Accedo expects over half of cloud DVR penetration to have taken place by 2022.
There are numerous advantages for the service provider in terms of capital savings from using shared and scaleable storage over dedicated hard disks, and fewer customer service call outs. Importantly, cloud DVR delivers a greater degree of control over content for customers, service providers and advertisers alike.
“A content provider can assign rules around which content can be recorded and for what period,” says Roland Mestric, head of video marketing, Nokia. “Such data can be capitalised on by advertisers who can place relevant ads around content when it is actually watched.”
However, technical and licensing challenges are hampering rapid advancement of this kind of service. Negotiated rights vary programme to programme and region to region, with the pivotal issue being whether a unique copy is required for every subscriber.
According to Ericsson, an objective for all telcos is to personalise the content discovery journey through the delivery of rich, detailed data delivered in the correct format to any screen. Cloud-based technology is also central here.
“There are two clear benefits to getting this right: ‘sticky customers’ who don’t want to leave, and monetisation opportunities, which boost returns,” says Walker. “The latter is achieved by collecting information about consumer behaviour and using that data to deliver targeted content, promotional offers and advertising.”
As cloud-based on-demand TV consumption increases, the value in managing addressable ads delivered to personalised, connected screens will become more transparent.
Transplanting user experience (UX) to the cloud also affords the ability to change the interface rapidly and at scale, rather than rewriting UXs for every make and model of STB, and enabling an operator to innovate discrete user interfaces for every subscriber.
“The always-on nature of the cable or telco network enables the cloud to be harnessed so that operators can deliver advanced user experiences – such as Millennial Navigation, Kids’ Modes and Sports Zones – that are not capable of being supported by the set-top box alone,” says Carlucci.
Cloud-based or STB strategies are not mutually exclusive. “You’ll see the industry continue to use the cloud to deliver TV UXs even as boxes become more capable,” says Carlucci. “We will leverage what the improved STB can do but we also will continue to see the cloud and the network evolve.”
The approach to engagement, marketing, packaging and delivery are all very different in the traditional TV sector. “Telcos will need to change from being mobile service providers with ‘pipes and devices’ to becoming credible content aggregators and delivery brands,” says Walker.
However one thing is certain: with exposure to the cloud and consumer centric propositions, there is no doubt that telcos are well placed to face – and address – the technology challenges that lie ahead and realise seamless anywhere, anytime TV.