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86-93 Aging Public Workforce

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  • 1. Communications & High Tech “Infinite Possibilities” television? By Arjang Zadeh, Gregory K. Douglass and Raymond Dogra Nagging questions swirl around the business case underlying Internet protocol television. To be successful, an IPTV strategy must be based on creative thinking about how delivering video content over the Internet will change the way people access and use that content, and about how it will enable new ways of delivering value-added services and advertising. After several years of hype and hope, planning and testing, some of the biggest players in telecommunications, media and cable are poised to metaphorically flip the switches that will activate the flow of content—and, presumably, the flow of revenue—via Internet protocol television. The likes of AT&T, Telecom Italia and PCCW in Hong Kong—along with a host of cable and major media companies—are just a few of the hundreds of businesses vying for a share of what’s popularly known as IPTV, which could be worth $17 billion a year by 2010. But nagging questions still swirl conducted by Accenture—sampling So first, service providers need to around the business case underlying the opinions of consumers in West- create those attractive value propo- IPTV. And some wags are already ern Europe and the United States— sitions. Some operators are market- asking whether the “IP” stands for did not really know what IPTV ing IPTV as just another way to “infinite possibilities” or “impossible is. Even those who claimed some deliver video services, with a bit of payback.” The answer is that IPTV understanding of it had widely cool interactivity thrown in as a will be an important new business— differing perceptions. bonus. These providers might, for but only if all the various types of example, offer viewers watching the companies going for a piece of the Is that a problem? Not necessarily. FIFA World Cup soccer tournament pie understand and surmount the People know what television is and the option to make real-time bets hurdles they face. what the Internet is, and our research on different features of a game or also shows healthy demand for the connect live with other fans around A lack of consumer awareness of types of services IPTV can provide. the world. IPTV and the generally hazy notion If consumers have value proposi- of what its value propositions might tions in the form of information The hard truth, however, is that be are among the first obstacles and entertainment options presented most of the interactive features and these companies will encounter. to them at attractive prices, then other functions touted in IPTV solu- Almost half the respondents in a understanding and subscriptions tions are already available, with recent international IPTV study should follow. regular digital interactive cable. If Outlook 2006, Number 2 79
  • 2. Communications & High Tech interactivity is the distinctive product When providers know they can feature an IPTV provider is using identify you as a “market of one,” as a marketing pitch, then there are they will be able to target services nearly 3 million digital cable sub- and advertising based on interests scribers in the United Kingdom you have already expressed through alone, for example, who are likely your choices, thus increasing your to respond, “Ho-hum.” satisfaction and loyalty to their company. Internet users already Indeed, such a value proposition know about this feature: Commer- leaves a provider vulnerable to cial websites, such as Amazon.com some of the consumer fears about or Apple.com’s iTunes, make edu- IPTV that were also revealed in the cated guesses about your interests Accenture research study. Consumers based on sophisticated software are painfully aware of how often that analyzes your past purchases, their home Internet connection and then suggest other products and goes down, and they struggle with services that might interest you. computer viruses and unwanted adware. Many believe they would Today, the issue of advertising is encounter similar problems with obviously a complex one, as TV IPTV services. viewers continue to find ways (through personal video recorders A channel of one and the like) to avoid watching tradi- In fact, much more profound value tional advertising spots (see “Why propositions exist for IPTV. Here is TV advertising will never be the a way to understand one of them. same,” Outlook, January 2006). Glance through the weekly program- Indeed, the Accenture IPTV consumer ming guide for the 100 channels study found that “less advertising” of your cable service or the 500 was one of the more appealing fea- channels of your satellite service, tures to consumers of video services then ask yourself a simple question: delivered over the Internet. In truth, How many of these programs the issue with advertising may not are relevant to my interests? The be a desire for “less advertising” most likely answer is that you but rather for “less advertising that have no idea. means nothing to me.” But consider what happens when, IPTV will fundamentally alter the through the combination of video traditional television advertising programming, Internet browsers model. Because the set-top box will and content management software, become essentially a database of you can search video content much viewing and purchasing activities, like you surf the Web, finding and IPTV will unlock opportunities for cataloging what interests you most. more personalized advertising— This is not just “video on demand,” including one-to-one targeted a service to which consumers offers and interactive ads. Advertis- already have access. This is “my ers will be able to identify the video content on demand.” Over commercials that customers are time, it will not matter how many watching, and this data will then TV channels are available to you; be used to improve the efficiency that entire mental model of televi- of marketing campaigns. sion will become increasingly meaningless. All that will matter Concerned about privacy? Con- is one channel: yours. sumers will be able to opt in or out 80 www.accenture.com/Outlook
  • 3. of IPTV’s ad monitoring feature, an IPTV ad if they knew it would be and will weigh for themselves the targeted only to people living within pros and cons of both options. As a certain distance of the store. with a frequent shopper card con- sumers use at the grocery store— A community of many which means the store knows every Yet IPTV can also mean much pack of chewing gum and jar of more than creating increasingly peanut butter they have purchased— cocooned individuals watching the positive trade-off will come TV programming selected especially in purchase discounts, special for them. Consider the innovative offers and services tailored to their IPTV initiative currently being real interests. developed in Iceland by Reykjavik Energy, the utility that provides Similar functionality will increase electricity and water to the city the value of advertising for everyone of Reykjavik and surrounding com- in the IPTV value chain. Consumers munities. Industry observers are are more likely to pay attention to watching the initiative closely an offer targeted to their expressed because Iceland, though small in interests, and advertisers are more population, has a technologically likely to pay for it. Even small busi- advanced economy with high levels nesses—a pharmacy, a dry cleaner, of broadband penetration. Thus a florist—might be willing to pay for it serves as a lab test for larger- Regional IPTV subscribers (thousands) The number of IPTV users could increase more than twelvefold in the next six years. 25,946 Asia Pacific Americas Western Europe Rest of the world 19,669 10,580 7,583 13,437 4,552 5,071 3,587 8,562 2,942 2,137 4,961 9,540 1,411 7,622 1,482 2,694 1,049 5,699 901 3,946 650 2,344 1,129 14 86 263 530 877 1,274 2005E 2006E 2007E 2008E 2009E 2010E Source: “IPTV: A Global Analysis,” Informa, 2005 Outlook 2006, Number 2 81
  • 4. Communications & High Tech scale IPTV initiatives elsewhere in Listen to Reykjavik Energy execu- the world. tives speak of their IPTV initiative and you will hear about more than Reykjavik Energy is working to just revenue-generating strategies. connect every home and company Their vision is also about connecting in the city with a high-speed, inter- municipalities and citizens, about active IP/fiber network and then enabling better sharing of govern- put in place an IPTV platform ment information, better educational to deliver content. Why would a opportunities and even improve- utility be in the IPTV business? ments in the democratic process by According to CEOþGuðmundur þ offering people more opportunities þ ?óroddsson, “We are looking at þð to interact with one another. fiber to the home today as an- other essential utility—in addition Each municipality in the region to the wires that bring energy to will have its own portal and will be homes and the pipes that bring able to both supply content to the hot and cold water. One utility network and receive content from brings electricity, another water. other municipalities. According to But fiber and our IPTV platform Steinunn Valdís Óskarsdóttir, the will provide a form of energy mayor of Reykjavik, “We believe just as important to our citizens: our IPTV platform will significantly information.” increase the quality of life for our Regional IPTV revenues (US$ millions) IPTV revenue growth is expected to be particularly dramatic in Western Europe. Asia Pacific 10,443 Americas Western Europe Rest of the world 2,914 7,481 2,064 2,621 4,910 1,813 1,346 3,069 1,105 768 4,524 1,714 754 3,364 406 2,329 884 505 210 1,492 308 789 365 1 14 55 130 240 384 2005E 2006E 2007E 2008E 2009E 2010E Source: “IPTV: A Global Analysis,” Informa, 2005 82 www.accenture.com/Outlook
  • 5. citizens, and also make our city a more attractive place for people Content acquisition will become the and businesses.” most significant component in the IPTV Overcoming the challenges cost/revenue model. Despite visionary thinking by some, the fact remains that IPTV technolo- gies and solutions are immature and ful IPTV strategy must address a the market is fragmented. There is number of complexities and realities. no “out of the box” IPTV solution— complete, integrated and ready to 1. Content is king go. This technical reality has already The experiences of providers in both led to setbacks for several providers Europe and the United States have that waited until far too late in the made it quite clear that the “killer development process to consider application” for IPTV solutions is the integration challenges and the programming content. Acquiring and impact on their existing systems, processing that content are not skills especially operational systems like that telecommunications providers rating and billing. necessarily possess, so they must decide how to get those skills. One In addition to technical issues, option is a joint venture model, providers looking to create a success- in which the IPTV provider teams Regional IPTV average revenue per user (US$) The Americas and Western Europe are expected to be the biggest IPTV markets on a revenue-per-user basis. $ 50 Asia Pacific Americas Western Europe Rest of the world 40 30 20 10 2005 2006 2007 2008 2009 2010 Source: “IPTV: A Global Analysis,” Informa, 2005 Outlook 2006, Number 2 83
  • 6. Communications & High Tech with cable and satellite operators to the quality of an IPTV feed can be a acquire wholesale premium content. challenge, however. Network experts A second option is a sales package know how to measure network qual- model, in which a company forms ity, but that does not necessarily a direct content acquisition relation- indicate what a customer actually ship with film studios and other sees on a TV screen. If a customer content providers. is paying for video on demand and then complains about the picture In either case, the cost of content will quality during a movie, knowing be substantial for IPTV platforms. where the problem occurred is Accenture’s business case analysis vital to deciding whether to give indicates that content acquisition will that customer a refund. become the most significant com- ponent in the cost/revenue model, 3. Creating a viable IPTV business accounting for more than 40 percent case is not simple of costs by the fifth year of operation. Based on our research and our work with clients, the business case for 2. Transmission quality must be high IPTV as a stand-alone product can Since content is king, the quality of be challenging. Because content the programming feed itself must be providers have the supreme position as good as or better than existing TV in the IPTV value chain, margins services. Monitoring and measuring may appear discouraging. In fact, Much more than entertainment Although the most obvious impact of IPTV—television virtual collaboration at much lower costs. IPTV has the programming delivered over the Internet—will be on the potential to have a huge impact on the ability of many kinds communications industry (see story), reverberations will of organizations to innovate and grow by making it easier to be more widespread. Here are a few examples of impacts connect workers in meaningful ways, anywhere in the world and opportunities in other industries. where there is an Internet connection. Media and entertainment. The most important success factor Government services. Visionaries like those in the Icelandic in an IPTV strategy will be the quality of the content itself, city of Reykjavik and those at Reykjavik Energy (see story) so media and entertainment companies will occupy, arguably, now see IPTV as a way to link communities, to share informa- the highest spot in the IPTV value chain. IPTV presents tion and to enhance the democratic process. opportunities for targeted programming and content, and obviously a much broader set of channels to consumers. The Education. Online educational offerings are likely to soar in impact of this new consumer channel into the home will be popularity, as the rather “flat” kinds of interaction in current nothing short of revolutionary. distance learning applications become more robust through low-cost video links—either in real time or as video files that Health care. With the proper video links, doctors and other can be accessed anytime. health practitioners could make “21st century house calls,” extending their ability to provide care to patients, especially Financial services. Financial advisors and insurance agents the homebound. As large numbers of the population in many will have a more direct channel to reach clients and to provide industrialized nations approach retirement age, such an ongoing services. For example, a broker or money manager offering could be both important and lucrative. might be able to target an investment suggestion to a client, based on something he or she hears during a financial news Pharmaceuticals. In pharmaceuticals research and develop- program—a corporate earnings report or regulatory change, for ment—or, really, in any industry in which R&D is a critical example—that might have an impact on the client’s portfolio. function—IPTV will finally enable more satisfying forms of 84 www.accenture.com/Outlook
  • 7. IPTV will probably be simultaneously To be successful, an IPTV strategy several years in the oil and energy the most complex service a provider must take more than a simple “me industries. He is based in London. has and also the one with the lowest too” approach to television program- gross margins. What this means for ming. It must be based on creative arjang.zadeh@accenture.com most providers is that they must thinking about how delivering video squeeze as much cost as possible content over the Internet will change Gregory K. Douglass heads the global from elements of the platform, the way people access and use that Convergence group in the Accenture including the set-top box and the content, and about how it will enable Communications & High Tech/Global hardware, software and middleware. new ways of delivering value-added Solutions practice. With more than services and advertising. 17 years of consulting and management In an attempt to make the business experience in the telecommunications case for IPTV more compelling, some The current craze with MP3 players and media industries, Mr. Douglass’s providers are working with hybrid offers a hopeful parallel for IPTV work focuses on operations support solutions—using either satellite or dig- providers. The iPod obviously systems, billing, network management, ital terrestrial TV for regular broad- turned out to be much more than customer relationship management and cast signals, and then using IPTV for just another way to listen to music. integration technology. He is based in interactive and on-demand services. The ability to catalog music, to Las Colinas, Texas. BT in the United Kingdom, Telecom organize it and search through it, Italia in Italy and Telefónica in Spain to download a variety of content gregory.k.douglass@accenture.com have all publicly announced their and to bring it with you anywhere intentions to include a hybrid strat- has changed the buying patterns Raymond Dogra is the Accenture glob- egy in their IPTV implementations. and listening behaviors of millions al lead for IPTV. He has more than 15 of people around the world. years’ experience in the communica- 4. Excellent customer service tions, media and high-tech industries, is imperative In much the same way, the marriage including six years working with IPTV Many providers today are finding of video content with the search and digital TV operators. Within IPTV, that the bundling of services in areas and cataloging capabilities we have Mr. Dogra has a particular focus in like IPTV is a double-edged sword. all become accustomed to on the business planning, product definition, Yes, a provider can get a bigger Web will produce a variety of com- program management and operations. share of each customer’s spending pelling applications and services. He is responsible for shaping and devel- across the spectrum of related com- IPTV will be one of the products oping Accenture’s IPTV market offerings munications services. On the other that will alter the worlds not only and assets. His client work includes hand, providers that fail to deliver of communication and entertain- designing and building the operation excellent customer service with any ment but of government, education and launch plans for new IPTV busi- part of the bundle risk losing the and business. nesses within major telecom operators customer across the entire bundle. in Europe and in India. Mr. Dogra is Studies have shown that operators based in London. that have trouble with the quality or About the authors value of one of the components or Arjang Zadeh leads Accenture’s raymond.dogra@accenture.com services in the bundle find that their global Network practice within the customers are actually as much as Communications industry group. In 60 percent more likely to churn than 2003, Mr. Zadeh was selected by the a customer of a single service. Broadband World Forum as one of the top executives of the European Clearly, operators must monitor and broadband industry. He was the rigorously measure both customer founder and chief executive officer satisfaction and the stability of the of Imagine Broadband, an organiza- services they’re offering. This may tion specializing in the development require ensuring that customer rela- and delivery of complex large-scale tionship management capabilities commercial convergent solutions. are fully integrated throughout the Previously, he held positions with entire solution. BT Laboratories and worked for Outlook 2006, Number 2 85