The IPTV Explosion:
                                                     Who‟s Positioned for Success?
                   ...
Agenda: The IPTV Video Explosion:
                            Who‟s Positioned for Success?




                          ...
Section I: The Global IPTV and IP Video
                                            Infrastructure Market and Competitive ...
The Major Drivers for the Overall IPTV and IP Video Market



                                                            ...
IPTV and IP Video Market Evolution



     Significant Factors
       IPTV Impact on Ad Models

          – Unicast conte...
IPTV and IP Video Market Evolution (Continued)



     Significant Factors
       IP Video and IPTV Business Case Evoluti...
Current IPTV and IP Video Solutions Competitive Positioning Matrix
                                                       ...
IPTV and IP Video Content Security

               Four components:
                 Conditional Access Systems (CAS)
   ...
IPTV and IP Video Content Security Competitive Positioning Matrix
                                                        ...
Competitive Actions to Improve Market Positioning


                      Needs to leverage integrated B/OSS capabilities ...
Section II: The US IPTV Market and
                                                    Competitive Terrain




Washington ...
Service Provider Drivers and Trends

  Universal Service Provider Drivers
   Increase ARPU
   Decrease churn

  U. S. Se...
Business Case Drivers: Competitive Pressures (U. S.)


          Telcos Losing Wireline Voice to MSOs, Wireless Substituti...
U. S. Consumer Drivers and Trends


   Consumer Demand Drivers                                                            ...
IPTV Case Example: AT&T U-verse Service Delivery


Technical:
        Largely FTTN (FTTH for new
         homes)
       ...
Section III: The European IPTV Market
                                                    and Competitive Terrain




Wash...
Split European Broadband Infrastructure Strategies



   Infrastructure Build-out Strategies:
       FTTH with Active Eth...
European Business Case Drivers: Competitive Pressures




                  Need to drive up ARPU and justify heavy infras...
Service Provider Drivers and Trends


   Telco Priorities                                                                 ...
European Consumer Drivers and Trends

               DTT and license financed „Free TV‟ shakes up
               EU market...
IPTV Case Example: Illiad FreeBox Service Delivery


  Technical:                                                        A...
Catch-up TV VOD case study – BBC iPlayer


    Free to view in the UK
    Viewers can stream to browser,
    iPhone, Virgi...
IPTV Best Practice Revenue Models



 Consumers pay for content, picture quality and ease
 of use
       Size (# of subsc...
Global IPTV and IP Video Technology Drivers and Trends

   Standards and Acceptance: GPON/VDSL2
   and DOCSIS 3.0 standard...
Questions and Answers




All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited...
Recent Current Analysis Reports on IPTV


Our customers have been reading:
    Netflix‟s Streaming Video Service Crosses O...
Competitive
                                      Intelligence
                                   levels the playing field...
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  1. 1. The IPTV Explosion: Who‟s Positioned for Success? Ron Westfall, Research Director, Access and Applications Yoav Schreiber, Senior Analyst, Digital Media Infrastructure Larry Hettick, Principal Analyst, Digital Home Services U. S. Bernt Ostergaard, Research Director, Telecom Services Europe Ben Tudor, Senior Analyst, Consumer Broadband Services Europe June 4th & 5th, 2008 Washington DC / Paris All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent.
  2. 2. Agenda: The IPTV Video Explosion: Who‟s Positioned for Success? Section I: The Global IPTV and IP Video Infrastructure Market and Competitive Terrain Section II: The US IPTV Market and Competitive Terrain Section III: The European IPTV Market and Competitive Terrain Washington DC / Paris All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 2
  3. 3. Section I: The Global IPTV and IP Video Infrastructure Market and Competitive Terrain Washington DC / Paris All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 3
  4. 4. The Major Drivers for the Overall IPTV and IP Video Market • SDP for Any Device, Any Content Back-Office • Metadata Management/Semantic Web and • Future IMS based services • Content and Workflow Mgmt Organization Evolution Applications and IP Video and Standards and Services IPTV Acceptance • IP Video/IPTV • MPEG-2/4 • Any Play, Interactivity • Open IPTV Forum • PC TV, Mobile TV and OTT Video • DOCSIS 3.0, tru2way • Personal Ads • DLNA, Semantic Web • User-Generated Content • HD, PVR Mainstream • DVB-H Regulation • EU Model Spur Content Innovation and • Net Neutrality • Interactivity and Custom Ads Competition • Regulators Need to Adapt All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 4
  5. 5. IPTV and IP Video Market Evolution Significant Factors  IPTV Impact on Ad Models – Unicast content such as VoD, DVR/nPVR – Long tail content, non-linear content – User-generated and personal content  Networking and Home Wiring – May prove most challenging technical issue in U.S. – Regions beyond U.S. = single TV households  IPTV Standardization Efforts – Some progress, but still open-ended – Open IPTV forum and others All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 5
  6. 6. IPTV and IP Video Market Evolution (Continued) Significant Factors  IP Video and IPTV Business Case Evolution – SD to HD = MPEG2 to MPEG4 – Pay models shifting – MSOs already offering free VoD – IPTV: a separate or bundled/hidden charge  IPTV Middleware Market Segment Fragmentation – Microsoft Mediaroom traction – Wide variety of established players, independent players and carrier-originated IPTV middleware – Increased consolidation of players expected All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 6
  7. 7. Current IPTV and IP Video Solutions Competitive Positioning Matrix Overall Vendor Content Digital Middleware VHE/Encoding CDS/VoD IPTV/IP Security Home/STB Video Cable IPTV MW Very Security, but Cisco MIA Competitive #1 Linksys/STB Top Ranking IPTV = Partners Ratings Key Alcatel-Lucent MSFT Portfolio MSFT Partners Partners Partners Friction Hedge Dependent Positive TANDBERG Portfolio Execution Ericsson Kasenna Solid TV Respectable Diversity Key Neutral Rebuilding Huawei Cascade N/A Limited N/A STB Assets Credibility Negative Lead Some HE Integrator NSN Myrio Partners Partners Partners Assets Message Has Holes IPTV and Execution Thomson Thales IPTV Mobile In-House Respectable Key TV Asia-Pac ZTE China Competitive Competitive In-House Decent Threat Cable New Re-Org Competitive; Portfolio Security, but = Many Motorola Cable More Cohesion Streamlining IPTV = Strong Unanswered Though can Help Partners ?‟s All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 7
  8. 8. IPTV and IP Video Content Security Four components:  Conditional Access Systems (CAS)  Digital Rights Management (DRM)  Encryption  Watermarking Content security solutions require agility (i.e., renewability via hardware or software) to enable business model flexibility for operators ARPU growth enabled by securing interactivity (via middleware integration) Key goal = seamless content portability across devices and networks, and securing “whole home” convergence Pirates focus on systems with large numbers  To date, IPTV numbers are smaller than either cable or satellite  Largest software-downloadable content security: PCCW and France Telecom  NDS has the largest 17 million customer license for smart cards All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 8
  9. 9. IPTV and IP Video Content Security Competitive Positioning Matrix Technology End-to-end Messaging & Overall Vendor Footprint Flexibility Strategy Vision Ranking Smartcard + Subsidiaries: 1 billion+ devices & Positioned to robust software IDway Business Model Irdeto apps secured; capabilities middleware & IBS Protection influence mostly cable/sat. converged market (Cloakware) Interprit B/OSS Integrates own Integrated Few tier 1 accounts; Lacks market Latens mostly telco Software-based ECOsystem CAS/DRM speeds momentum middleware time-to-market Primarily Leverages content Securing content Ratings Key 78 million+ active smartcards; management & aggregation, Can influence Nagravision cards/devices; mostly chipset-based middleware from delivery, hybrid market cable/sat software solution sister companies consumption Positive 87 million+ active Primarily Market leader in Owns middleware, Securing & Neutral NDS devices; mostly smartcards, server- DVR & apps enabling content scope and cable/sat based software influence Negative Secure Media Limited; primarily Software-based Relies on partners Open platform Lacks influence telco content protection 4 million+ screens Layered security to 3-D content IPTV Leadership in protected; 100+ prevent cloning security (multiple Verimatrix customers; mostly Software-based (GeoAuthentication networks, screens, terms of system scale and licenses telco & Quantum ID) layers) 13 million+ smart Primarily hardware; Turnkey offering Still establishing Securing digital Viaccess cards shipped; has software offer and acquired Orca content middleware mostly cable/satellite (Purple Box) middleware credentials 130 operator Software –based; Partner driven Multi-format & Broad multi- Widevine accounts, few tier 1s; has cable card strategy; multiple multi-platform platform credibility mostly telco offering SI relationships protection All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 9
  10. 10. Competitive Actions to Improve Market Positioning Needs to leverage integrated B/OSS capabilities for “whole-home” convergence and Irdeto Cloakware software as differentiators Needs more system integrator partners to drive penetration, and needs to Latens demonstrate integrated middleware ECOsystem success Needs to build mobile DRM differentiator, and leverage installed base to win the Nagravision hybrid cable + IP market Needs to focus on interactivity enablement as key differentiator, leveraging NDS middleware, DVR and apps; IPTV execution is key Secure Needs to expand customer base to demonstrate market viability of Encryptonite Media One system Needs to consolidate offerings and vision to solidify IPTV lead and extend to new Verimatrix markets, (i.e., Internet, cable, mobile) Viaccess Needs to demonstrate Orca middleware acquisition synergy as key for IPTV success Needs to gain Tier 1 customers to demonstrate system scale, and leverage multi- Widevine platform/format leadership positioning All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 10
  11. 11. Section II: The US IPTV Market and Competitive Terrain Washington DC / Paris All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 11
  12. 12. Service Provider Drivers and Trends Universal Service Provider Drivers  Increase ARPU  Decrease churn U. S. Service Provider Trends  A zero sum game  Telcos: add video  MSOs: add voice  Both: increased speed, video options (HD+++, DVR, etc.)  Both: double play / triple play  Up to 85% of U. S. Homes Pay to Watch TV All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 12
  13. 13. Business Case Drivers: Competitive Pressures (U. S.) Telcos Losing Wireline Voice to MSOs, Wireless Substitution Telcos Losing the ARPU Battle but Targeting 30% Video Market Share by 2010 MSOs Gaining on Targeted 30% Voice Share by 2010 MSOs Losing Little Video Share to Date Verizon FiOS Driving Broadband Speed as U. S. Competitive Advantage Satellite TV Driving HD Channels as Competitive Advantage All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 13
  14. 14. U. S. Consumer Drivers and Trends Consumer Demand Drivers Consumer Demand Trends  More for less  $99 triple play (up to 60% for new  A little more for a lot less subscribers) – Unlimited voice Current Monthly A La Carte – 200+ digital channels, 40+ HD Prices – 1.5 – 6Mbps broadband  Voice: Unlimited Domestic $140-$160 Premium Triple Play Calling (including loop) ~ $20 to $45  Unlimited voice  Broadband: Downstream  + HD, + DVR, + premium Video @ 1.5 / 3 Mbps to 50 Mbps;  10 – 20 Mbps broadband $19.95 to $149.95  Video: ~ 200 Digital Channels = ~ $45 - $65 All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 14
  15. 15. IPTV Case Example: AT&T U-verse Service Delivery Technical:  Largely FTTN (FTTH for new homes)  VDSL  IPTV/MPEG-4 Financial:  Capex: $330 / home passed  CPE Cost / Sub ~ $550  APRU / sub: not disclosed, however estimated at > $115 / month Subscribers:  Q1 07: 13,000  Q1 08: 379,000 Source: AT&T All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 15
  16. 16. Section III: The European IPTV Market and Competitive Terrain Washington DC / Paris All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 16
  17. 17. Split European Broadband Infrastructure Strategies Infrastructure Build-out Strategies:  FTTH with Active Ethernet or Passive Optical Network – Point-to-point FTTH: Free (FR), AMS Citynet & Reggefiber (NL), Neuf in Paris, – FTTB/FTTH + Ethernet backhaul: Fastweb (I) fiber to the customer – FTTC+VDSL Gigabit Ethernet to the PoP: DT, Belgacom (B) – FTTC/FTTB with GPON backhaul +VDSL (fiber + cabinet + copper): TI – FTTB AE with copper in the building : B2 & Telenor Sweden (S) – GPON: Neuf outside Paris & Orange (F), Energi Midt (DK)  HFC Hybrid Fiber/Coax to subscriber – DOCSIS 2.0: The standard delivery – DOCSIS 3.0: No commercial services. Trials at UPC (NL), Telenet (B), Virgin Media (UK) and Cablecom (CH) 17
  18. 18. European Business Case Drivers: Competitive Pressures Need to drive up ARPU and justify heavy infrastructure investments Telcos Losing wireline voice to MSOs with wireless substitution Broadband becoming commodity Cable, MSOs, broadcasters and others offering triple play services FTTx rollouts gathering speed (France, Nordics) Advertisers looking for more detailed audience data Need to make services „sticky‟ – see BT Video Traffic is the Key Growth Factor – BUT: Infrastructure investments cannot be justified by IPTV alone. SPs need to evolve Video Related Services: VoD, P2P video, video conferencing, Games and Apps sharing, Video security services. All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 18
  19. 19. Service Provider Drivers and Trends Telco Priorities EU and Non-EU Europe Region  Add a revenue stream to flat-rate DSL  Staunch revenue losses to cable  Differentiate from discount ISPs  Stop revenue loss to content providers  Move up the value chain  Preparing for multi-screen delivery Cable Operator Priorities  Triple play services  Stay ahead in HD quality delivery  Enhance in home service delivery Current Broadband Speeds / Prices vary wildly: Cheapest prices $5.80 in Sweden, $33.38 in Czech Republic (Source: OECD) All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 19
  20. 20. European Consumer Drivers and Trends DTT and license financed „Free TV‟ shakes up EU markets Fibre rollouts / xDSL evolution makes it easier to deliver IPTV Consumers conditioned by what‟s available in their market Huge appetite for catch-up TV, time shifting VOD offerings from broadcasters enable new consumer behaviors Games console penetration used to distribute content Regulatory Issues: - Infrastructure access and investment sharing - Role of publicly-funded broadcasters All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 20
  21. 21. IPTV Case Example: Illiad FreeBox Service Delivery Technical: A fiber-connected  Unbundled ADSL2+ Freebox home  FTTH in 80 cities  IPTV/MPEG-4 Financial:  Capex: €70/€400 apartment/house  CPE Cost: €300  APRU / sub: not disclosed Subscribers:  Q1 07: 2,1 mill  Q1 08: 3,1 mill (400K FTTH households passed) Power line Connections for HDTV connections in-house  Base subscription €29.99 per month for both ADSL and FTTH Source: Free www.free.fr All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 21
  22. 22. Catch-up TV VOD case study – BBC iPlayer Free to view in the UK Viewers can stream to browser, iPhone, Virgin Media STB or Wii 75 million streams / downloads since Christmas 2007 UK #3 ISP, Tiscali, complains about bandwidth cost PlusNet: iPlayer traffic accounts for 6.3% of total downloads All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 22
  23. 23. IPTV Best Practice Revenue Models Consumers pay for content, picture quality and ease of use  Size (# of subscribers) critical for best content deals  Large flat screens ready for HD  Triple- & Quad SP are attractive, but bad customer experience can hurt across all bundled services There is zero customer loyalty – just varying degrees of vendor lock-in to delay churn to better, cheaper SP‟s  DTTs will set the bar We are a long way from IPTV profitability  If carriers want to avoid being bit carriers they have to stop thinking like bit carriers All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 23
  24. 24. Global IPTV and IP Video Technology Drivers and Trends Standards and Acceptance: GPON/VDSL2 and DOCSIS 3.0 standards and silicon advances = fixed wireline BW per sub boosts to further drive video and other BW-intensive apps Regulation and Competition: Intermodal competition realized among operators; Content regulation still lagging Back-office and Organizational Evolution: All-digital/IP upgrades, FMC architectures, SDP/IMS and metadata management enhancements = operator org. shifts Applications and Services: Mobile TV, PC TV, and OTT video fuel overall video demand including Adobe Flash proliferation All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 24
  25. 25. Questions and Answers All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 25
  26. 26. Recent Current Analysis Reports on IPTV Our customers have been reading: Netflix‟s Streaming Video Service Crosses Over to the TV via the New Roku Set- top Box Product Intelligence Report | Digital Home - U.S. [May 2008] Netflix’s new broadband device can stream movies on a television for only $99 for the equipment with no extra service fees. But there is no HD content and overall Netflix’s online selection is skimpy compared to its vast DVD library. The State of the UK IPTV Market Advisory Report | Consumer Broadband Services Europe [May 2008] The market for IPTV in the UK is driven by varying technical and market conditions. Existing broadcasters are keen to bring their own products to market, and existing broadband provisioning is currently not suited to mass IPTV adoption. IPTV World Forum 2008 Round-up: A Wealth of Emerging Trends Worthy of Metadata Management Advisory Report | Digital Media Infrastructure [March 2008] The IPTV World Forum 2008 show indicated IPTV is now beyond the bleeding edge of technical implementation and first generation service deployment, but some cutting edge challenges and innovations are around the corner in 2008. All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 26
  27. 27. Competitive Intelligence levels the playing field… Competitive Response enables you to Win. Current Analysis is the only competitive research firm that provides solutions to improve your company’s Competitive Response 21335 Signal Hill Plaza, Suite 200 Sterling, VA 20164, United States Phone +1 703 404 9200 Toll free 877 787 8947 Fax +1 703 404 9300 www.currentanalysis.com All materials Copyright 1997-2008 Current Analysis, Inc. Reproduction or distribution prohibited without express written consent. 27
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