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Presentation Title (Arial 32 pt.) Sub-title (Arial 28 pt.)

  1. 1. IPTV Deployment I Challenge and Opportunity
  2. 2. IPTV Deployment – Challenge and Opportunity Agenda IPTV deployment – confronting challenges to success Over-the-top content…threat or opportunity? Focusing for success The convergence equation 2
  3. 3. IPTV: Do I Really Have To? Alternative platforms are driving loss of eyeballs  PCs, smartphones, pull viewers away from the TV  Younger demographic is migrating away from the TV  Increasing societal mobility Free, over-the-top content is driving fundamental change  Lack of control of OTT content makes network and CAPEX planning difficult, and creates unreimbursed OPEX to facilitate 3rd party profit  Traditionally sacred walled gardens are being cannibalized for the web by their owners (Hulu)  Is the print media landscape a glimpse of the future for broadcasters? Worldwide IPTV deployment is growing nevertheless  End of 2Q08 – 17.1M subscribers  End of 2Q09 – 26.3M subscribers (+53%) 3
  4. 4. IPTV Investment Considerations Broadband is an essential investment  Broadband customers are sticky customers; eventually ALL customers will be broadband customers  Relevant revenue generating applications and services require broadband delivery  The business case for IPTV is most attractive when treated as one component of a portfolio of broadband services IPTV is currently the most complex broadband application, with the lowest gross margin – a short term investment in a longer term payoff Cornerstones of current successful IPTV offerings  Differentiated, HD intensive content delivered via MPEG-4 encoding  Time shifting (VOD, Restart TV…)  Compelling applications  Local demographic focus and execution It‟s increasingly clear that video is becoming a requirement  The customer can be won thru video  90+% of AT&T video customers are also broadband subscribers  60+% are VOIP subscribers 4
  5. 5. Strategic Considerations for IPTV Deployment Customer retention and acquisition  Difficult to compete effectively without a full broadband portfolio Leverages initial broadband investment  The single most marketable application Opportunities do exist to leverage investment in IPTV  Shared headend and network resources  Content aggregators  Intelligent network planning and content distribution May discourage competitive incursion or expansion  If competitors are kept out, all services are protected; video may be the key barrier to entry IPTV is the primary portal upon which to construct an advanced applications portfolio in an all video world  Easily extended to additional screens/portals  Enhances monetization, customer retention, brand effectiveness 5
  6. 6. The Whole Enchilada Premium broadband pie Complementary applications Traditional telephony/ISP features  Caller ID  Voicemail  Call management  Email/IM The widget Broadband  The lesson of the iPhone  100K developers*  150K+ available apps*  1.5B downloads*  Enable incremental revenue streams  Attract new customers and reduce churn  Directly targets the millennial demographic  Mobile/PC like functionality creates a homogenous multi-screen experience Source: Entone *SF Chronicle 07-15-09 6
  7. 7. IPTV Deployment – Challenge and Opportunity Agenda IPTV deployment – confronting challenges to success Over-the-top content…threat or opportunity? Focusing for success The convergence equation 7
  8. 8. Over-the-Top Emergence A light at the end of the tunnel…? Or an oncoming train? 8
  9. 9. What Is Over-the-Top Video? Video content riding over a broadband pipe, where the content provider has no affiliation with the broadband provider 9
  10. 10. Compelling Over-the-Top Dynamics Cisco estimates 90% of all consumer IP traffic will consist of video by 2012 Internet video transactional revenue (Parks & Assoc.)  2008 - $1B  2013 - $6B US web video streams (+41%) and time-per-view (+38%) both rose dramatically y-o-y from 8/08 to 8/09 158M US users streamed 21.4B videos in July „09 Hulu downloads have grown 490% over the last 12 months (Hulu)  With 40M+ viewers, Hulu now has more than Time Warner Cable “Lost” had 1.4M unique online views in December „08  “Lost” was not aired on television in December ’08 US consumers spent $1B+ on Internet connected TVs in 2Q09 (ITV Reporter, 08-16-09)  Unit sales doubled to 620,000 vs. prior quarter, in the midst of a historic recession Best Buy owns Napster and is working with CinemaNow  As of 3Q09, y-o-y DVD sales were down 23%  Implications for physical media and appliances are becoming clear Statistics provided by Nielsen unless otherwise noted 10
  11. 11. Compelling, but TV Is Still King Video consumption Viewers (millions) Minutes per month 4Q07 4Q08 4Q07 4Q08 In-home TV 281 285 145 151 Internet video n/a 123 n/a 3 Even though total viewership for OTT content is significant (>100M), the actual time spent viewing content was just half the incremental increase in time spent viewing in-home TV The Nielsen Company TV is still the only screen that supports the social and “event” viewing experience "Our average user spends 15 minutes a day on the site. They spend five hours in front of the television. People say, 'YouTube is so big,' but I really see that we have a ways to go." Hunter Walk, Google Director or PM, SF Chronicle, 01-04-10 11
  12. 12. Telco Monetization of OTT Content 12
  13. 13. Implications for the Network Broadband is going primetime Streaming, unicast entertainment traffic accounted for 26% of total broadband traffic (32% in primetime: 7-10 PM) in September ‟09: 211% y-o-y increase During primetime, unicast traffic has surpassed P-to-P, and the gap is widening  More and more streaming unicast traffic is HD The steadily increasing percentage of traffic being unicast presents a real threat to network capacity  Streaming real-time applications are more susceptible to service degradation Subscribers are becoming increasingly sensitive to quality of experience, and are increasingly willing to pay for dependable quality An opportunity is emerging for the service provider to deliver a personalized, premium service offering, featuring premium bandwidth and popular applications Source: Sandvine: 2009 Global Broadband Phenomenon 20 N. American, AsiaPac, & EMEA DSL & Cable Networks 13
  14. 14. Implications for the Business Obstacles “Hitchhiking” applications that ride for free  In-home platform: Roku, Vudu, AppleTV…  Hosted, Internet based applications: Hulu, YouTube, Facebook…  Peer-to-peer audio and video Who built and maintains the network?  Why should Google and Facebook get all the money? Lack of granularity in terms of network utilization visibility  Discrete, unconnected databases: Plenty of data, little information  No clear “big picture”: No end-to-end customer view Danger of being relegated to a “utility” by simply offering ever fatter pipes and settling for nominal flat fee participation 14
  15. 15. Implications for the Business Objectives Apply your knowledge, presence, responsiveness  Facebook knows their IP address; you own the customer Application and content creation and participation  Do-it-yourself and/or partner, but do it Brand and package a superior broadband portfolio; continuously innovate  Accessibility  Common multi-screen experience Capitalize on unicast demand: Start with VOD, and share the revenue Exploit your network; leverage the “cloud”  The cloud is more than a “hosted applications”; it’s an emerging business model  Availability, ubiquity, quality  Directly supports user preferences: Dimension shifting, on-demand, instant gratification  Live, scheduled, “event planned” programming: Sports and ??? Proactivity equals success; reactivity equals irrelevance 15
  16. 16. Avoid This Strategy to dumb pipes 16
  17. 17. IPTV Deployment – Challenge and Opportunity Agenda IPTV deployment – confronting challenges to success Over-the-top content…threat or opportunity? Focusing for success The convergence equation 17
  18. 18. Growing Universe of Interactive Functionality VOD Caller ID Content Sharing Content Feeds Local Content 18
  19. 19. Local Content as a Differentiator Local High School Sports School Channel Church Channel Local Content Stefanie: What do you think about this film...? Local Video Production Government Channel Source: Dascom Systems Local Weather Community Channel 19
  20. 20. Branded, Local Relevance - A Competitive Weapon Custom packaged, locally relevant Increases take rate and reduces churn Custom skins enhance brand recognition Enables direct subscriber/carrier interaction Viewed favorably by franchise authorities Public entities  Schools  Libraries  Municipal agencies Customer validated  CenturyTel, HickoryTech, Pineland, WT Services, Mahaska  Service providers subsidize production facilities/resources  School districts and churches print & email communications to parents and parishioners directing them to carriers UI Don‟t forget to lock up the rights  Don’t let competitors steal your advantage 20
  21. 21. Successful Local Focus Take rate >60% of homes passed So successful the cable company sold out to them In addition to being a communications provider BEK has also transitioned into a broadcast media group 21
  22. 22. Tactical Keys to Customer Satisfaction Things to remember Don‟t break your business Locate “most watched‟ content closer to high usage areas  Cost and operationally efficient  Superior customer experience Embrace the role of compelling applications provider  Make it easy to use; minimize navigation One size fits one  Personalization minimizes churn  Millennials are accustomed to having it their way  Social networking will NOT be a requirement on the TV screen Enable mobility  As many platforms/screens as you can offer If you enable niche content, make sure you own it Something to contemplate King Gillette and “freebie” marketing  Is broadband the razor? 22
  23. 23. Forward Looking Strategy IPTV is a main pillar upon which to construct an advanced applications portfolio in an all video world  Each new application represents a discrete, high margin revenue stream OTT content is exploding, yet traditional TV isn‟t going away  OTT content is on the TV already; should be exploited as another revenue opportunity The TV screen is and will remain the screen of choice  70% of US consumers rank TV viewing in their top 3 media activities, outpacing web surfing, music, or reading*  The average US consumer increased TV viewing time from 16 to 18 hours per week in 2009  Millennials increased their viewership nearly 50%, to 15 hours per week from 10.5* Tribal marketing has evolved into a strategic tool  Targeting social and affinity groups, and acting on feedback is becoming the most effective source of consumer marketing, and consumer brand loyalty  The CSP possesses the most complete combination of presence, knowledge, and means to capitalize on 21st century social network based marketing Who else is coming to the party?  BestBuy (Speakeasy + CinemaNow – physical media), Wal-Mart, Starbucks… *Source: Deloitte & Touche “State of the Media Democracy” 23
  24. 24. IPTV Deployment – Challenge and Opportunity Agenda IPTV deployment – confronting challenges to success Over-the-top content…threat or opportunity? Focusing for success The convergence equation 24
  25. 25. The Network: Fundamental to Success Application Application IP Application Ethernet Fiber The network transforms to a scalable, efficient outdoor LAN Capacity increases as OPEX decreases Carrier bundles applications and services that  Contribute to profit  Reduce churn  Target competitors and their customers 25
  26. 26. How Calix Helps You Win in an All-Video World The Calix commitment Frictionless business model Direct engagement Deployable standards Committed to strength  The largest telecommunications equipment supplier focused solely on access  More video deployments than all North American competitors combined (240+)  More FTTH deployments than all North American competitors combined (375+) 26
  27. 27. Thank You