IPTV: Almost Ready for Prime Time

Despite the multiple millions of dollars being poured into its development, Internet Protocol Television (IPTV) is still not an eminent threat to old fashioned cable -- but it is edging closer to "prime-time" status.

Microsoft (Nasdaq: MSFT) is billing its TV IPTV Edition as "better TV, not 'me too' TV." Nortel, Cisco (Nasdaq: CSCO) and their various competitors are peddling IPTV appliances. AT&T (NYSE: T) and its rivals are rolling out IPTV solutions as part of communications bundles. Google (Nasdaq: GOOG) is hiring software engineers to work on television technology. Content providers are ramping up for the digital revolution as well.

In other words, there's too much investment in this system, where television and video signals are pushed to subscribers through a broadband connection over IP, to turn back now. Over the past year, the industry has surpassed some critical obstacles in its quest to stream television programming into the living room through high-speed Internet connections that could transform the entertainment hub as we know it.

Well on Its Way

"Although IPTV still faces barriers to consumer adoption, it has come a long way technically, psychologically, and in the business environment," said Kenneth A. August, principal, Deloitte Consulting, and Pacific Southwest practice leader for the technology, media and telecommunications group.

"Likewise the idea of IPTV is no longer exotic," he told TechNewsWorld. "This is partly because of the success of VoIP, partly because IPTV is increasingly in the press, and also because IPTV has been embraced and implemented by companies."

To date, IPTV's evolution has focused on overcoming the three types of obstacles August mentioned: technology, psychology and business.

A bandwidth limitation on simultaneous video streams, especially in an expanding high-definition TV (HDTV) environment that demands five to six times the bandwidth of standard-definition TV, remains a key challenge. Older video and audio standards for broadcast quality authored by the Moving Picture Experts Group (MPEG) compound the bandwidth problem, allowing only a handful of simultaneously available channels.

Errors in the video stream have been another ongoing issue, even more so with multicast streams, and infrastructure still needs to become more robust. The good news is that solutions for these technical issues are either nearing completion or are in the midst of being addressed, according to August, who said scalable, broadcast-like commercial quality is not far off.

The System of Choice

The battle between cable operators and phone companies for a share of the living room has spurred telecoms to invest in solving these IPTV challenges.

"On the business side, not only is IPTV the system of choice for the phone companies to compete with cable, but much of the necessary infrastructure and devices needed to make IPTV a reality are now available not only from Microsoft and Alcatel (NYSE: ALU), but from companies like Cisco, Tandberg, Samsung and other companies that believe in the IPTV future," August noted.

Finally, the ability to use IPTV interoperably with other consumer electronics devices in the living room has become a technical reality. Specialized content packages and long-form television deals with phone companies are moving forward. While there are still challenges ahead, huge progress -- as well as substantial corporate commitments -- has been made with regard to IPTV's future.

Barriers to Consumer Adoption

With technology issues getting solved and Fortune 500 companies backing the concept, perhaps the greatest barrier to consumer adoption of IPTV today is a simple lack of access, according to Bernie Arnason, principal of the Pivot Group, a market research firm that covers small telcos and IPTV.

"IPTV is only available in miniscule portions of AT&T's footprint. It will take several years before they get wide scale coverage. The majority of IPTV deployments in the U.S. are by smaller rural operators, who collectively serve less than 10 percent of the U.S. population," Arnason told TechNewsWorld.

Beyond the availability question, there are also some early adopter issues that could cause a few hiccups on the road to mainstreaming IPTV. Like any new technology, there are always initial hurdles to overcome such as "buggy" software, equipment availability, service provider employee learning curves, and the like.

The Critical User Experience

Customers of major providers, like AT&T and Verizon, will enjoy the same experience as they did with traditional cable television thanks to much-publicized multimillion-dollar investments in IPTV, explained Yaron Raps, Services over IP lead at BusinessEdge.

"As long as the wireline IPTV offering is attractive for the customer price-wise and quality-wise, the customer will see no difference in the service." Verizon's and AT&T's main challenge is the lack of brand recognition they have in the video market among today's Gen-X consumers, Raps told TechNewsWorld.

Once the technology challenges are solved, service is widespread and brand recognition is achieved, however, IPTV adoption becomes a matter of overcoming inertia: cable and satellite customers need a reason to make the switch. Consumers must be convinced that IPTV offers better features, such as price, interoperability, content, search or other unique applications.

The a La Carte Debate

Raps sees many consumer advantages in IPTV. IPTV already offers complete integration between communication channels, including voice, data and the TV set. He also expects to see an application that will allow customers to surf the Internet, view caller ID, click to call from the TV set, buy products directly via TV ads, and enjoy more HD channel streams to the home over time. IPTV succeed in closing the circle over the fight for the living room, he claimed.

Content-wise, there's not much to brag about just yet. IPTV programming today does not differ much from traditional cable or satellite offerings. The true power of IPTV is to open up a world of content, much like the Internet has, that allows consumers to choose what interests them. This is the so-called a la carte debate.

"IPTV takes the a la carte debate to a whole different level, because it can offer so much more choice -- conceivably, we are talking limitless channels. Cable and DBS have limitations on their technology that won't allow them to do the same," Arnason said.

Mainstreaming IPTV

The a la carte promise may be years off, or may never be fulfilled since it requires a complete paradigm shift in the current pay TV business model. Those who control that model now -- media conglomerates, large cable companies, and the like -- have no interest in seeing it change, Arnason argued.

From his view, Raps believe IPTV will achieve mainstream status, but not for about a decade since it demands a nationwide fiber network to every single household. August, however, disagrees.

IPTV can enter the mainstream within the next two to three years, he believes, but cable will remain a formidable adversary with several advantages, such as experience and existing relationships in the content and programming worlds, an already deployed and stable infrastructure which is being rapidly enhanced, and consumer inertia.

There is, however, an X factor in the IPTV storyline: WiMax.

"WiMax may derail or slow the IPTV rollout or at least undermine some of its advantages," August explained. "The real answer depends on how quickly and in what way the technology and programming challenges are overcome, how the regulatory battles are fought and won, what new corporate combinations may occur and whether new business models are created and embraced. It will be fascinating to watch."