Is IPTV Ready?

The IPTV marketplace offers an often confusing dichotomy; in Europe, players such as FastWeb and Free Telecom are offering IPTV services to millions of subscribers. At the other extreme, Australia’s Telstra pulled out of Microsoft’s early adopter program presumably because it felt the technology was not ready. Likewise, Swisscom, SBC and others have pushed their IPTV deployment timelines to 2006, citing similar concerns.

So how can a technology be considered not ready by some, but used successfully by others? The IPTV dichotomy largely has to do with technology generation. The first generation of IPTV is ready and proven. The next generation — driven by Microsoft — is only starting to get to market; depending on the specifics of a given market, some carriers will be content with a first-generation IPTV, while others will wait for the next best thing. (Section 3.1 of “Transforming Telcos With IPTV” provides a general framework for IPTV service sophistication in specific markets.)

In summary, we believe it will take some time for wireline video services to fully realize IP capabilities. We identify three phases in the development of the IPTV offer:

• Operators will enter the market with a “me too” pay-TV offer at first

• The VoD offer will improve, with more content choice, attractive pricing and new equipment in the home

• After upgrading the access network and expanding service coverage, operators will scale their IP offerings and begin introducing more interactive services

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