The Gap Between IPTV Promises and Reality

Original Address: IPTV promise meets reality

Original Author: Marguerite Reardon - CNET News.com Columnist

Translator: IPTV has some tricks, hyped by big names, but the competition with cable TV and fiber-to-the-home HD TV has never stopped.

Published at 12 PM on June 8, 2006.

Telecom companies are about to launch the first large-scale Internet-based TV service, but delivering on promises of new interactive features and lower prices remains a long journey.

The largest US telecom company, AT&T, is set to operate the biggest IPTV service. Not just providing small-scale services in San Diego, the entire company will launch operations in 20 cities by the end of the year, with all eyes on Ma Bell and Microsoft, who are developing software to support the new service.

Both companies claim their technology is ready for IPTV operations. However, they have decided to roll out services slowly and cautiously.

"We do strongly want to proceed with IPTV," said former AT&T CEO Christopher Rice. "But we need to be more careful. We've learned lessons from DSL. We don't want to rush."

IPTV promises to change how people watch TV. Viewers can participate in interactive TV programs, choose multiple perspectives while watching sports events, search and watch movies and TV shows from vast digital content libraries, share pictures and home videos, browse high-quality content, and even experience TV shopping. With telecom companies joining the competition, the price of TV services is expected to drop.

However, rich features and low prices will have to wait because initially, AT&T aims to avoid providing duplicate services. Unlike DSL, which has already reduced prices to $12.99/3MB (charged per traffic), AT&T has not yet announced the fee standards for TV services, and it won't be cheap at the start.

"We want to have a price advantage in the market," said Rice. "Like our other products, the more services people buy, the more discounts they get. But we don't intend to play the role of a low-cost provider."

AT&T's service, called an Internet-based TV service, will not differ much from what other cable TV providers offer. Cable TV based on the Internet will provide digital video recording, video on demand, and high-quality content channels.

Meeting user expectations

Users who have tried AT&T's service in San Diego indeed find it better than cable TV. Alan Weinkrantz described his experience using AT&T's service on his blog, particularly liking the IPTV interface and fast channel switching. He was impressed by the titles of on-demand programs.

After these services are commercially available in San Diego, he plans to become a paying customer. However, he says the price should be adjusted, and AT&T must ensure that high-quality programming runs smoothly. Currently, AT&T does not offer high-quality channels in its demo presentations.

"I am fascinated by the services IP can provide in the future," he said. "The user interface is very easy to operate. So if I only have to pay $5 and can ensure HD, I would be happy to pay."

Microsoft TV's marketing director, Christine Heckart, said customers currently only need basic TV features. She said adding more interactive applications too quickly might alienate customers.

"This year we only need to provide competitive operations," she said. "For operators with new technologies, this is a brand-new market. The entry threshold will be high. It's hard to gain benefits early in the operation, and there are unforeseen problems to solve."

Parks Associates analyst Deepa Iyer agrees with this view. She said most people who switch from cable TV services to IPTV services provided by telecom companies expect better and more services.

"The younger generation may be willing to experiment with new services," she said. "But more users simply want to turn on the TV, sit down, and enjoy entertainment. And they are willing to pay for the same content, gradually seeing more content or more features."

Iyer said the new features customers are most interested in include remote home management, visual call ID information, and downloading music from the TV.

Even so, AT&T will initially offer basic TV services, and the company is unlikely to win new customers through rock-bottom pricing. Verizon Communications, which charges for its TV service, started operating its service early, which is a good sign.

When customers in areas covered by Verizon's TV service enjoyed bottom-line services, most cable companies also joined the price war. However, Verizon avoided the price war by offering high-speed Internet browsing, phone, and video services.

Take Long Island, New York, as an example, where cable TV and Verizon's fiber-to-the-home service compete. The cable TV operator offers a box, high-speed Internet, and a first-year $90/month phone service — close in price to Verizon's monthly $105 fiber service.

In Texas, where Verizon first offered TV services in a city, the local cable operator Charter Communications provides 3MB bandwidth service for six months for only $70. This price matches Verizon's 5MB high-speed Internet browsing and TV service.

Value for money

Microsoft's Heckart said that AT&T and other telecom companies do not need to win customers through price cuts. According to a survey conducted by Microsoft among more than 800 potential IPTV customers, AT&T and other telecom companies can capture 13% of the market share by offering services similar to cable TV and charging the same price.

Despite the optimistic prospects for IPTV, Cox Communications President Patrick Esser said he is not at all worried about the challenge from AT&T, even though AT&T aims to challenge Cox's 40% market share and has already merged with BellSouth.

While AT&T operates IPTV, Cox will continue to promote new services and content packages to loyal customers. Content is king, Esser said, which can make customers more loyal to one service provider and less likely to switch to another company's service.

"Once we install one service in a household, we can continue to sell the second and third services," he said. "Am I concerned about competition with telecom companies? I worry about all competition, but I won't be overly anxious; I will plan strategically."

Translated by sirtoozee (www.akomedia.com)