Is IPTV good business for telecom operators?

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Today, it seems that services like Netflix and YouTube are consolidating their hold on the media industry. These “over-the-top” (OTT) platforms stream media directly to users via an Internet connection, thus bypassing broadcast television providers. The growing popularity of OTT platforms signals the democratisation of digital media content (to an extent), allowing users to access media whenever and wherever they want. As such, more traditional telecoms providers have had to adapt to changing market. Enter IPTV: an Internet protocol-based service that delivers exclusive content from telecoms operators. These systems ensure streaming quality – but as the quality of “normal Internet” gets better and better, do IPTV systems represent a good investment for telecom companies?

What’s the difference between IPTV and OTT services?

As introduced, both OTT and IPTV media services deliver video content via an Internet connection. Whereas previously many OTT services were only available on personal computers, now, many TV sets can deliver OTT content. Therefore, what exactly is the difference between these two online-media services? The table below breaks it down:

OTT	IPTV
Delivered via public, unmanaged Internet connections.	Delivered via the service provider’s own hardware and managed network, e.g. a set-top box.
Content is delivered to any Internet-enabled device, including smartphones, smart TVs, and tablets.	Content has to be delivered to an IP-connected TV with content headend for IPTV signals and a set-top box.
Can deliver content via any type of connection, including mobile data and WiFi.	Must be connected via cable broadband, and although specific WiFi connections can also be used, it tends to unusual.
Internet service providers don’t differentiate between data delivered by these providers compared to other types of data, thus quality depends on connection speed.	Quality is guaranteed by the service provider and their network and hardware.
Offer content for a monthly subscription, which they can watch on any of their devices.	IPTV bundles content packages e.g. there’ll be a package of channels for kids. This content requires a set-top box, so the user may need one for every TV set in their home.
OTT services work with production companies to create and deliver content while offering on-demand content through deals with certain channels or distributors.	IPTV services work with TV broadcasters to distribute exclusive content with options for catch-up, timeshift, and on demand TV.

Essentially, although OTT may offer greater flexibility, the managed network of IPTV offers viewers a higher quality viewing experience. However, considering changing consumer habits, to what extent is IPTV a profitable model for telecom providers?

Is IPTV a viable model for telecom companies?

Certainly there is nostalgia for the convenience and comfort of regularly scheduled programming – but statistics suggest a marked shift towards OTT, particularly amongst younger viewers. Thus, telecoms providers have to consider whether or not IPTV remains a profitable offer, especially for viewers with a limited budget. In order to remain competitive, telecoms providers need to keep the following questions at the forefront of their strategy:

• Primarily, telecoms companies need to secure lucrative content. Not only does this mean making competitive bids against other providers, it also involves convincing top broadcasters that they offer something unique. For instance, large production houses already own stakes in cable companies. Take Disney for instance; why would they want to mediate content through a third party? Essentially, telecoms companies need to demonstrate the superiority of their content packing solutions.
• Secondly, companies need to identify the most effective technology for content delivery. These investments need to be carefully considered, particularly in regard to future-proofing; for instance, do fibre-to-the-home or DLS technologies present more longevity? Moreover, companies need to ensure they have sufficient time for rollout – on average these services take about 24 months to launch.
• Finally, telecom providers need a strategy as to how they intend to stand out. Consumers are used to cable or satellite television and many of these providers like the British market leader Sky have decades of experience delivering media content. Equally, users understand what services like Netflix and Amazon Prime offer. Thus, what is it that makes an IPTV service unique? How should companies market these offers?  

Why creating a unique offer is the key to a competitive product

Previously, the unique selling point of IPTV was streaming quality. Now, as broadband and mobile network speeds become faster and faster, telecoms providers need to assess what differentiates IPTV services from OTT. In order to have a competitive stake in the video distribution market, IPTV providers need to broker strategic partnerships with television broadcasters and make sure the message of exclusivity is clearly communicated to consumers. Moreover, quality remains paramount; telecoms companies need to continually invest in technology to maintain the edge on quality. Without this USP, telecoms providers will need to make serious assessments as to the profitability of these services in a volatile market and continue investing in R&D.