Telecom operators across the world, faced with a sharp drop in revenue from traditional business streams, are focusing on delivering bundled services that provide higher revenues and growth.Internet protocol TV (IPTV) is one such service, using which operators can leverage their brand equity to offer attractive bundled products and create consumer loyalty. Also, IPTV offers the opportunity to consolidate multiple specialised networks into one cost-efficient network as a step towards adopting next-generation networks. It has the added advantage that it provides telecom operators with a defence strategy against the entry of cable operators into the telephony business.

Meanwhile, with 534 3G networks (WCDMA and high speed packet access) functional around the world, mobile TV has witnessed rapid growth. We take a look at the international IPTV and mobile TV markets…

IPTV market

After a slow start, IPTV is now gaining traction globally as deployments increase in North America, Europe, Asia and other markets. According to figures released by the Broadband Forum, the global IPTV market grew by nearly 64 per cent in 2008.The worldwide IPTV subscriber count is now almost 22 million. In the quarter ended December 2008, the subscriber base grew by about 19 per cent ?? the highest quarterly growth till date.

This growth has been driven primarily by the increase in the North American IPTV subscriber base. Broadband adoption in North America grew at a rate of 12.6 per cent over the quarter. Though digital subscriber line (DSL) is still the dominant broadband technology, fibre has grown twice as fast as cable or DSL. IPTV service providers are benefiting from new fibre lines. There are currently more than 50 million fibre lines worldwide.

According to research firm Gartner, the global household IPTV penetration is expected to be 2.8 per cent by 2012, with revenues totalling $19 billion. The growth will be driven by increasing consumer demand for video as well as the entry of new content providers. Many European IPTV operators have increased their subscriber base by offering differentiated services, exclusive content and interactive features.

Moreover, device manufacturers are offering their own internet-based offerings, such as the Apple TV, while broadcasters such as BBC, NBC and Fox are taking their programming directly to consumers. On the distribution side, internet companies such as Amazon.com are offering video-on-demand (VoD) services.Such companies are developing or have developed a combined set-top box (STB) and video download service.

While the number of IPTV subscriptions is increasing, there are vast regional differences. Western Europe has the largest number of IPTV subscribers, but North America is the largest market in terms of revenue. Gartner predicts that IPTV revenue in North America will grow to $8 billion in 2012.

According to senior analysts at Gartner, before 2008, IPTV operators focused on increasing their footprint and providing an alternative to cable and satellite. In the future, however, especially in developed markets, there will be an emphasis on innovation and differentiated pay-TV services.

While cable operators are still a major force in the broadcasting space, IPTV may have the real advantage as the service is provided over less expensive access lines which are also growing faster than any other connections. Also, Wi-Max networks are going live in several parts of the world, despite the Wi-Max-long term evolution (LTE) debate, and mobile broadband is growing as well. This presents a big opportunity for IPTV as the availability of broadband is critical for the service.

According to research firm Multimedia Research Group (MRG), Inc., which tracks the progress of global IPTV market leaders, over 35 new IPTV operations have started trials or deployments in the past six months. This steady growth is being driven by the continued investments by telecom operators to upgrade their service, offer high definition content and deliver exclusive programming.

By 2012, according to MRG’s report, “IPTV Global Forecast 2008 to 2012”, Europe will overtake Asia as the largest IPTV market in the world. Europe will have a 41.5 per cent share of the global IPTV market, while Asia will be close behind with 35.8 per cent market share.Despite flat growth in Japan, rapid growth is expected in China, Taiwan and Korea. North America will have just 17 per cent share of the total subscribers. It is, however, expected to lead the market in terms of gross service revenues, raking in about $13 billion primarily due to higher average revenue per user (ARPU).

MRG predicts that the global IPTV market will grow to $29.6 billion in 2012, registering a compounded annual growth rate (CAGR) of 50 per cent from $5.9 billion in 2008.

Amongst IPTV service providers, in North America, Verizon and AT&T combined are likely to have well over 3 million subscribers by mid-2009, and will continue rapid growth till 2012. Like these major players, smaller US and Canadian operators are following the strategy of offering better quality and unique content to their customers.

In the vendor community, while software giant Microsoft has moved to second position globally in middleware and content protection, Verimatrix continues to be the leader in content protection. Despite the competition in middleware (over 22 companies are present in this space), each of the six top vendors has well over 1 million subscribers. A similar situation exists in the STB segment, where the top eight suppliers have over 1 million subscribers each. Motorola and Amino, which recently acquired Tilgin, are beginning to pull ahead in this space.

In Asia, UTStarcom has moved into first position in access, VoD, STB, middleware and content protection as a result of its strong gains in China. According to analysts, such market dominance across multiple categories is unprecedented.

Larger vendors as well as service providers have started to pull out all the stops to serve the regional markets, in the belief that the economic contraction is offering unique opportunities to move aggressively into unserved areas. Ericsson, Thomson, NEC and Cisco are expected to create alliances with various companies on a regional and local basis to compete with companies like UTStarcom and ZTE that have achieved considerable regional success. Turnkey system plans on a regional or local basis mark a new era in vendor strategy. This is likely to help IPTV operators make and accelerate early deployments.

Clearly, the IPTV market is showing strong growth. Not only is there a rise in subscriber numbers, but new operators are also in the midst of deploying IPTV systems all around the world.

Mobile TV market

The number of 3G networks across the globe is increasing steadily. However, the mobile TV market, which was expected to grow in tandem with 3G network deployment, is still in its infancy.

But things are expected to change soon. According to a study by ABI Research, there will be 500 million mobile TV viewers by 2013 and the mobile TV market will be worth more than $50 billion. This growth will be driven by the rapidly evolving 3G market and the constant decrease in operators’ ARPU from conventional services that will shift the focus to services like mobile TV. It will also be driven in part by the switchovers to all-digital TV transmissions in the US and other regions. For instance, 63 stations in 22 cities in the US have committed to providing over-the-air digital TV services to mobile devices in 2009.

Japan, South Korea and China are the markets where mobile TV is currently growing. In the US, where Qualcomm’s MediaFlo is the leading mobile TV technology, growth in the segment is expected to remain sluggish.

According to analysts from ABI Research, growth is expected to be steady in Asia, where the demand for mobile TV services has been the strongest. The service has been around in Japan and Korea since 2005. Europe lags behind Asia because of a standards battle that only ended a year ago, with the European Union adopting the open-source digital video broadcastinghandheld (DVB-H) standard.

According to research agency RNCOS’s report, “Global Mobile TV Forecast to 2010”, the global mobile TV subscriber base is expected to grow at a CAGR of more than 60 per cent between 2007 and 2010. Western Europe is expected to account for the largest part of the global mobile TV service revenue by 2010, followed by Asia Pacific and North America.

Nevertheless, industry experts feel that there is a long way to go. Users are yet to value mobile TV properly because it has not been validated as an independent product and service, and is primarily offered at the end of a long list of preferred cellular services.

On the positive side, mobile TV offers the promise of personalised TV on handsets, thus giving content providers the opportunity to exploit traditional TV content in innovative ways. Moreover, with the mobile ad spending anticipated to grow at more than 42 per cent from 2008 to 2013, advertising could play a significant role in generating mobile TV revenue for carriers across the world.

Clearly, mobile TV will soon be positioned as an extension of traditional broadcast TV services and will witness rapid growth. It is also likely to expand beyond cellular phones into automobile screens and small hand-held computers known as mobile internet devices or MIDs.