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Table of Contents

Market Study
Published: June 2010
Pages: For full details, please email keithw@cmsinfo.com
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 1500.00  Buy Now!
Research from: Informa Telecoms and Media
Sector: Broadband & Fixed

"Providing over-the-top video is not a game that only Internet firms can play This year will be pivotal as ISPs
and content providers explore radical new ways of working together"
Rob Gallagher, Principal Analyst, Broadband and Internet, Informa Telecoms & Media

Drives by broadcasters, Internet firms and consumer electronics giants to take online video from the PC to the TV screen, such as the BBC’s Project Canvas, will place unprecedented stress on broadband networks. But the beauty of ‘going over-the-top (OTT)’ is that any company can do it. ISPs can – and should - undermine their rivals by providing their own OTT video services and merging popular existing ones with their TV services.

Network operators can also take advantage of the online video boom by providing so-called ‘content delivery network’ services to OTT providers behindthe-scenes. But content firms and policymakers are concerned that some of the operators’ more radical ideas could harm the “neutrality” of the Internet by tilting its level playing field in favour of media conglomerates and well-funded Internet firms.

This research report gives you the most timely and clear view of the over-the-top (OTT) video landscape, the evolving TV ecosystem and how operators need to respond.

Based on this research there are five ways operators can stay relevant:
•Open up to third party online video providers – to make their content a seamless part of the pay-TV experience
•Offer innovative services that improve the video experience – such as content delivery networks, TV widgets and apps, and personalised advertising
•Understand standardization - like the BBC and BT’s Project Canvas and HbbTV as well as various providers’ proprietary efforts
•Use their marketing clout – leveraging their strengths in subscriber numbers and brands to outflank Internet upstarts
•Bundle intelligently – subsidise and bundle content with broadband and fixed-line to reduce churn.

This research will provide vital assistance to:
• All ISPs and operators – gain insights into the retail and wholesale strategies of leading providers
• Content providers – assess the opportunities and risks of working with operators and ISPs over OTT video
• Equipment vendors – plan for the role OTT content and services will play in future operator platforms
• Settop box manufacturers – learn about operator and content provider requirements
• Consumer electronics – understand the operator partnership opportunities and the best routes to market.

Fixed-line operators have taken a fair old battering from their mobile counterparts over the years. First, mobile operators took their voice customers, and now some are threatening to do the same with broadband. But fixed-line operators could have the last laugh when it comes to the Next Big Thing: the connected home.

Operators once assumed that owning a mobile network would be essential to provide services that span the connected home’s “three screens”: the PC, the TV and the mobile. Even now, many fixed-line operators are looking to become virtual mobile operators (MVNOs) by using wholesale services from existing networks. A few are even considering acquiring wireless spectrum in order to roll out their own multimillion-dollar infrastructure.

But recent developments suggest that owning a mobile network might offer little advantage in the battle for the connected home. The irony is that another trend hurting fixed-line operators might actually work to their advantage in this regard.

Over the past couple of years, big media and Internet startups have challenged the notion that owning infrastructure matters when it comes to TV by delivering high-quality video services “over the top” (OTT) of broadband networks without involving the networks’ operators.

The beauty of OTT is that anyone can do it. A cable operator could, for example, provide a mobile version of its TV and PC video services over any number of 3G networks. A satellite or digital terrestrial TV (DTT) operator with no mobile or broadband infrastructure could even use OTT methods to enable customers to control their TV settop boxes (STBs) using their mobile phones.

This is not just a theory. A number of operators are already providing OTT services to iPhone users. And those without mobile infrastructure appear to be the most aggressive, with Sky leading the pack.

3G technology has given mobile phone users access to “true” broadband speeds at flat rates, which in turn has made providing richer OTT services more viable.

But crucially, Apple’s iPhone and App Store have made it more attractive for companies to develop mobile phone applications and easier for consumers to find them. Sky, for example, last month revealed that more people watch its content using their iPhones than their PCs.

The same is true for the TV operator’s remote PVR service.

Apple’s model has proved so successful that it has been copied by its handset-vendor rivals, and several major mobile operators are trying to create a cross-industry version, which if successful will only widen the OTT opportunity.

Unsurprisingly, the emergence of this new environment hasn’t escaped the notice of consumer-electronics giants and Internet startups. IPhone users can already download apps in several categories that operators hoped their connected-home services would cover, including video, music and home security.

Worryingly for operators, these apps show that a firm need not own any broadband infrastructure to provide a connected-home service. True, many are no more than newfangled remote controls that work over home Wi-Fi rather than traditional infrared, but some also interact with online services via fixed-line or mobile networks.

Providing connected-home services over the top of mobile networks is nothing new. Sky, for example, introduced its remote PVR feature in 2006, and many other TV operators have offered mobile video for some time.

What’s different now is that the mobile market is much more open to OTT strategies. The spread of Wi-Fi and high-speed downlink packet access (HSDPA) 3G technology has given mobile phone users access to “true” broadband speeds at flat rates, which in turn has made providing richer OTT services more viable.

But crucially, Apple’s iPhone and App Store have made it more attractive for companies to develop mobile phone applications and easier for consumers to find them. Sky, for example, last month revealed that more people watch its content using their iPhones than their PCs.

The same is true for the TV operator’s remote PVR service. Apple’s model has proved so successful that it has been copied by its handset-vendor rivals, and several major mobile operators are trying to create a cross-industry version, which if successful will only widen the OTT opportunity.

And apps will get more sophisticated over time. US DVD-rental firm Netflix is planning to launch a mobile version of its highly successful online video service, which is already available via a growing number of Internet-enabled TVs and STBs. French broadcaster TF1 already has an app that enables users to buy and watch catch-up TV on their iPhones.

Despite these developments, few operators that own TV, fixed and mobile broadband infrastructure appear to have launched OTT connected-home apps. Are they waiting for their customers to take all three services from them first?

If so, they could be waiting a long time. As Sky is wont to point out, TV and fixed broadband are home technologies and mobile is personal, which makes bundling and upselling services difficult. An individual’s various contract periods are rarely in sync, let alone those of a family.

The OTT opportunity, meanwhile, waits for no one.

About the analysts

Informa Telecoms & Media’s global footprint keeps us better connected to local markets

Informa Telecoms & Media’s team of analysts are based on the ground throughout the world and includes a dedicated in-house team of specialist forecasters. Together by analysing the key drivers and dynamics of each market they provide a comprehensive and accurate picture of the entire global mobile marketplace

Rob Gallagher
Principal Analyst, Broadband and Internet Markets

Rob is a principal analyst in Informa’s Broadband & Internet team and manages this channel of the Intelligence Centre. He is also responsible for the the company’s fortnightly research service about fixed-line telecoms, Telecom Markets.

Rob is responsible for directing Informa’s global research into broadband and telecoms in the home. Under his guidance, Rob’s multinational team of analysts and associates produce exclusive analysis, forecasts and consultancy covering three key areas:
fixed-network operators and regulation; online content and applications; and the connected home.

He also oversees Informa’s series of broadband research reports and regularly carries out projects about next-generation networks, IPTV and new business models for fixed-network operators.

Rob has been covering information and communications technologies since 2000 and has specialised in broadband and telecoms in Europe since 2003.  He regularly chairs and speaks at conferences, and frequently briefs operators, policy-makers and vendors on industry trends and developments.

Giles Cottle
Senior Analyst, Broadband and Internet Markets

Giles is a Senior Analyst for Informa’s Broadband and Internet Intelligence Centre, and heads up Informa’s coverage of online content.

With his team, he regularly produces analysis, executive briefings, research reports and forecasts on a wide variety of topics, including online TV and video, digital music, games, social media and online advertising. He has also undertaken several consultancy projects for clients in the media and technology sectors.

Giles also briefs and presents to clients on issues surrounding online content, and has presented and chaired at numerous industry events. Previously at Informa, Giles covered fixed broadband in the home, and produced major pieces of research on FTTx and value-added services for broadband operators.

Giles has been covering online content and media since 2005. He began his career at media agency Initiative, where he analysed new media and advertising opportunities and advised clients including Unilever, Johnson & Johnson and General Motors.

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