IPTV pricing too high for enterprise

Australian enterprise has turned its back on IPTV due to expensive broadband pricing.

IPTV delivers standard and high-definition video over IP by using advanced compression technologies like MPEG-4 (H.264) and can bundle other IP-based communications such as VoIP into 'triple play' or converged services.

Current compression rates allow broadcast quality to be maintained for about half the size with standard definition requiring about 2Mbps and 8 to 10Mbps for high-definition. Analysts argue that while broadband adoption rates are high within the enterprise, the data consumption required for IPTV results in expensive bandwidth costs, which increases as more devices feed into the technology.

Telsyte managing director Warren Chaisatien said while end-user hardware is capable of handling IPTV and broadband adoption is increasing, data bandwidth pricing coupled with Australia's slow uptake of technology could hold it back five to six years.

"While broadband infrastructure is available, the costs of residential broadband could create a bottleneck by holding back adoption rates to over five years," Chaisatien said.

"I wouldn't say adoption is constrained by [end-user] hardware, however the pricing model for broadband bandwidth is a restraint."

"IPTV is a future technology because there are many areas for improvement and this needs to be driven to the market, but business is aware of the technology and it is using it."

He said as IPTV becomes more popular, broadband pricing will need to accommodate the increased strain on bandwidth as the technology is a heavy consumer of data. I

t is suggested that telecommunications providers will need to offer DSL rates of 20 to 40Mbps to accommodate for what Chaisatien sees as a total convergence of all voice and data applications to IP.

Gartner Asia Pacific vice president for research enterprise communications applications Geoff Johnson agreed with Chaisatien saying while IPTV has great enterprise and consumer potential, lagging consumer adoption and lack of product differentiation will push the technology back five to 10 years.

"IPTV has the potential to be transformational in terms of network architectures and service offerings, but consumer inertia, lack of product differentiation, market saturation and highly competitive multichannel video environments could [weaken] the market impact," Johnson said.

"Australia's adoption of IPTV is trivial [as] successful business models, revenues and cost savings haven't been determined."

He says the increasing adoption of broadband, the gradual migration to ADSL2+ and eventual FTTN will feed IPTV into the mass market.

"IPTV needs more bandwidth, so moving from ADSL to ADSL2+, to squeeze more from their copper lines, and eventually to fibre will encourage adoption," he added.

Nemertes Research president and senior founding partner Johna Till Johnson said while IPTV offers telecommunications providers revenue stolen by VoIP, and introduces more competition in the "insatiable" media content market, the converged delivery format will save it from being devoured by free rival offerings.

IPTV gives providers a sustainable consumer offering [in which its] margins aren't eroding, and by doing so, introduces competition into the content-distribution business," Johnson said.

Page Break

"IPTV lets carriers reverse that trend by giving them a shot at selling something for which the market demand is demonstrably insatiable: content.

"While providers appear to be jumping on the content bandwagon just as it's headed for the ditch, because of undercut margins by peer-to-peer content services, people pay for content to be packaged and delivered to them in a form that's convenient rather than for content itself."

Chaisatien said IPTV is part of an inevitable shift towards converged content such as fixed to mobile convergence where voice and data for the enterprise will be available through single devices and freely shifting between data networks.

"IPTV will be more interactive, for instance in conference calls, instead of dialing an outside number to ask questions, it will use live voice and e-mail questions which could greatly benefit e-learning, Webcasting and live presentations," he said.

Chaisatien said while convergence is happening simultaneously in the consumer and business markets, they seem to be viewed separately as content convergence versus triple play.

"We are already very familiar with IM and SIP (session initiated protocol) technologies within the enterprise, but this represents the last steps for the integration of content into triple play and now we will see it take-off," he said.

Allen Consulting Group's report A Competitive Model for National Broadband Upgrade commissioned in July this year found the lack of competition in the Australian telecommunications market was reducing advancement in broadband availability and stalling cost reduction.

Copyright © 2006 IDG Communications, Inc.

Shop Tech Products at Amazon