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Commentary: IPTV and its Grip on Reality
The IPTV World Forum in London was awash with set-top box and middleware manufacturers in a fool's gold rush for a market that doesn't exist.
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This week I visited the IPTV World Forum in London. Having worked for the past 16 years with webcasting, streaming media, and IPTV technologies this event gave me an opportunity to catch up with the latest developments in the sector that identifies itself as IPTV. Call me cynical, but I was impressed by all the "wrong" things.

So the first thing that struck me as I arrived at the show was the size of the exhibition. It crossed my mind that the sector has enlarged significantly in the past 5 years. Indeed, I remember writing to the editor of Cable and Satellite TV (a publication by the IPTV forums’ organisers) in 2004 offering articles about IP connectivity for TVs; he politely refused the offer, citing that this was not relevant to his audience. It's interesting that now that publication is called Digital TV and its clearly the exploding area in his business.

The second thing that struck me about the show was the number of faces who have moved into IPTV from telecoms. The event was a heaving morass of suited ex-telecom workers in mass quantity. It's like a huge amount of folks who were selling B2B network services and technologies that failed have all moved over to IPTV. The same still-drunk-from-last-night-bullish-but-ignorant-sales-guys-in-suits who always need to "refer to a colleague" if you ask them any question about their technology are now surfing middle-management roles in IPTV ventures. They really do know nothing about their technologies, and sit on the bottom of the corporate pond as "box shifters," moving boxes they don’t understand, into the hands of buyers who don’t really know what they want. If I had a noise-reduction-filter for these idiots at the event it would have reduced the headcount by about 80%. It’s like "sales by press gang" and it doesn’t wash with me: I’m far too passionate about the technology to put up with all their bullsh*t and I carry a bag of acronyms which I throw at them to defend myself.

The next thing that I noted was that there was only a small handful of technology types exhibited: basically set-top boxes (and accessories such as remote controls) and middleware providers (which also generally crept over to head-end services).

There were no network service providers. There were no content providers, aggregators, advertising systems (of any real worth), subscriber systems, etc. There was one network technology—Edgeware, which was actually quite interesting and the exception to the whole day for me).

It should have been billed as the "Set Top Box Forum."

Worse, even small providers had stories of "800 client IPTV networks" and "millions of boxes sold," but when I asked for some examples of profitable, sizable deployments everyone got cagey and cited example networks in Nepal or the Congo. I don’t believe that they were real.

When you step back and look at the UK market there are three ways the mass market gets their TV now: Freeview (digital terrestrial with xDSL IP capability), Sky (DTH digital satellite with xDSL IP capability), and Virgin (cable with DOCSIS IP).

The other player, BT Vision, has so few subscribers that if you took £1 from every £15 monthly subscription to pay for staffing BT Vision you would have 2 full time staff. Think about that. BT Vision, it has to be noted, doesn’t believe in its own network for delivery of linear video either – it has a Freeview card built in. Hardly a vote of confidence in its own network, is it!?

Of these only Virgin, which has its own network and so their own QoS, is lined up to become a true IPTV player as it migrates to the IP way of doing things across the board.

So given that Sky and Virgin still supply their own STBs to subscribers, and Freeview is at least a year away from IP, I wonder who in the UK market would be interested in buying any set-top boxes for their subscribers. Let’s imagine that there is a crazy VC who wanted to set up an IPTV platform for the Isle of Wight. He wanted to buy a few thousand set-top boxes. He wants to deploy a network—and assuming the BT network isn’t good enough for BT Vision, he is unlikely to consider BT an option.

It would be likely that he does a deal with an unbundled DSL provider (one with their own kit in the local exchanges) such as Cable and Wireless. This would result in a "private network" to the home—one of the absolute pre-requisites for IPTV, and the key factor that differentiates if from internet TV or "over the top" (OTT) TV, as its now being called.

In pure "footprint terms," regardless of the other network options in the area, he would be selling against satellite-delivered Sky unless he is selling in to what Sky call "multi-tenant-occupancy" locations such as tower blocks. That’s some stiff competition, so he had better have some excellent deals on content to draw viewers away from the Sky offering.

Is he really likely to get any significant uptake? I don’t think so.

So I don’t currently believe in IPTV start-ups for consumer propositions where there are incumbent broadcasters. "Serious IPTV" should be viewed as a migration path for incumbent operators to migrate to in my opinion. The sale of new set-top boxes and middleware is to Sky, Virgin, and soon to Freeview. It is not to new network operators with no subscribers, no content, and no experience.

All those new set-top box companies that claim to have 800 IPTV networks as clients must be making that figure up. It just doesn’t bear any grip on reality. If that is the length of their client database I reckon more than 80% are simply labs, test groups, consultants, a few digital signage applications, and a sprinkling of small network operators such as hotels and businesses with specific applications. Not that these should be in any way discounted. However there is no way that the scale of that market is really big enough to justify so many set-top box manufacturers exhibiting at the show. It seems worryingly overinflated.

It really comes across as a market full of people who believe hype, and have suspended reality (probably down to a "creative" accounting level) to justify the spend on manufacture and device development.

Those of you who have been in the streaming and CDN space for a while will remember the satellite edgecasting networks (Enfocast, SkyCache, iBeam, etc.) from 2000/2001. Great products, great ideas, and so on; however, they seemed to blindly ignore the pending massive commoditisation and price drop in the established fixed line market that eventually came and flash-flooded their businesses away.

At the end of the day Pace, Huawei, Phillips, and a small number of other big players completely control the market. Small players like Amino may get some traction in more niche product areas like hotels and halls of residence applications, but they are going to surprise me if we see Virgin or Sky switch to their devices and away from the big names.

As soon as the "big guys" see a trend in their customers (and the relationships with these customers are virtually joint-venture level) they adapt, and there is no room for a smaller player to ramp up production and meet the demands that the major networks operators have.

Though I mention Amino, I thought it was interesting to note something in their tactics: These guys burst into the scene because theirs was the first high profile implementation of VC-1 (Microsoft’s early implementation of an MPEG-4) to be released "on-chip" in a set-top box. That simple thing, a little akin to Inlet's current closeness to Microsoft with Smooth Encoding, propelled Amino to the forefront of the industry in both the IPTV and streaming media worlds.

The differentiating VC-1 feature (which meant a simple Windows Media Server could be used as a head-end instead of extremely expensive alternatives) seems to have been forgotten, and not just by the market, but by the company itself. At the IPTV World Forum they didn’t even have the VC-1 enabled box on the stand. They were all about their PC-based boxes and their middleware. Just like everyone else at the show. Strange to forget or bury your unique selling proposition in such a fiercely competitive space.

Here’s another example that this audience will appreciate: Why is it that you can buy a basic Dell PC and an Osprey Card for under £1000 and build a perfectly reliable encoder for almost any format? That is a streaming media approach.

If you are an IPTV guy, you can buy a Tandberg chassis, with a convoluted hidden away XP Embedded PC and a proprietary and expensive video card to use as your encoder and it will cost you nearly £30k. The reliability is almost exactly the same. In fact, apart from the 1u Tandberg chassis,and the video card, the rest probably IS the same. £29k is a lot for a brand.

There is so little that makes sense in the IPTV market that I was really left puzzled as to why the conference was so busy and there seemed to be so much finance moving around in the sector. I fear it’s all too much and too quick, and when the hype subsides many of the groups who could have made better financial decisions and investments will recoil from the sector and the real opportunities with long term value will have been missed in the fool's gold rush.

In contrast, the (surprisingly when you think about it) more mature, slightly differentiated streaming media space is much more deliberating now. We had our fool's gold rush at the start of the millennium. Since then the internet video space has become much more focussed on selling infrastructure to sustainable clients—ones who themselves have viable, if not already working, business models.

Subscriber access is much easier in the streaming world where the user pays for their own access technology—the middleware of media players and operating systems—and the business models (subscription or ad-led) pay for CDN services and hosting. There are few huge capex risks that are needed. Last year was the year of "ecosystems" in streaming media. These ecosystems are nearly complete now, with correctly scaled models feeding thirsty markets. The consumers are fickle and want to move from platform to platform with ease—possibly many times in one use session. The PVR under the broadcast TV does a good job of capturing series to view on the "main screen" but if I want specific VOD or niche programming, well hell, that’s what the internet is for isn’t it? I don’t need to pay for a set-top box with less content on it than a single video web portal. I already have access to an infinite number of web portals on my laptop. Why oh why would I buy an IPTV service?

Why is it that business forget to ask, "who’s paying for all this at the end of the value chain?"

So while I have no doubt that the incumbent "big broadcasters" and subscriber services will move to IPTV to increase their profitability, and that small IPTV plays will continue to work in closed spaces like hospitals, halls of residence and, hotels, I think that the chances of users dropping their Sky subscriptions and turning off their laptops to take out a service from a small IPTV player are on par with hell freezing over.

I just can’t see it being scaled right at the moment and I hope for all the IPTV companies’ shareholders sake I’m horribly wrong!