1

TIAD

Final Paper

Cable TV,

Terrestrial

TV & IPTVBharath MH

Naidu

5th April 2015

Table of contents

Technology: Cable TV and differences with terrestrial TV 3

Stakeholders in cable TV 6

Advantages of cable TV to users 7

Switching costs from terrestrial to cable TV 8

Disadvantages of cable TV 9

Rise of cable TV industry 11

Adoption rates of terrestrial TV 13

Adoption rates of cable TV 14

Changes in viewing habits and cultural norms 16

Decline of terrestrial TV and rise of digital terrestrial TV 17

Sustaining nature of cable TV technology 18

Network effects of cable TV 20

Competitors for cable TV 21

Rise of internet streaming services and IPTV over multiple devices 22

How internet streaming works 23

Adoption of IPTV 24

Appendix

Bibliography

26

27

2

Technology: Cable TV and differences with terrestrial TV

Prior to cable systems, a lot of households used terrestrial transmission to receive TV

broadcasts. In this system, the programs and content were routed through a transmission

room to a broadcasting tower which then transmitted the signals over a certain distance.

Antennas at homes of subscribers received these signals and displayed them on TV sets. This

technology was severely limited by distance constraints as signal strengths decreased with

increasing distance from the broadcasting towers. Remote and isolated places were at a

disadvantage due to the lack of proximity to these broadcasting towers. Poor signal quality,

dependence of signal strength and quality on weather conditions and limited channel

transmission capabilities limited the effectiveness of terrestrial television. Cable TVs sought

to address these shortcomings.

The earliest cable systems were strategically placed antenna systems connected to the

subscribers’ television through long cables in order to receive better quality of transmissions.

This was a popular practice adopted by subscribers with access to terrestrial transmission, but

limited reception strength. The cables served as a means to strengthen the signal. Amplifiers

were also inserted at regular lengths along the cable to increase the signal strength as they

tended to weaken with the length on the signal.

In the early 1950’s microwave transmitting and receiving towers were used to capture signals

from distant stations. The addition of Community antenna television and spread of cable

systems led manufacturers to add a switch that could enable people to tune into channels

based on the FCC frequency plan or the plan used by most cable systems. However, most

modern cable systems use the technology outlined below.

3

Cable TV distribution starts at the ‘Headend’ or the point at which the cable signal originates.

The Headend is where the cable system receives programming from various sources

(predominantly satellites today) and assigns them to channels. The head end sends signals out

via satellite while also picking signals from other headends to process the available

information, form bouquets of free and premium channels and send it out to subscribers.

Information in this context, refers to transmission signals which are received by the end

subscribers in the form of content. Signals are then sent over fiber-optic wiring systems into

the area of service. These fiber optic cables are spread all across the neighborhoods,

eventually branching into smaller ‘drop-lines’ that reach the homes of the end user. These

drop lines are often embedded into the ground or are strung onto cable poles. Amplifiers are

attached to the wires along the way to prevent the loss of signal strength during transmission.

In 1989, General Instruments demonstrated the possibility of converting cable signals from

analog to digital and transmitting it in a standard 6 MHz TV channel. Using modern

techniques such as MPEG compressions, CATV systems today, transmit up to ten channels

of video in the 6 MHz analog bandwidth channel. Combined with 550 MHz overall

bandwidth, it is possible to receive 1000 channels of video on a system. Digital technology

allows for error correction as well, ensuring quality of the received signals.

Fiber optics are an important component of the cable transmission technology. Fiber optic

cables does not suffer the same signal losses as traditional co-axial cables and reduced the

requirements for the number of amplifiers required along the transmission path. This is due

to prevention of signal leakage in fiber optic cables. Fiber optic cables also have the capacity

4

to serve 500 households, making it possible to target individual neighborhoods for messages

and services. This grouping was extended to create LAN (Local area network) to provide

internet services.

With advances in technology, advanced high capacity fiber wires are replacing older cables

with the capacity to transmit stronger signals further. Newer methods of transmission such s

satellite HD, where by subscribing to a satellite HD service and purchasing the appropriate

equipment, subscribers can access HDTV content with enhanced sound quality.

5

Cable TV transmission Optic fiber cable

Terrestrial TV transmission

Value proposition: Stakeholders in cable TV

To understand the value in adopting cable TV, it is important to understand the various

stakeholders in the cable TV industry. The stakeholders in the cable TV business go beyond

just the broadcasting stations and the end consumers. Indeed, the effect of the cable TV

industry is far-reaching and impacts multiple industries. Stakeholders in the cable TV

industry include content producers or production studios, broadcasters, advertisers,

government entities such as the Federal communications commission (FCC), trade

associations such as National cable and telecommunications association (NCTA), equipment

suppliers, cable TV operators and end users.

Content producers produce content such as TV shows, sports shows, soap operas and other

forms of content. These programs are usually produced by major studios and require a huge

budget. The broadcasters which are popularly known as ‘channels’ purchase or license this

content from the content producers and air them on their channels. This content can either be

free or premium pay-per-view content. Advertisers choose to air their ads on these channels.

The decision to air ads are based on the popularity of the content with audiences, the time

slot in which the content is being aired, the type of content being aired and other factors. The

advertisers are charged a preset fee per second for the broadcasting their ads.

Once the content is broadcast over satellites to cable operators, who then form bouquets of

these channels as per consumer choices or ‘packages’ they sell to consumers, usually for a

monthly fee, and transmit the same to consumer households. Governmental entities such as

the FCC oversee the allocation of broadcast spectrum that is available to broadcasters,

6

enforcing the bandwidth allocation as well as ensuring competition among cable companies

and overseeing issues such as mandatory carriage of television broadcast signals, program

access, over the air reception devices etc. The NCTA is the voice of the cable TV and

communications industry and manages its regulatory and legislative priorities.

Advantages of cable TV to users

From our understanding of the various key stakeholders and their roles in the industry, it is

clear that the obvious advantage to the end consumer is choice and the freedom to choose

programming and customize it according to their needs, a feature that was tellingly lacking in

earlier terrestrial TV. However, there are other advantages of cable TV over terrestrial TV.

These can be broadly described as follows.

Stability

The dependency of TV signal reception on proximity, weather and other conditions not

directly related to broadcast and transmission is reduced as signals are transmitted through

cable. The chances of a broken cable or router are far lesser when compared to unfavorable

weather conditions. Thus, most importantly, consumers were able to experience increased

stability when compared to terrestrial TV.

Choice

The advent of cable TV saw an explosion of channels. Rather than the limited number of

channels that were available to consumers before, they now had access to a large number of

channels, possessing the option to customize the channels they receive and pay for as per

their needs. With such wide genre of programming such as news, sports, cartoon,

documentaries, comedy among others, it became possible to disseminate knowledge among

7

the public and raise public awareness. By catering to diverse needs, consumers were also

exposed to the many facets of the world, all through the comfort of their living room. Since

cable TV can be customized to include strong language or other ‘indecent’ content by the end

customer itself with a choice not to watch the same, indecency laws are not as strict for cable

TV networks as they are for OTA channels.

Multiple channels

Cable TV allowed numerous channels to share broadcasting space on the same delivery

system. Rather than maintaining separate transmitters for every over the air channel, a single

transmission system could carry hundreds of channels through different frequencies.

Price

Cable TV can be fairly inexpensive and the ability to customize channels further puts the

choice in the hands of the consumers in deciding how much they pay every month. The FCC

requires that all cable operators provide a basic cable package consisting of few broadcast

channels and local channels.

Bundling

With advancements in cable related services such as broadband and telephone, it is possible

to bundle multiple services into one package, thereby reducing the complexity of installing a

multitude of services from various providers as well as making it easier to deal with bill

payments.

Value proposition: Switching costs from terrestrial to cable TV

The switching costs from terrestrial to cable TV involved multiple layers of changes to the

existing system of broadcasting and transmission. Co-axial cables and later, fiber optic cables

8

had to be laid out by cable operators across much of the country. End users, who received

OTA transmissions as analog signals had to purchase converters that were capable of

processing signals from cable transmission and relaying the same onto their sets. In some

cases, newer TV hardware had to be purchased, raising switching costs. With the advent of

digital signals, most users who were using TV sets compatible with analog signals had to

purchase analog to digital signal converters. This was especially relevant after 2007 when the

government enacted a law to make all transmissions digital.

These switching costs were however, offset by the advancements in hardware technology and

the need for better programming content by the people. Rapid advancements in TV hardware

from bland and white vacuum TV sets to CRT based sets to LCD and LED technology,

prompted people to upgrade TVs frequency to experience the pleasure of watching HD TV as

well as better picture and sound clarity. The newer TV sets came with the option of

connecting to cable directly. The late adopters were the last to use converters and switching

to cable TV became extremely easy once the initial cable network was established and the

entire population moved to newer types of TV hardware.

Value proposition: Disadvantages of cable TV

Cable TVs, while largely representative of the significant advancement from OTA, were not

without their disadvantages.

Monopolies

Despite the FCCs intention to promote competition, certain areas were largely served by a

particular cable operator which had a significant cable network in that region. The rise of

these local monopolies reduced the choice of the customers in opting for the cable operators

9

of their choice, though most major operators relayed most, if not all major channels. This

culminated in poor customer service, less frequent checks on cables.

Confusing price packages

The problem of choice is extremely evident in the cable TV industry. Despite all efforts to

classify various channels in an appealing and easy manner, many users are left confused

about the pricing for these packages. While it is extremely difficult to cater to individual user

tastes, the pricing mechanism remains a major concern. This is further compounded by

hidden fees, taxes, rental charges and ambiguity about the long term costs of cable TV

subscription. Additionally, most packages are designed to contain a variety of channels while

most people watch few channels only in the long run.

Privacy

With bundling of cable and internet broadband services, it becomes difficult to mask location

if required due to IP addresses being stable in this type of offering and allowing unscrupulous

elements to track location and browsing history. In contrast, DSL modems, change IP

addresses every time the modem is reset.

10

Adoption: Rise of cable TV industry

1940 1950 1960 1970 1980 1990 2000 2010 20200%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TV adoption rates

Overall TV Color TV

Sources from Mahajan

To understand the adoption of cable TV, it is essential to know a brief history of cable TV

itself. In the 1950’s, cable operators took advantage of the fact that they could pick up signals

from long range and broadcast them to households. In 1962, 800 cable systems serving

850,000 subscribers [CCTA 2015] were in business with well-known firms such as

Westinghouse jumping into the fray. The existing TV networks viewed them as threats to

their services and the FCC expanded it jurisdiction and imposed restrictions on the ability to

import television signals, creating a freeze effect.

This freeze on cable TV lasted until 1972 after which the clamps were released and

regulations surrounding transmission of these signals by cable operators eased. The clamp

down had adverse financial effects for cable companies. Changes in technology in the 70’s

such as satellite communication increased the number of cable subscribers as well as cable

services offered. In 1972, USA’s first pay per view channel, HBO was announced, leading to

11

the creation of a national satellite distribution system, paving the way for an explosion of

program and network services. The end of the decade saw nearly 16 million subscribers.

Further deregulation in the 1980’s created a strong market for cable TV industry and led to a

combined industry spending of more than $15 billion [CCTA 2015] in the wiring of America

and even more on program development from 1984 to 1992. The end of the decade saw

nearly 53 million [CCTA 2015] household subscribers and more than 79 program networks

in 1989, compared to 28 networks in 1980.

Legislations to regulate prices were enforced in the 1990’s in response to consumer concern

over increased pricing and cable subscriber growth continued to increase with over 65

million households subscribing to cable. A major upgrade to optic fiber cable service

delivery was undertaken with $65 billion in spending to create a broadband network capable

of multi-channel video, HD video, internet and phone service delivery via a single cable. The

2000’s have witnessed a sea change in the cable services offered with broadband internet

services being the main focus of cable operators. With this in mind, it is interesting to note

that most households, around 98% have a TV at this point of time. The evolution and

increased adoption of the color TV and advanced hardware also played a major factor in the

increased adoption of cable TV services – a factor that will be examined in detail in

subsequent sections.

As is common for most technology, cable usage has been on the decline with increasing

number of ‘cord cutters’ have been cutting off cable and opting for internet streaming and

on-demand services besides satellite TV services. This has led many to believe that cable is a

12

dying industry while many predict that it is the first of many steps in the continued evolution

of cable TV.

Adoption: Adoption rates of terrestrial TV

1945 1950 1955 1960 1965 1970 1975 19800%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Terrestrial TV adoption rate

Source from Mahajan

Terrestrial TV, being the pre-cursor of cable TV saw a high adoption rate. This coincides

with the rise of TV itself. Prior to cable TV, terrestrial transmission was the sole means of

broadcasting content to TV sets. Due to lack of reliable data on the adoption of terrestrial TV,

it has been assumed that the adoption of TV implied the adoption of terrestrial TV. Since

commercial TV was introduced and made affordable to the public in 1950’s, TV was adopted

fairly quickly, reaching levels of up to 98% adoption a little after 1970. Data for terrestrial

TV has been factored in until 1975, since cable TV was introduced in 1970 and the adoption

rate had already reached the zenith by then.

13

Adoption: Adoption rates of cable TV

1940 1950 1960 1970 1980 1990 2000 2010 20200%

10%

20%

30%

40%

50%

60%

70%

80%

Cable TV adoption rate

Sources from Mahajan, Fishkin, Rangaswamy and various

Using the adoption rates of cable TV, we notice that cable TV adoption follows the S shaped

curve pattern. Since its introduction around 1965, cable TV witnessed a steady growth. As is

consistent with its history, cable TV subscribers were nominal due to regulatory pressures

and the lack of networks to fully capitalize on the power of cable delivery system until 1980.

However, there was still some growth from the early adopters who preferred some choice

and possibly pay-per-view programming to regular television.

We notice that the number of cable TV subscribers increased sharply after 1982 due to the

aforementioned de-regulation and the explosion of programming content that was available.

This period also witnessed the establishment of large scale cable networks, reaching more

people than ever before and is consistent with history.

The number of subscribers for cable TV has continued to climb in the 1990’s as well with

late adopters joining in the fray, reaching an optimal of nearly 69% adoption rate before

levelling out. As of today, the number of cable subscribers are on the decline, with more

14

people opting for internet streaming, satellite relay and other means of content delivery,

moving away from the cable delivery model.

It is also interesting to note that the increased adoption of cable TV coincides with the

increased adoption of color TV in the 1970’s. This demonstrates the inter-dependency of

cable TV services on hardware quality and customer need for better signal and picture

quality. The climb also continues well into the 90’s with TV sets becoming increasingly

cheaper, leading to the introduction of LCD and LED TVs as well. In recent years however,

the introduction of newer ways of viewing content which are not dependent on cable

services, but rather the internet such as laptops, mobile phones and tablets may also be

contributing factors for the decline of cable and the increased adoption of internet streaming

services.

Viewed through demographic lens, it is also interesting to note that cable TV was adopted

initially not only by the wealthy or the innovators, but by people who desired programming

with no proximity to standard terrestrial TV services who can broadly be termed as imitators.

The demographic of cable TV viewers has since cut across income divides, reaching the

general public through its differential pricing, recognizing differing abilities to pay of

different income groups.

1940 1950 1960 1970 1980 1990 2000 2010 20200

102030405060708090

Cable TV usage (hrs/ month)

15Source from Fishkin

Another lens through which adoption of cable TV can be seen is through the number of

hours/ month of cable TV viewing. From 2-3 hours/ month when cable TV was a novelty in

the 1970’s to nearly 86 hours/ month in 2010, the number of hours viewed has been steadily

increasing. This is attributable to the availability of content that caters to specific tastes of

subscribers, motivating them to tune into cable TV more often. It is interesting to note that

cable TV is a mix of both regular as well as pay per view. While cable services did initially

start off as an ad free service in the 70’s, the introduction of ads into cable TV did not

dampen user response to the programming content. With such a remarkable increase in

subscriber engagement through the years, it remains to be seen if internet streaming and

video will enjoy similar success. It is indeed ironic that while cable subscriptions have been

declining, cable viewership has been more or less on the rise, demonstrating the network

effects of content programming on cable TV technology.

Adoption: Changes in viewing habits and cultural norms

Cable TV also had the benefit of bringing about cultural diversity and bringing cultural issues

to the fore. In the days of terrestrial TV programming, when diversity was an issue and was

predominantly dominated by the white population, cable TV enabled people of other races to

voice their opinions and cater to diverse needs, hastening its adoption and demonstrating the

power of choice in content programming. It played a major role in bringing various sections

of the population onto a single platform. With the popularity of this type of content, content

creators became more inclusive.

16

Cable TV also had a significant effect on the psyche of the American family, leading to

increased adoption. Where OTA was limited to a few channels that were broadcast and TV

viewing was seen significantly as a family activity with members gathered around television

sets, much like they did around the radio, cable TV with its cost effectiveness, ease of

installation and ability to cater to multiple TV sets in a single household with highly

customized programming made it easier for different members of the family to watch

programs more suited to their taste. TV viewing was beginning to be seen as less of a family

activity and more of a personal choice. However, the fact remained that having a large

number of TV sets was extremely cost prohibitive in nature due to the expensive nature of

TV hardware.

Market dynamics: Decline of terrestrial TV and rise of digital terrestrial TV

Analog terrestrial TV declined in popularity with the advent of cable TV as is the case with

older technology. While terrestrial TV had the distinct advantage of airing free to air

channels initially, they were showcased later via cable itself as part of FCC ruling that free to

air as well as few local channels be broadcasted compulsorily. The marked variety of choice

and signal clarity of cable TV reduced the number of viewers opting for terrestrial TV. The

increase in the number of alternate technologies contemporary to cable TV such as satellite

TV and IPTV gave consumers the choice of watching content in the platform of a choice and

many people shied away from terrestrial TV due to its obvious disadvantages.

In 2007, all analog signals were mandated to be converted to digital, freeing up precious

spectrum to be used for other purposes. This marked the end of analog terrestrial TV era as

17

these signals were no longer broadcast. People possessing analog terrestrial signal compatible

sets were encouraged to use converters which converted these signals to digital signals. Due

to growing popularity of cable TV and lessening interest in terrestrial TV, TV hardware

makers also stopped including antenna reception in TVs and antenna installation to receive

signals. As a network effect of the decline of terrestrial TV, antenna sales fell sharply and

disappeared almost altogether.

Of late, terrestrial TV has been staging a comeback in a new avatar in the form of digital

terrestrial HD TV has been witnessing increased adoption. Digital terrestrial TV works the

same way as traditional broadcast TV while being capable of receiving multiple channels,

including HD channels, on a single frequency. Coupled with advancements in video

encoding, DTTV capabilities are expanding vastly. DTTV signals are received through

digital set top boxes, gateways or integrated tuner cards in TVs. DTTV also supports more

free to air television channels and multi-sound channels. While Digital Terrestrial TV also

faces the distance limitations of its predecessors and is feasible in well populated urban areas,

alternatives such as digital satellite TV are making connectivity easier and reducing

dependency on distance as well as cable network.

Market dynamics: The sustaining nature of cable TV technology

We can view the rise and diffusion of cable TV through Christensen’s definition of

characteristics of disruptive and sustaining technologies. It becomes increasingly evident that

cable TV was a mostly sustaining innovation with some features of disruptive innovation in

relation to terrestrial TV due to the following reasons.

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Catered to same market with improved technology – Cable TV was an extension of terrestrial

TV since its beginnings. It started out as a way to enable better reception of TV signals and

catered to the same segment of the market i.e. households with television sets. It can be

argued that cable TV, while successful in creating a relatively new market for a segment of

the audience with pay-per-view, hastened the process of adoption. TV sales peaked at around

the same time as the inception of modern cable technology and the alternate medium with its

capability to reach more households than terrestrial TV, represented the next step in content

delivery systems without radically disrupting the fundamental means of broadcasting

programs and content.

Building incrementally on existing technology – While the fundamental means of signal

dissemination was different with cable network replacing broadcast towers, it did not

represent significant disruption in the means of service delivery. Households and families

still viewed cable TV in the same way they viewed terrestrial TV, albeit paying for improved

service. Cable TV was a means of building upon the initial hiccups of content transmission

rather than a brand new way of changing how people use technology. While people did move

to cable TV, they also had the option of viewing terrestrial TV as the content was free. This

provides further basis to the argument that cable is a sustaining technology.

Non-displacement of existing players – Existing major networks such as CBS were not run

out of business with the introduction of cable TV. Rather they evolved out of necessity and in

later stages, governmental regulations to broadcast signals over cable as well. While there

was an explosion of channels and content with the introduction of cable, this was mostly due

19

to the better capability of content delivery as compared to traditional broadcast. Besides, with

means of broadcasting heavily regulated by the government, it can be argued that even

disruptive technologies eventually fall under the ambit of sustaining technologies due to the

high regulatory intervention and nature of the business

Arguments for disruption

Different pricing and packaging and new business models – While Terrestrial TV was free,

cable TV gave subscribers the freedom to choose customizable content packages of their

choice. This came with the caveat that various pricing models evolved for these methods of

delivery. The pay-per-view model could be argued as being potentially disruptive. The

advent of cable TV revolutionized the TV content and broadcast value chain, representing

significant opportunities to realize revenue for players in the business.

Market dynamics: Network effects of cable TV

The advent of cable TV had a major effect of a number of dependent service providers as

well as equipment manufacturers. The major network effects on key stakeholders were as

described below.

Content producers – Content producers were incentivized to produce more content that

catered to a wide variety of subscribers. This was mostly done in the expectation that people

would consume more content increasingly due to having access to programs of choice at the

convenience of home. Initial reactions to cable and airing of movies was that it would

hamper ticket sales at traditional theaters, but this perception changed over time. It can be

argued that cable TV would not be as popular without content to enhance its adoption.

20

Content broadcasters – Cable’s ability to broadcast multiple channels to subscribers gave

rise to a number of local channels that showcased increasing amount of content on TV. The

higher number of channels of various genres also served to attract more subscribers to cable

TV’s fold. Content broadcaster’s requirement to broadcast further programming increased

the amount and type of content produced for TV.

Equipment manufacturers – Increased adoption of cable TV required that a vast network of

cables be laid. This in turn gave a huge thrust to the cable laying and maintenance industry.

TV hardware manufacturers also had to adopt to the increasing popularity of cable by making

provisions for reception of cable lines.

Advertisers – While cable was initially viewed as an ad free service, it started showing ads in

later years as well. The ability to reach a large audience by showcasing ads on popular

programs piqued the interest of corporations wanting to advertise their products on TV. This

also spawned a huge media and TV advertising industry in itself, giving rise to the digital

media and advertising industry that we are familiar with today.

Market dynamics: Competitors for cable TV

Cable TV has not been without its share of competitors over the years. Some of them are

listed below.

Terrestrial TV – While terrestrial TV itself was being slowly replaced by cable TV, the free

service offered through terrestrial TV was a big draw for consumers who had access to

21

traditional broadcast content. Many people were satisfied with the service quality and

competition has become more relevant due to the rise of digital terrestrial TV in recent years.

Satellite TV – Satellite TV or direct to home (DTH) services are steadily becoming the

medium of choice for content delivery to television. By receiving signals beamed through

communication satellites, DTH removes the dependency on cable networks and delivers HD

content. DTH services are especially becoming popular in growing economies such as India.

Internet streaming – By being able to stream content of your choice on demand from any

device through services such as Netflix, internet streaming’s versatility and portability of

video watching experience is leading to a generation who have grown without the

dependency on cable to receive information. It will not be an understatement if internet

streaming services are viewed as the most potent long term threat facing the cable TV

industry.

Next generation: Rise of Internet streaming services and IPTV over multiple devices

Internet streaming has undeniably changed the way we consume video content and

information in our day to day lives. Coupled with social media, it has changed the

entertainment landscape with such companies as YouTube, Netflix and Hulu operating with a

different business model and catering to a variety of devices and not just limiting themselves

to TV. All these sites, along with the rise of Internet Protocol TV (IPTV) and players such as

Apple TV are changing the traditional TV viewing landscape with on-demand program

delivery.

22

One of the biggest drawbacks of cable TV was that programs were broadcast at a certain time

during the day and you had to be present in front of a cable enabled set to watch the same.

Streaming services and IPTV remove this obstacle by providing content that can be searched

and accessed on multiple devices if you subscribe to the service. With the advent of mobile

devices such as laptops, cell phones and tablets, the concept of portable, multi-device access

video entertainment is all the more relevant.

Next generation: How internet streaming works

Ironically, this radical new way of consuming entertainment was fuelled by the growth of

internet broadband, spearheaded by cable companies who wanted to satisfy the increasing

demand for internet services by the consumers. As mentioned earlier, cable allowed multiple

services to be bundled together and cable companies seized this opportunity to offer

broadband services in addition to cable services.

IPTV and internet streaming works by directly broadcasting content from the source i.e. the

cable companies as well as streaming services servers. These signals are transmitted through

the internet connection onto your computer or IPTV set top boxes that decode encrypted

signals and play them on the hardware. IPTV comes in 3 major flavors which include Video

on demand (VOD), time shifted IPTV and live IPTV. Streaming video companies such as

Netflix and YouTube are examples of VOD, where you subscribe to service to access the

video content. Time shifted IPTV services however allow you to watch content broadcast on

TV at a time of your convenience. Examples of time shift IPTV is BBC using its dedicated

23

video player BBC iPlayer to broadcast content. Live IPTV broadcasts live events over

internet channels to the subscriber.

Next generation: Adoption of IPTV

2008 2010 2012 2014 2016 2018 2020 20220

50

100

150

200

250

Worldwide IPTV adoption forecast

Mill

ions

of s

ubsc

riber

s

Source from Statista

Data shows that the number of IPTV subscribers worldwide has risen to roughly about 90

million subscribers [Statista 2015] with about 13 million subscribers [Statista 2015] in the

US in 2013. This can be attributed to existing broadband subscribers using internet services

as well. A new generation of ‘cord-cutter’ or people who are unsubscribing from cable to opt

for streaming services and IPTV services are leading the way in adoption of this technology.

IPTV can be truly classified as a disruptive technology because of the fundamental difference

in the way content is broadcasted and is being consumed. With increased broadband

penetration and higher number of people having access to streaming services, IPTV is

increasingly gaining relevance and becoming the preferred medium of choice for watching

24

TV. While terrestrial and cable TV were viewed as bring family units together, IPTV, with

its ability to stream to multiple devices has created a far more personal form of video

watching, breaking it down to individual choice.

Cable operators are adapting quickly to these services by providing internet services as well

as VOD and movie streaming services to capitalize on this growing market segment. It can

be argued that IPTV required larger bandwidth capabilities to work effectively. But with

upgrades of bandwidth capacity taking place similar to laying of cable networks for cable,

the day is not far off when IPTV reached the masses.

25

Appendix

Predicted adoption of IPTV using Bass model

2014 2016 2018 2020 2022 2024 2026 -

20,000,000.00

40,000,000.00

60,000,000.00

80,000,000.00

100,000,000.00

120,000,000.00

IPTV US AdoptionCu

mul

ative

Sub

scrib

ers/

yea

r

m Total number of adopters 150,000,000N(t) Number of adopters in 2014 13,000,000 Cable TV 0.1 0.06 0.3N(t-1) Number of adopters prior to 2013 11,500,000 Home PC 0.121 0.281 0.1S(t) Number of added adopters 1,500,000 Color TV 0.059 0.146 0.2m-N(t-1) Size of potential market remaining 138,500,000 Cell Phones 0.008 0.421 0.1N(t-1)/ m Percentage of adoption 8% LAN networks 0.0006 0.686 0.3

Likelihood of purchase by new adopter 8% Overall P and Q 0.05488 0.3232S(t) Potential new purchasers 11,032,725.33

Adopters Remaining Market Cumulative adoption2015 11,032,725.33 127,467,274.67 24,032,725.33 2016 10,153,873.14 117,313,401.52 34,186,598.48 2017 9,345,029.15 107,968,372.38 43,531,627.62 2018 8,600,616.59 99,367,755.79 52,132,244.21 2019 7,915,502.94 91,452,252.85 60,047,747.15 2020 7,284,964.53 84,167,288.33 67,332,711.67 2021 6,704,653.97 77,462,634.36 74,037,365.64 2022 6,170,570.17 71,292,064.19 80,207,935.81 2023 5,679,030.78 65,613,033.42 85,886,966.58 2024 5,226,646.76 60,386,386.66 91,113,613.34 2025 4,810,299.05 55,576,087.61 95,923,912.39

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Presentation by Dr.Arvind Rangaswamy, Anchel professor of marketing, Penn state university

Cable: it's not just for TV, Dutta-Roy, A. Spectrum, IEEE Volume: 36 , DOI: 10.1109/6.763204 Publication Year: 1999 , Page(s): 53 - 59 

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Dawan, Geethika. "Iptv." Slideshare. Web. 5 Apr. 2015. <http://www.slideshare.net/nishumittal1410/iptv-14747608>.

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