detecon opinion paper p2p tv: a looming media revolution?

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P2P-TV – a looming

media revolution?

2008 / 09



P2P-TV – a looming media revolution?

Opinion Paper 2 Detecon International GmbH

Table of Contents

1 Executive Summary ............................................................................................ 3 2 P2P turns the distribution paradigm upside down............................................... 4

2.1 Video traffic dominates – on-demand replaces linear programs................. 5 2.2 Hybrid P2P networks are the solutions of choice........................................ 6 2.3 P2P-TV has reached commercial status ..................................................... 6

3 Liberating captured value in the broadcasting sector.......................................... 9 3.1 Trend comparison of network costs ............................................................ 9 3.2 Breaking-up the traditional TV business model......................................... 10

4 Telco opportunity: efficiency gains and new revenues...................................... 11 4.1 Comparative cost advantages vary by type of content.............................. 11 4.2 No one-size-fits-all recipes........................................................................ 12 4.3 P2P is here to stay .................................................................................... 14

5 Recommended strategy for telcos: embrace P2P-TV....................................... 15 6 Conclusion & Recommendations ...................................................................... 17 7 The Authors....................................................................................................... 18 8 The Company.................................................................................................... 19





1 Executive Summary

Internet video traffic is exploding. It is expected to amount to almost 10 billion terabits per

month in 2010, starting from less than 1 billion in 2006. The impact on traditional networksand network engineering will be highly significant as network operators have to master the

enormous traffic load while keeping their costs under control and finding alternative revenue

opportunities to offset these costs. The problem is aggravated by the fact that an increasing

share of video and TV content will be consumed on demand. Traditional broadcast and even

IP-based multicast distribution, only recently deployed by telco operators to deliver IPTV,

don’t scale well for non-linear content.

New technology concepts will be required to tackle the issue of increasing traffic load on IP

networks of the future. Decentralized peer-to-peer (P2P) TV networks that scale with

increasing number of users represent a promising solution to the problem. Not surprisingly, a

considerable number of players have adopted P2P-technology to stream TV and videocontent in a cost effective way. Among the best known P2P-TV services is Joost, a start-up

company backed by the founders of the ground-breaking voice-over-IP service Skype.

These providers have been extremely bullish in pushing the benefits of P2P-TV technology,

claiming massive cost savings and revolutionary experiences for users. However, the real

underlying benefits for traditional network operators and traditional media providers have

remained largely unproven and not clearly understood. This paper attempts to highlight the

possible areas of opportunity for operators, both in driving new revenues and in managing

network costs.

P2P-TV will potentially disrupt existing market dynamics, as it offers a viable alternative to

traditional broadcast business models. From the perspective of the P2P-TV provider, lower

distribution and network deployment costs translate into less need for returns, usuallygenerated in the form of ad revenues. As a consequence, long-tail content that would

otherwise not have passed the threshold to generate a critical mass of viewers demanded by

advertisers can now be distributed. In other words: P2P-TV has the potential to grow a new

market for content that was previously undeveloped due to profitability issues.

Telco operators need to understand how P2P-TV affects their business. As and when the

quality of P2P-TV improves the risks that IPTV will be substituted (if only partially) increases.

On the other hand, telcos can use P2P-technology to differentiate their IPTV offering (e.g. by

extending the content portfolio) and expand its reach (e.g. by making a best-effort IPTV

service available over a P2P-client based PC solution). The launch of a separately branded

P2P-TV service could also be an option. But the biggest opportunity for telcos is to use P2Pnetworks as a means to improve the cost effectiveness of content distribution. Given the

tremendous impacts that are looming for operators, any technology which provides a longer

term solution for their network evolution must be very critically, and imminently, considered.





2 P2P turns the distribution paradigm upside down

P2P-TV is the name for peer-to-peer software applications designed to transmit and

redistribute video streams of live or archived content from one user to others over theInternet. Such networks rely primarily on the computing power and bandwidth of the

participants in the network rather than concentrating it in a relatively low number of

centralized servers. That way, the broadcasting paradigm is being reversed into a user-

centric scenario that takes advantage of resources available at the edges of the Internet (e.g.

storage, processing power).

P2P-TV could be considered as an equivalent to television because it represents an

alternative means to distribute traditional, linear broadcast content. However, P2P-TV can

also be considered as much more. Because it is based on the internet protocol and has

evolved from the PC environment, it is by character much more similar to an internet

application than to a conventional television program watched on the TV.

Definition of Terms

PCTV-setPCPrimary renderingdevice

Mainly user generatedTypically professionally

generated contentProfessionally and user

generated contentType of contentsource

Social networking sites, TVbroadcasters, start-ups

Free offerings, pay per view,payable premium services

Mainly non linear

Streaming and download

Client server architecture(centralized)

Web-TVIPTVP2P-TV

Network operators

Subscription (e.g. bundledwith DSL access and VoIP)

Linear

Streaming

Multicast; client serverarchitecture (centralized)

StreamingType of contentdelivery

Niche providers, internetfirms

Providers(exemplary)

Free offerings (e.g. adfinanced)

Typical businessmodel

Linear and non-linearUser experience

Distributed, decentralizednetwork / server = client

Type of deliverynetwork

PCTV-setPCPrimary renderingdevice

Mainly user generatedTypically professionally

generated contentProfessionally and user

generated contentType of contentsource

Social networking sites, TVbroadcasters, start-ups

Free offerings, pay per view,payable premium services

Mainly non linear

Streaming and download

Client server architecture(centralized)

Web-TVIPTVP2P-TV

Network operators

Subscription (e.g. bundledwith DSL access and VoIP)

Linear

Streaming

Multicast; client serverarchitecture (centralized)

StreamingType of contentdelivery

Niche providers, internetfirms

Providers(exemplary)

Free offerings (e.g. adfinanced)

Typical businessmodel

Linear and non-linearUser experience

Distributed, decentralizednetwork / server = client

Type of deliverynetwork

Figure 1: Characterization of different types of Internet-based TV





2.1 Video traffic dominates – on-demand replaces linear programs

P2P-technology has originally become known to a broader public through (mostly) illegal

music file sharing applications (e.g. BitTorrent). However, for the distribution of streaming

video content (e.g. content that is not downloaded but transmitted for viewing only, liketraditional TV broadcast), the technology has different and even further reaching

implications.

First of all, the sheer dominance of video content over the Internet underlines its relevance.

Therefore, solutions are required that allow delivery of content in an efficient and effective

way. Here P2P-TV will play a major role. Secondly, the linearity of typical general interest

content broadcast to a large audience is gradually being replaced by on-demand content that

addresses niche segments besides the mass market. By nature, content not relevant for the

mass market does not scale when delivered via a broadcast medium. The characteristics of

P2P-TV much better fit these arising distribution requirements.

Traffic & demand patterns

Source: Information Gatekeepers, Internet Growth 2006

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

11.000

2005 2006 2007 2008 2009 2010

Million terabits / month

Video / TV traffic

Internet, data &voice traffic

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 20122007 2008 2009 2010

Linear formats

On demandformats

Source: Detecon Analysis

Figure 2: Key trends: dominance of video traffic and on-demand formats

A large part of digital TV and video content delivered to end users will be provided by third

parties that make use of the telco network infrastructure. This is possible, as IP technology

(IP = Internet Protocol) leads to an abstraction of services from the network infrastructure.

Because telco operators bear the brunt of the network costs without being able to participate

in revenues generated by those third parties, telcos have named this phenomenon ‘free rider

problem’.

P2P-TV is closely linked to the free rider problem, as the service is typically provided by

companies that are not telco operators and the volume of traffic is huge, i.e. the potential

impact on network costs is high. However, it is not the intention of this paper to discuss the

free-rider problem in more detail. P2P-TV is just one of possible other services that generate

third party traffic – although considerable – on telco networks. We are more concerned about

the specific characteristics of P2P-TV and its relevance as an alternative content delivery

paradigm. We will primarily take the view of a telco operator who is positioned or planning toposition as a new media player engaged in the delivery of digital content either based on a

B2C or B2B business model.





2.2 Hybrid P2P networks are the solutions of choice

P2P-TV can be based on different technical solutions. Depending on the degree ofdecentralization, pure and hybrid P2P networks can be discerned.

In a pure P2P network, peers act as equals, merging the roles of clients and server, there is

no central server managing the network and there are virtually no capacity limits. Every user

is an up-loader for another constantly increasing bandwidth. Compared to server based

technologies pure P2P-TV is very cost efficient due to the distribution of processing load, but

offers no control for DRM, billing and reporting. Because accessing these decentralized

resources means operating in an environment of unstable connectivity and unpredictable IP

addresses, peer-to-peer nodes operate outside the DNS and have significant or total

autonomy from central servers.

The decentralized nature of P2P immediately raises concerns about the reliability and qualityof the services rendered. These concerns are valid. Therefore, researchers have developed

hybrid P2P solutions that rely on a certain degree of centralized management.

In a hybrid P2P solution, a central server keeps information on peers and responds to

requests for that information. This central management facility manages content distribution,

load balancing, redirection of users, reporting and QoS (QoS = quality of service). Peers are

responsible for hosting available resources, letting the central server know what resources

they want to share, and for making shareable resources available to peers. The central

components comprise some of the efficiency gains of pure P2P solutions but have the ability

to significantly increase the level of reliability, stability, security and QoS needed to provide

services at commercial grade.

2.3 P2P-TV has reached commercial status

Lab experimentation is a thing of the past! P2P-technology that streams video content over

the internet has matured considerably. Additionally, the spread of high speed broadband

connections in conjunction with flat price offerings paved the way for an increasing number

of commercial P2P-TV offerings to emerge in the market over the last one or two years.

Although probably not well known outside Asia, Chinese providers are leading the pack in

terms of number of users. PPLive for example, is estimated to have attracted a global

installed base of 75 million and approximately 20 million monthly active users (source:Alexa.com).





Mostly Chinese TV-Channels, but also internat.

channels

Channel description formost channels

./. ./.

Mainly Chinese, but alsoUS and European

TV-Channels

Can be embedded into blogpages, create own

channels, few HDTV

Donations; adds on theplayer while buffering

./.

250+, Coop. with e.g.Viacom, CBS

DVD-Player controls,networking featurespers. chan. guide

Free Player; financedthrough advertising clips

2.3 mn.(10.01.2007)

Realtime; 22 channels(Germany);

Live-Stream TV

Won Red Herring 100Award (ebay, skype,google); Ease of Use

Free Player; financedthrough advertising clips

1 mn.(10.05.2007)

Exclusive content,movie/independent movie

makers, e.g. Spike LeePersonalized channel guide

Free Player; financedthrough personalized

advertising clips

4000 beta testers(14.05.2007)

Mostly Chinese TV-Channels; CCTV-5

(Bundesliga)Channel list in Chinese ./.

75 mn. global installed base20 mn. monthly

active users

FeaturesProgram Business Model # of users

Figure 3: Main P2P-TV players in terms of reach (Source: Detecon Analysis, Alexa.com)

Also worth mentioning is Roxbeam, another Chinese P2P-TV solution. It does not offer an

own end user service but enables third party services on a white label basis. Currently, it

partners with Softbank and Yahoo! Japan.

Similar to Roxbeam in China, Octoshape in Europe has developed a P2P-TV solution that

has until now only been offered to third parties. For instance, Deutsche Welle, a German

broadcaster, is making use of the Octoshape technology to distribute its TV program,Deutsche Welle-TV, over the internet, primarily to make it accessible to an international

audience abroad that cannot access the program through satellite or cable TV.

In Europe and North America, Joost is probably the most well known P2P-TV end user

service. It enjoyed huge media coverage not least due to the fact that the famous founders of

Voice-over-IP service Skype are behind this ambitious initiative. Its appealing and intuitive

user interfaces have been praised and are likely to have helped Joost to become the most

popular P2P-TV service outside Asia so far. The service offers buddy lists, viewing

recommendations, play lists and many more interactively configurable features attached to

its “program”. This program is a pure on demand service, requesting the viewer – now

probably better called user – to search for the particular type of content he or she is

interested in.

However, Joost has so far not been able to meet the high market expectations. It recently

announced that it would not pursue a global footprint, as originally planned, but would focus

on the US market for the time being. Although there are no official statements from Joost

itself, it is commonly assumed that the failure to add sufficient general interest content to its

portfolio has led to the slower than expected uptake of the service and ultimately the

decision by Joost to give up some of its plans.





Other P2P-TV services that have received attention include Zattoo, a start-up company

based in Switzerland which has successfully rolled out its service across several European

countries. Notably, while Joost is a dedicated on-demand service, Zattoo pursues an

approach which focuses on the redistribution of linear TV programming. It includes public

broadcast channels like the German ZDF and ARD,and it also recently added BBC One and

ITV1 to its line-up. While its legality remains unclear, Zattoo has already launched in

Switzerland, Germany, France, Belgium, Spain, Denmark and Norway. A launch in the

Netherlands is planned for later in the year. Zattoo offers a free service, although pre-roll

advertisements have already been introduced in some countries, activated when the viewer

changes channels.





3 Liberating captured value in the broadcasting sector

The value proposition of P2P-TV is derived from its theoretical ability to distribute content

more cost effectively than other transmission types. The degree of potential network costsavings mainly depends on the number of users viewing a particular type of content.

3.1 Trend comparison of network costs

A trend comparison of overall network cost elements with increasing subscribers shows the

potential advantages of P2P TV.

Broadcast – satellite / antenna: large initial cost to reach the first user, including

license costs and radio transmission network; incremental costs are essentially

zero for each additional user.

IPTV – IP multicast: higher initial core network outlay on distributed network

servers; multicast delivery reduces incremental bandwidth requirements

compared to unicast.

Web-TV – unicast: unicast delivery offers low initial investment in central server

and low initial connectivity

P2P-TV – P2P delivery offers lower initial central server and bandwidth costs;

bandwidth and storage is mostly covered by content receivers and

supplemented by central provision. For telcos, the free rider problem

mentioned before has still to be solved.

Satellite /antenna(broadcast)

P2P TV

Web-TV(unicast)

IPTV ( IP-multicast)

Number ofviewers

Cost for VideoService Provider

Light Load Medium Load Heavy Load

Comparison of network costs

ILLUSTRATIVE

Figure 4: Trend comparison of network cost by transmission type (Source: Detecon Analysis)

The trend comparison is a high-level overview based on implementation of a new network

architecture specifically designed to handle repeated content scenarios such as live massive

event broadcast. A more detailed analysis based on a real operator’s perspective of P2P-TV

implementation using an existing network infrastructure is described in a later section.





P2P-TV and The Long Tail

Reach

Generalinterest

Thematic Regional /local / special interest Friends & family

Personal

One-to-many One-to-one

Type ofcontent

Many-to-many

Peer-to-peer

Unicast

Broadcast

IP-Multicast

3.2 Breaking-up the traditional TV business model

P2P-TV has the potential to derail the business logic of traditional TV that has driven the

industry for decades. It was based on the principle idea, that a certain amount of advertising

revenues is needed to refinance the distribution costs. Typically, niche or special interestcontent, that did not pass a certain audience threshold, was not broadcast on traditional TV,

because it did not attract sufficient viewers to lure advertisers, i.e. to generate ad revenues.

The audience threshold is a consequence of the cost structure of traditional TV. Scarce

resource of transmission spectrum and the comparably high costs to set-up the broadcast

network lead to a competition between content that is best suited to generate a return on

investment. The rule of the thumb is that only such content that generates enough reach, i.e.

general interest content, had a chance eventually to be broadcast.

With P2P-TV, niche and special interest content doesn’t have to pass a critical threshold to

be distributed in a commercially viable way. That is because initial costs to set up a P2P-TV

distribution network are lower than in traditional TV; moreover, P2P-TV is not burdened byscarce spectrum resources. Consequently, as long as no significant content acquisition costs

incur (which is typically the case with niche and special interest content) and the overall

costs remain low, the whole business model is less dependent on ad revenues. Therefore it

is not surprising, that P2P-TV providers such as Joost have started to fill their library with

niche content that is inexpensive to acquire.

Consequently, P2P-TV offers a richer user experience than traditional TV by providing users

with access to long tail content; theoretically, it allows unlimited access to all conceivable

sorts of content, thus establishing the potential to use content as a differentiator. The walled

garden programming of traditional broadcasters is an endangered species.

Figure 5: Type of content distribution technologies along the “Long Tail” (Source: Detecon Analysis)

In the long run, if P2P-TV providers want to attract a mass market audience, they will need

premium content which can be very costly, increasing overall expenses. However, not

having to recover high initial costs (as described above), will allow such providers to grow

their business gradually, e.g. by generating revenues from advertisement targeted to theirspecial interest groups and in parallel adding premium content step-by-step to their library to

reach larger audiences.





4 Telco opportunity: efficiency gains and new revenues

P2P-TV will have an effect on the entire TV broadcasting and video distribution industry.

Telcos in particular have only recently embarked into the domain of television, utilizing theirhigh speed broadband networks to deliver rich media content. For them the main question is,

if and how their IPTV offerings will be affected by P2P-TV (i.e. is P2P-TV substitutive or

complementary to IPTV), how P2P-technology can improve the cost of TV and video

distribution and to which extent P2P-TV may offer an additional revenue source. We will

elaborate on these questions in the following chapters.

4.1 Comparative cost advantages vary by type of content

LiveC

Linear

C

LinearB

Negative for P2P

Positive for P2P

VoD D

VoD B

VoD A

UGC

TVoD B

TVoD C

P2P vs Multicast is comparative upstream, downstream and storage costs.

Impact is the size of the effect based on bandwidth and storage results.

P 2 P v s .

M u l t i c a s t

Bandwidth /StorageImpact

LinearA

LiveB

LiveA

Bandwidth and Storage Comparison

TV on Demand

Video on Demand

User Gen. Content

Live Event

Linear TV

Type of content Example

Figure 6: Comparative costs for P2P (Source: Detecon Analysis)

Whilst P2P-TV service and platform providers are quick to adopt the potentially massive cost

savings of P2P distribution technologies, many leading technology experts, particularly within

the telecom sector, argue that P2P-TV simply shifts the network costs from the P2P provider

to the access network provider. This argument implies that whilst the technology is attractivefor the content provider, P2P will have no benefits, and in fact negative impacts, on the

network operators’ infrastructure costs.





The network impact of content distribution using

P2P, multicast and unicast techniques on a

“real” operator network architecture was

simulated across a number of different content

use cases (streaming vs download, user

generated vs. professional broadcast, see

“sidebar”). The results highlighted that in a

network architecture optimized for P2P

distribution, in some content cases, P2P does

provide a lower cost alternative for the operator

compared to multicast and/or unicast. In these

cases, the combined bandwidth and storage

costs required for P2P are significantly reduced

when compared with current content distribution

methodologies. Particularly relevant content

classes where P2P could show substantial costbenefits, as shown in Figure 6, are “massive

event” live streamed content, and user-

generated content.

Whilst the results of the simulation are network

architecture and content case specific, it is

certainly clear that P2P-TV is not just a viable

but potentially very critical solution for enabling

operators to manage network expansion costs

into the future.

Of course these benefits need to be put into perspective in the sense that the above

mentioned effects do not take into consideration the overall effect of P2P-TV, which includes

the traffic of 3rd

party providers. However, the free rider problem can be treated somewhat

abstracted from the question, which technology is best suited to distribute content in the

most cost effective way. For further reading on the subject matter of 3rd

party provides we

recommend our opinion paper “Barbarians on your network – how over-the-top players

googlize your business”.

4.2 No one-size-fits-all recipes

The right approach towards P2P-TV depends on the operator’s market positioning (e.g.

incumbent or alternative provider), the competitive and regulatory environment (e.g. level ofmarket liberalization) and technical maturity (e.g. broadband penetration). From a telco

perspective, the phenomenon of P2P-TV will be particularly relevant to those operators that

provide IPTV services and related offerings (e.g. VoD). Two main options can be identified

that have the potential to provide additional value to a telco operator’s IPTV offering:

Content and Use Cases

The changes in media consumption and

creation have lead to a number of newcategories of content:

TV on Demand (TVoD): refers todownloaded programming, typically TVseries

Video on Demand (VoD): refers todownloaded programming, typicallymovies and special interest programming

User Generated Content (UGC): refersto downloaded content generated byusers of a service, typically of shortduration, created by professionals or

amateursLive Event: refers to live streamed videoof events such as concerts or sportingevents

Linear TV: refers to live streamed videoas typically viewed as TV programming

Categories A/B/C/D: the traditional long-tail can be segmented into four areasbased on the total number of usersinterested in a particular type of content,from category A (mass-market) tocategory D (niche market)





(a) Network agnostic content delivery and differentiated content offerings

By character, P2P-TV is an enabling technology rather than an end user application.

The user is not interested by which technology content is delivered as long as it

meets his expectations. In that sense, operators can combine their multicast networkwith P2P technology in the background to ensure that the most cost effective type of

delivery mode is applied for the respective type of content.

In the future, intelligent networks would be able to detect the type of content and

route the pertaining traffic over the fitting network to ensure maximum cost

effectiveness. The cost savings thus realized could be used to extend the content

portfolio considerably, e.g. by adding Web content and niche programs that target

special interest groups with a limited number of users per channel. Especially when

operators succeed in providing programming for segmented target groups the

extended content portfolio can be a key differentiating factor and a means to

subscriber uptake.

(b) Independence from place and device

Using P2P technology, an operator can make its IPTV offering accessible over the

Internet. Such an approach would effectively extend the geographical footprint of an

IPTV provider and would give users the possibility to access the service when they

are not at home using a portable internet device or PC with internet connection.

It must be stated though, that such a strategy raises a number of questions.

- As there are no QoS guarantees with P2P-TV, it could not be positioned as

a premium service or even Pay-TV, but rather a low price product with

relatively poorer quality. However, this would require a marketing strategy

that manages to avoid brand and image conflicts between the two different

product propositions.

- Moreover, the scenario to make the IPTV offering available over the Internet

implies that the service can also be used by customers who have

subscribed to a competitors’ broadband connection. This might undermine

the strategy of the original service provider to bundle IPTV with the internet

connection with the primary objective to strengthen its access business.

Extending the geographical footprint can also mean to enter international markets

outside the domestic turf. Operators could either try to establish a retail offering for

end customers, like Zattoo does in different European countries. Or they can start to

wholesale their domestic solution abroad, enabling content providers or any other

player who wants to distribute content in a cost effective way.

One of those factors is the risk of cannibalizing the own IPTV offering when considering

launching an independent (differently branded) P2P-TV service.

While at present P2P-TV and IPTV address different market segments the positioning gap of

IPTV and P2P-TV will narrow in the future. Over time, improving offering quality in terms of

both, attractiveness of content and quality of service, will allow P2P-TV providers to charge

for selected premium services. At the same time, prices for IPTV services are expected todecline as the market matures.





Meanwhile, technical progress will also lead to further quality improvements on the side of

IPTV. However, quality of service alone (e.g. HD content which will not be available for P2P-

TV for a long time) can only partly suffice to differentiate IPTV from P2P-TV. Free or low

priced P2P-TV offerings with satisfactory quality levels are likely to directly compete with at

least some content offerings of IPTV because it then provides comparable value for lessmoney. The same logic applies when third party P2P-TV providers enter the market of an

operator which offers IPTV, leading to a certain substitution risk.

4.3 P2P is here to stay

While the commercial P2P-TV market is evolving, researchers continue to improve the

technology. The most significant funding initiative so far comes from the European Union. In

early 2008, it has invested $20.5 million in a research project that is exploring the use of

peer-to-peer technology for Internet television delivery across Europe. Total funding for the

project is $28 million, with the remaining $7.5 million coming from some of the 21 partners onthe project. Aside from the broadcasters, other partners in P2P-Next include Lancaster

University, Markenfilm, Pioneer Digital Design Centre Limited and VTT Technical Research

Centre of Finland. The P2P-Next project is using an open-source BitTorrent client called

Tribler, whose partners, including the BBC and European Broadcasting Union, plan to

stream live TV. The cooperation with both the British and German public broadcasters

indicates that P2P is here to stay.





5 Recommended strategy for telcos: embrace P2P-TV

What is then the strategic option space to telcos with regard to P2P TV? Three main options

are available:

Fight it (like the battle of the music industry against the file sharing P2P

networks)

Ignore it (like with VoIP for some time by the majority of telcos)

Embrace and adapt it (build you own retail (and optionally wholesale) P2P-TV

service offering)

The first two options listed above are only viable if the P2P-TV market would decrease or

stagnate. But this is a highly unlikely development due to further maturity development of this

technology and that the other value chain players (content providers, broadcasters TVoWeb

providers) will use this technology increasingly.

Thus, the strategy where a telco embraces P2P-TV is likely to be superior to “ignoring” or

“fighting”. The “embrace” option would translate for telcos with their own multicast premium

IPTV offering into the task to design and position a more inexpensive P2P-TV offering as a

complimentary offering to its multicast IPTV. Offering an inexpensive P2P-TV service allows

for deterring potentially disruptive entrants. Telcos can use P2P-TV to acquire low-end users

and the emerging Web TV/Video customer segments and can then try to gradually migrate a

larger faction of them to the high-end IPTV offering.

What are potential principal P2P-TV business models a telco could head for? There are two

principal options:

Own P2P retail offering:

PC client – possibly marketed on the basis of a sub-brand to avoid conflict with the

main premium brand

Complement to existing IPTV offering

Wholesale offerings:

P2P-TV enabling services (DRM, central bandwidth ingest server, AAA, billing etc.)

for other carriers, broadcaster, content providers and web communities

Fully operational P2P-TV white label service (Live TV re-distribution, On-demand

Internet-TV, Web Communities etc.) for content providers or larger brands (like sportequipment or car manufacturers) pursuing branded TV channels as a marketing

channel.





Clients, Super-Nodes & Service Platform with Repository of P2P Enabling Services

Telco P2Pclients(retail &

wholsale)

Telco P2PServicePlatform

CommunityBuilding Tools

CommunicationTools

Authentification &Authorization

IdentityManagement

DRM ServiceModule

Payment ServiceModule

P2P Stores

Charging Policy &Accounting

Module

Billing

Live BroadcastService Module

Revenue ShareClearing Module

AdvertisementBrokering Service

Security Functions

BandwidthInjection on-

demand

VPN Module

Program GuideModule

….

CommunityBuilding Tools

CommunicationTools

Authentification &Authorization

IdentityManagement

DRM ServiceModule

Payment ServiceModule

P2P Stores

Charging Policy &Accounting

Module

Billing

Live BroadcastService Module

Revenue ShareClearing Module

AdvertisementBrokering Service

Security Functions

BandwidthInjection on-

demand

VPN Module

Program GuideModule

….

Telco-

operatedSuper-nodes

Figure. 7: Clients, Super-Nodes & Service Platform with Repository of P2P Enabling Services

In order to realize the identified business potential it is mandatory that a so called hybrid

peer-to-peer structure is deployed where certain relevant components remain centralized

under the control of a Telco. Doing it that way the comparative cost advantages of P2P-TV

as a content distribution technology for live or archived TV/video content could be realized

without loosing control at the same time over important central functions which enable

business for a Telco.





6 Conclusion & Recommendations

P2P-TV has the potential to exert a heavy and lasting impact on an operator’s core business.

As the possible effects of P2P-TV are manifold and complex, we advise to thoroughlyanalyze pertaining threats and opportunities. There will be no generally applicable strategic

direction for all operators. The right path will depend on external market conditions, current

strategic positioning and direction as well as internal factors such as type and structure of

broadband network architecture.

The major opportunity may reside with the potential of P2P technology to deliver streaming

content in a more cost effective way. The relevance of this point is reflected by the steep

increase of video traffic and its portion of overall traffic which an operator has to deal with –

be it traffic generated by its own services or services of other providers.

Especially for those operators who pursue a bit pipe strategy (i.e. concentrate on the

transport of traffic) cost effective content delivery will be mission critical. Solving the logistical

and network problem of routing different types of content over the respective best suited

distribution network (i.e. unicast vs. P2P vs. multicast vs. broadcast) will directly translate

into competitive advantage.

Such operators should not shy away from a radical approach to a new network architecture

that incorporates the decentralized elements of hybrid P2P distribution. We recommend such

a move to be best prepared to handle the patterns of future video traffic, which will be

derived from an increasing share of on demand formats consumed by a growing number of

fragmented user groups. Existing network architectures, designed to deliver linear TV

programming over IP-multicast and VoD libraries over unicast networks, will fall short in the

quest to become a champion in cost effective content delivery.

For those operators, who pursue a service provider strategy (i.e. compete on the application

layer), P2P-TV may pose a disruptive threat against an existing IPTV offering. A risk analysis

taking into consideration key differentiating factors such as network QoS for both, IPTV and

P2P-TV, and the detailed analysis of the competitive environment can help to make more

concrete statements about the actual threat level.

However, when used as an enabling technology that unlocks captured values of the

traditional broadcasting business model, P2P-TV may also offer new business opportunities

to service providers. The P2P technology may either be integrated with the IPTV platform or

be deployed as a stand-alone solution for an individually branded retail service. In both

cases, the added value occurs because cost advantages realized through the distribution of

applicable types of content (e.g. user generated or live-TV / event content), change the

business model: less viewers are needed, i.e. less advertisement dollars or returns from

other sources (e.g. premium services) to break even. Consequently, operators should

analyze how they can use P2P-technology as a prerequisite to build an extended content

portfolio – e.g. by adding niche content for special interest groups that now becomes

commercially viable – and to thus differentiate itself from competitors.





7 The Authors

Falk Wöhler-Moorhoff is a Managing Consultant with Detecon International. Following

completion of his Degree in Business Studies he worked for a German company inSingapore for three years and then for a start-up company for two years before joining

Detecon. He has a wide range of project experience in the telecommunications industry both

in Germany and abroad. In his work he concentrates on the areas of business innovation

and telco/media convergence.

[email protected]

Yasmin Narielvala is a Senior Consultant with Detecon, Inc. in San Francisco, California.

With over 10 years of telecommunication industry experience she has considerable

international expertise across a range of organizations and technologies. At Detecon, Inc.Yasmin is responsible for leading strategic technology assessments for telecoms clients,

scouting and assessing emerging technologies, services and products, and assisting in

development of technology, business and product strategies.

[email protected]

Johannes Ewers is head of the group “Telco Application Strategies” of Detecon. He has

years of experience as system architect and manager of international projects. In his

consulting work he combines strategic analysis, business modelling and technological know

how to design business support systems. The focus of his work is on developing solutions

for telecommunication companies including billing applications, internet services and

business intelligence systems.

Johannes [email protected]




8 The Company

Detecon International GmbH

Detecon International is a leading worldwide company for integrated management and

technology consulting founded in 2002 from the merger of consulting firms DETECON and

Diebold. Based on its comprehensive expertise in information and communication

technology (ICT), Detecon provides consulting services to customers from all key industries.

The company's focus is on the development of new business models, optimization of

existing strategies and increase of corporate efficiency through strategy, organization and

process improvements. This combined with Detecon's exceptional technological expertise

enables us to provide consulting services along our customers' entire value-added chain..

The industry know-how of our consultants and the knowledge we have gained from

successful management and ICT projects in over 100 countries forms the foundation of our

services. Detecon is a subsidiary of T-Systems, the business customers brand of Deutsche

Telekom.

Integrated Management and Technology Competence

We possess an excellent capability to translate our technological expertise and

comprehensive industry and procedural knowledge into concrete strategies and solutions.

From analysis to design and implementation, we use integrated, systematic and customer-

oriented consulting approaches. These entail, among other things, the evaluation of core

competencies, modular design of services, value-oriented client management and the

development of efficient structures in order to be able to distinguish oneself on the market

with innovative products. All of this makes companies in the global era more flexible and

faster – at lower costs.

Detecon offers both horizontal services that are oriented towards all industries and can entail

architecture, marketing or purchasing strategies, for example, as well as vertical consulting

services that presuppose extensive industry knowledge. Detecon's particular strength in the

ICT industry is documented by numerous domestic and international projects for

telecommunications providers, mobile operators and regulatory authorities that focused on

the development of networks and markets, evaluation of technologies and standards or

support during the merger and acquisition process.

Detecon International GmbH

Oberkasselerstr. 2

53227 BonnTelefon: +49 228 700 0

E-Mail: [email protected]

Internet: www.detecon.com

detecon opinion paper p2p tv: a looming media revolution?

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