Hybrids

page thirty www.cable-satellite.com Cable & Satellite International jan-feb 2007

Telco TV vs hybrid services

In early December 2006, analyst firm

In-Stat released a report that

investigated the way in which advances

in technology had been driving the telco

TV market. Specifically, In-Stat reported

that a large number of head ends had

been built in 2005 and 2006 to support

increasing telco TV deployments. It also

said the wide availability of H.264

compression equipment in 2006 had

prompted telcos that were waiting, to

move forward with deployment plans

(see Chart below).

The analysts concluded that technology

advances will further fuel the telco

TV head end boom and that much

of the near-term upgrade revenue

will come from telcos that are adding

HD channels to their existing SD channel.

This is excellent news for the telco

TV industry: one of the historic key

gating factors for telco TV has been

the inability to provide in mass

numbers HD services. In fact, the

cable and satellite companies which

compete with the telcos make a great

point of this.

Telco-based TV with HD is an

absolutely formidable prospect offering

top quality broadcasting with great

degrees of interaction, plus added

services over Internet Protocol (IP),

which is the base of services that

are revolutionising the communications

and entertainment industries such

as voice over IP (VoIP) and IPTV.

Analysts say that the key for suppliers

is not to offer IPTV per se, but offer

IP-based services.

Cable and satellite platforms are

excellent for delivering high-quality

broadcasts to many people. Yet, cable

firms struggle with telcos for ubiquity,

while satellite services - though

ubiquitous - traditionally didn't have

the interactivity built in. The last few

months have hence seen a dash by

satellite and cable firms to offer some

form of IP back path, but, as expected,

this has added a degree of expense

to the service as the interactivity needs

an essential piece of equipment to work:

the hybrid set top box. And to stem the

advance of telco TV, the hybrid is sorely

needed to make its way to market.

Analysis of the markets bears this

out. In July 2006, The Diffusion Group

predicted that global IPTV subscriptions

would jump from two million to 34 million

between 2005 and 2010, reflecting a

compound annual growth rate (CAGR)

of 60%. The Diffusion Group predicted

that North America would experience

the most rapid rate of growth during

this time period with a CAGR of 78%,

Cable and satellite operators need hybrid devices andservices to take the fight back to IPTV. But with bothmarkets in their nascent stage, business models androllout patterns remain in a state of flux. Hybrids aredesigned to give the best of both worlds, and thisincludes telcos too. Joe O'Halloran reports

"To stem the advance of telco TV, the hybrid is sorely needed to get outthere to market."

Hybrids

page thirty two www.cable-satellite.com Cable & Satellite International jan-feb 2007

followed by Europe, the Middle East

and Africa (EMEA), with a CAGR of 61%,

and Asia-Pacific with a CAGR of 41%.

Earlier this year market analyst firm

Gartner predicted that the number of

households subscribing to TV via IP in

Western Europe will reach 3.3 million

by the end of 2006 and 16.7 million

by 2010. However, despite the seemingly

encouraging growth in users, Gartner

advised IPTV suppliers to replace

MPEG2-based set top boxes (STBs)

in order to maximise the number of

households which could receive IPTV

services, and to allow for future services,

in particular HDTV.

Multiple definitions of hybridIndeed, some of these STBs will be

a hybrid. It's interesting to see what

industry figures regard as a basic

definition of what a hybrid is and

why it is used.

“Telecommunications companies

are moving quickly into television

broadcasting in an effort to win the

race to a compelling triple or quad

play proposition. Many are choosing

hybrid boxes as a way of delivering

both media through broadcast schedules

(such as digital Freeview and cable)

as well a differentiated, on-demand

content such as sport, film and education

via packet-based IPTV,” says John

Coldicutt, director, Account & Regional

Marketing, EMEA & Latin America

of Amdocs.

Companies such as Philips are in an

excellent position to comment on the

growth of hybrids given its extensive

STB portfolio for players of all kinds.

Rudy Roth, product strategy manager

and business innovation manager for

Philips home networks, says a hybrid

is “an addition to an IP-only box,

connected to manage networks, providing

network content to the customer via a

MAN network. When talking about hybrids,

[they add] an IP component on the

network [so that it can] provide traditional

broadcast TV via other networks.”

To David Holt, leader, IPTV Networks

EMEA of Nortel, it's a device that “picks

up a cable or satellite feed, but also

services delivered on-demand and

broadband services so you have

the best of both worlds. With hybrids,

it is important to understand that the

boxes have the ability to connect to

DVB and communication streams.

All that is happening is that providers

are finding ways to provide content

for real-time multi-media communications.”

Nick Fielibert, CTO and chief architect

for Europe of Scientific Atlanta, offers this

definition: “For the telco market, a hybrid

is a box that combines DVB and [feeds]

such as Freeview and the streaming

content from the network. With satellite

or cable [hybrids], there are pure

broadcast IP or video IP or video from

streams, as well as an Ethernet port on

the STB. The reason why [particularly

satellite] operators look at hybrids is that

IP can give the advantages of on-demand

where the customer brings content

to the home only when required.”

Technical and business modelchallengesThere are, however, technical issues that

need to be addressed. Experts say that

there are severe technical problems and

network problems in trying to deliver

a high quality broadband multicast service

through IPTV - the networks can't support

a unicast. Hybrids, to back up Holt, are

designed to give the best of both worlds:

you have a broadcast link and huge

capability in delivering broadband content,

backed up with broadband delivery of

on-demand content.

Looking at who will be supplying the

hybrids - that is, the cable or the satellite

company - there will inevitably be

markedly different roll out patterns

for hybrids across Europe, given the

relative penetration rates of especially

cable through the territory. Adds Holt:

“In different countries, there will be very

different levels of competition. We're in

the very early stages of a new (hybrid)

market and the IPTV rollout is in its very

early stages. The speed at which new

services provide a competitive framework

will drive the speed of rollout.”

Holt also suggests that there are a

number of key devices that the operator

could make: Do they go pure play

or hybrid play, and will the hybrid,

to an extent, depend upon the business

model in use? The business models

in hardware are different from those

in the content arena and, again, those

used historically in the telco arena.

"We're in the very early stages of a new (hybrid) market and the IPTVrollout is in its very early stages. The speed at which new servicesprovide a competitive framework will drive the speed of rollout."

Hybrids

page thirty four www.cable-satellite.com Cable & Satellite International jan-feb 2007

There seems a long way to go in

developing these new business models

to a positive economic sense. They are

different from the content arena and there

is still a long way to go in developing

new models. There is also the issue of

increases in bills of materials (BOM).

Operators will have to factor in the

increase in prices that the new hybrid

will demand, even if all that is added

to the box is an Ethernet port.

For cable and satellite providers, hybrids

are really the least expensive bit of the

chain that they have to manage if they

want to compete effectively with the

telcos and offer highly interactive and

personalised services. Cable firms have

to make huge investments in an IP core

network and satellite firms are seeing the

most viable solution acquiring someone

with an existing IP network, such as what

Sky did in 2006. Conversely, a carrier with

a DSL infrastructure may actually want to

offer a satellite feed using a hybrid device.

There seem to be an underlying principle

for hybrids to be used for delivering

services to customers. These services

have to work in a harmonious rather than

a disparate manner, and presented in a

unified and meaningful manner (by means

of the EPG). Some are saying that we are

in the realms of the network-aware device,

with end users having total control of

not just the entertainment services, but

also the ad-on services such as VoIP

through the EPG.

“Many [firms] are choosing hybrid

boxes as a way of delivering both media

through broadcast schedules (such as

digital Freeview and cable) as well a

differentiated, on-demand content such

as sport, film and education via packet-

based IPTV. There are great opportunities

for this approach, but to gain mass-market

adoption, the systems need to be simple

to use, offer great choice and superior

value,” adds Amdocs' Coldicutt.

In delivering services, however, the

issues are certainly not all about hardware

alone and what receiving and transmitting

electronics components go into the

box- there is a huge part to play in

terms of firmware and middleware.

Nigel Smith, VP broadband Internet

at NDS, believes that the real deal

about hybrids is not just what goes

into the box, but how to make the

services be delivered efficiently

and securely.

According to Smith, “Hybrids will be

a massive market for NDS as broadcasters

move towards adding content onto their

service, for example, Sky and Easynet

and the addition of a broadband service.

At the moment, services are relatively

discreet but one would expect the

services to converge and offer content

over the broadband network to the TV.

Software manufacturers are in a good

place and hybrids will form the major

market for IPTV. It isn’t all about the

technology because broadcasters have

content relationships and rights and

know how to package and market the

services; that can't be underestimated.”

“Hybrid” may become obsolete by 2010Looking into the future, Mark Rooney,

head of IPTV at Pace, believes that

well over half of all STBs will be hybrids

by 2010. He postulates: “Will the term

cease to be meaningful by then if that's

what boxes do? When we move towards

2008, we will get to the point where

the new boxes are incorporating

previous hybrids' technology. Broadband

speed and the increasing rate of digital

switchover will drive take-up even further.”

So the day of the hybrids will be among

us, even though the key question remains

unanswered. Namely, will it be telcos,

cable companies or satellite firms supplying

them for customers? The key element is

that end users will have a variety of high

quality entertainment, communications

and information services from one box.

With hybrids, operators have the

opportunity to surprise and delight

customers through advanced features.

These include recording programs that

they frequently watch or may be interested

in (based on their profile), as well as

targeted and localised advertising.

They could also be used to make video

available over laptop and mobile devices,

and being able to interact with the system

using a mobile phone for program guides

and recording. As Rooney says, the term

may itself become irrelevant, so who cares

where it comes from? CSI

"For cable and satellite providers,hybrids are really the least expensive bit of the chain that theyhave to manage if they want tocompete effectively with the telcosand offer highly interactive andpersonalised services."

Key tips for telcos

In order to gain adoption, and compete

effectively against the more mature

cable and satellite companies, telcos

must get the whole customer

experience right, as they may not get

a second chance to make a first

impression, advises John Calidicutt

of Amdocs. "Customer experience", he

says, refers to getting it right across all

customer lifecycle processes:

Ordering and Delivery - are orders

accurate and delivered on time?

Have they invested sufficiently in

their supply chain infrastructure?

Activation - are customers getting the

premium content based on their

subscription and additional pay-per-view

services? TV is immediate,

and TV-on-demand is no exception.

Billing - are customers able to check

their bill in real-time, across all their

products, on any device?

Customer service - are agents able

to effectively deal with customer

queries on how to use the hybrid

boxes, solve problems over the phone,

despatch engineers where possible, set

expectations and track progress…?

Advertising - is advertising relevant

for the customers? How can a telco

make more money from advertisers

by learning which content is most

appropriate for each user/household?

Good customer analytics and marketing

(with a feedback loop)

are critical.

Content management - ensure that

telcos have the right commercial

arrangements with media companies,

and are able to share revenues

accurately and quickly, thus maintaining

these vital relationships.