Video over IP: The Jewel in the Triple Play Crown

Not long ago when broadband access was relatively new, there was a "last mile challenge".   Now in many areas, the challenge is quickly changing to a "last mile choice" and, as a result, broadband wars are breaking out.

Local phone providers are battling with cable MSOs, the early market leaders in the US, while the Direct Broadcast Satellite providers (DBS), wireless providers, local utilities and others introduce their own broadband offerings.   All the while, new companies are partnering with municipalities to wire entire communities with state-of-the-art fiber connections.

With broadband penetration rates rapidly increasing and a widening array of access methods ranging from twisted pair to wireless mesh networks and broadband over power lines (BPL), consumers are seeing a real choice of providers for their broadband services.

Service providers now realize they must do more than offer simple access to bandwidth.   To become the consumers' service provider of choice, they must package a set of IP-based services that differentiate them from their competitors and deliver real value to the consumer, with the potential of owning the customer relationship for all IP-based services being the ultimate prize.   Offering video over IP, packaged with data and voice in a triple play offering, is a critical step toward reaching that prize.

Ian Locke, VP Marketing and Business Development for Envivio, a leading provider of video over IP solutions and David McNierney, Director of Strategic Marketing for Highdeal, discuss why video over IP is critical to a successful triple play offering.   The two companies have recently joined forces as part of a triple play consortium, called IPlay3.

Ian Locke, VP Marketing and Business Development for Envivio

David McNierney, Director of Strategic Marketing for Highdeal

Transaction Reporter: First, what is 'triple play'?

Ian Locke: Triple play is a service offering that combines broadband data access with voice and video services.   The three services, voice, data and video form a "triple play."   Companies offering, or planning to offer, broadband access face an increasingly crowded marketplace.   They are all seeking ways to leverage their broadband "pipes" to deliver greater value to consumers.   By offering triple play services, broadband becomes the platform for multimedia delivery into the premises.

David McNierney: For the service provider, triple play is the first step to an even wider world of IP-based, on demand services.   For example, service providers can bundle services such as massively multiplayer online games (MMOGs) for consumers and software as a service (SaaS) for businesses, all being delivered over the IP connection into the premises. If service providers are unable to move "up the stack", they run the risk of being marginalized.   Triple play is a big first step to the world of higher value and higher margin on demand services.

Transaction Reporter: Tell us what consumers can expect from video over IP ?

Ian Locke: The term video over IP refers to a broad range of services that includes IPTV, which is programming that is broadcast over IP and pay-per-view events, Video on Demand, or VOD, which allows consumers to watch a video or film whenever they like, personal video recording, or PVR, which allows consumers to record broadcasts and replay them when convenient, and Interactive TV, or iTV, which allows consumers to interact or provide feedback to a broadcast.   An example of iTV would be voting for your favorite contestants on a reality TV show, such as American Idol or participating in a video auction.

David McNierney: Both VOD and PVR are unique in that they reflect a trend in the viewers' ability to determine when they watch the programming.   According to a recent report, the VOD and PVR markets are forecast to grow more than 50% per year through 2008.   Soon, there will be no need for multiple boxes on the TV for things like DVDs, VHS cassettes and Tivo.   Essentially, consumers can enjoy all the services they enjoy from their cable or DBS provider today, plus much more.

Transaction Reporter: Video over IP, at least broadcast, been around for a while, right?

Ian Locke: Yes, and there have been some missteps, but there are two key differences between then and now: advanced compression technologies like MPEG-4 and the penetration of broadband access to the home.  

David McNierney: The same can be said for voice over IP.   There was a lot of buzz in the late 90's, yet the service didn't take off.   Today, we are seeing not only a resurgence of interest, but real VoIP services winning market share.   The CEO of AT&T recently announced that VoIP was the key to their company's future.   This change is happening due to the combination of broadband penetration and improvements in technology leading to better quality and increased functionality.   According to a recent In-stat survey, today, one in five households in the US has a broadband connection and more than 130 million households in the US will have broadband access by 2007.   So as broadband is rapidly becoming a mainstream service, video over IP is becoming a way to move up the value chain.

Transaction Reporter: Why is Video over IP the "jewel in the triple play crown"?

David McNierney: Broadband access is largely a commodity product.   If you can get 2MB download speeds from two providers, why will you choose one over the other?   Typically, the answer is price.   Voice over IP is an important step up the value chain.   However, while voice over IP provides useful enhancements over traditional PSTN telephony, the main value proposition focuses on the reduction of costs: both OPEX and CAPEX reductions for the operator and cheaper services for the consumer.   Video over IP however, opens the door to a range of higher margin services.

Ian Locke: Service providers all want the same thing: to increase their subscriber base and to drive higher ARPU from those subscribers.   Contrary to popular belief, video on demand has low profit margins due to the royalties paid to the content owners.   Yet consumers love the service, so it is an essential component of any video over IP offering.   However, services like iTV and PVR have exceptionally high margins and drive substantially higher ARPU.

David McNierney: With a video over IP offering, the service provider can develop new and segment-oriented revenue streams.   For example, they can create packaged offerings for demographic sub-segments like the Nascar dads and soccer moms here in the US.   Best of all, they can experiment by packaging services with high margins that resonate with their target markets and geographies.

Ian Locke:   For example, a service provider with a large Latin American community could create an offer that bundles Spanish language programming together with a calendar of pay-per-view sporting events like soccer from Brazil and free international calling to a Latin American country of the subscriber's choice.   In terms of alternative revenues, service providers could charge advertisers for soliciting viewer responses to surveys conducted through iTV.   There are a potentially unlimited number of revenue opportunities for a creative service provider to uncover.

Transaction Reporter: How is the quality of Video over IP?

Ian Locke: The quality is equal to, or better, than the quality you would receive from traditional cable or satellite TV.   In the past, the digital delivery of video was based on the MPEG-2 standard.   Envivio is leading the worldwide adoption of the advanced video compression standard, MPEG-4.   MPEG-4 delivers an order of magnitude improvement over MPEG-2 enabling not just amazing quality, but the addition of the interactive services just mentioned.   In short, service providers can do more with less bandwidth.

Transaction Reporter: How do consumers use these services?

Ian Locke: Service providers offer an intuitive, easy-to-navigate portal that consumers access through their TV using a standard remote control and set-top box.   So whether it's viewing IPTV, selecting a video on demand or recording programming, there's one simple interface.   Our consortium, IPlay3 offers a single consumer portal for all the triple play services and related charges.

David McNierney: A common user interface is a key value proposition for triple play services.   For example, consumers can use the same interface for caller ID while watching TV, so they can decide whether it's more important to answer the phone, or to find out who will be kicked off the reality show Survivor.   So the customer benefits by receiving voice, data and video from one service provider offering a single portal and a single invoice at the end of the month.

Transaction Reporter: What are the critical success factors in the deployment of video over IP?

Ian Locke: It depends on the service provider.   For broadband providers new to video, it is important initially that they deliver video services that match those offered by the competitors.   Fortunately, there are programming aggregators that make delivering a comprehensive portfolio of channels and programming easy.

David McNierney: The reason triple play services are becoming so successful is that service providers are coming up with creative ways to package their services that are compelling to their consumers. Partners like Envivio help solve the technical challenges around delivery of the services.

Ian Locke: And service providers offering video over IP must be prepared to pay royalties to the content owners.   This is something new for the telephone companies and utilities.   Often, the settlement side can be an even greater operational challenge than billing customers.   That is why Highdeal is so important to the IPlay3 consortium.

Transaction Reporter: Tell us more about IPlay3

Ian Locke: IPlay3 is a consortium composed of Envivio, Highdeal and NetCentrex.   NetCentrex provides the critical Voice over IP piece of the triple play solution.   Together, we offer a best-of-breed, turnkey solution for service providers seeking to enter the triple play market. The consortium was launched recently at the Spring VON conference in Silicon Valley and, based on the traffic at that show, it is clear that service providers are aggressively pursuing triple play strategies.

David McNierney: IPlay3 brings together three leaders in their respective fields to offer a comprehensive, pre-integrated solution.   Delivering triple play can be a daunting task - we make it easy for service providers to enter the market quickly and expand their market share as they educate consumers and as they, in turn, learn about the market.   Additional companies affiliated with IPlay3 provide a range of complimentary products and services such as digital rights management and project management.

Ian Locke: By leveraging the IPlay3 solution, service providers establish themselves not only as the broadband provider of choice, but as the preferred provider for a compelling range of IP-based services.   And for service providers seeking to move up the value chain, video over IP is the jewel in the triple play crown.