Microsoft Releases Beta ADK for Mediaroom

Microsoft has released the beta version of its Microsoft Mediaroom Presentation Framework Application Development Kit (ADK) to nearly 150 companies globally. These companies included content providers, applications developers, as well as its service provider customers including ATT and BT.

This ADK is intended to provide service providers, content providers, and applications developers with the ability to create interactive programming and applications that enhance the basic capabilities of Mediaroom.

I met with Microsoft in Mountain View yesterday to get an idea of what this meant. They demonstrated three demos that were created for CES in January that were based on this ADK:

• NASCAR application that gives the viewer the ability to select the specific in car camera displayed in a window on the screen and the driver audio that he or she would like to view or hear. It also provides access to information about the race, previous races, and the drivers that can also be displayed on the TV. These displays brings content that is already available on the web to the TV screen.
• A boxing application that permits the user to select the microphone audio to be played on the TV. It provides audio from four microphones. All four audio tracks are recorded on the DVR when the program is broadcast and may be selected during later playback.
• A TV based social networking application that permits to set up and join groups. Group members can communicate with each other using text entered via the remote control. It is possible to find out who in a group is watching the show you are watching in order to chat about it.

Microsoft stated that it is working closely with the companies in the beta program and are using ideas that come back from this group to decide how to enhance this ADK. It has found that this group often comes up with good ideas that it had not thought of itself.

This kind of application capability is a good answer to what IPTV does better than cable (or satellite). Of course Microsoft and its service provider customers will have to work hard to stay ahead of the U.S. cable companies. It could also be used to enhance the advertising experience as well as the programming itself.

Corbina in Russia Goes with Microsoft

VimpelCom in Russia has signed an agreement to use Microsoft's Mediaroom IPTV software for its Corbina TV IPTV service. The service will also use Motorola set-top boxes with or without a 160 GB hard disk. The service will support both SD and HD programming and will be launched in the middle of 2008. It will have 100 broadcast channels and 1,000 films, cartoons, and series available on demand. Corbina provides fiber based services to almost every apartment building in Moscow and many other cities in Russia.

This is another strong win for Microsoft. The Russian market is becoming a strong telecom market and it looks like IPTV will do well there.

Verizon Offers Starz Video Download Service

Verizon offers a $5.99 per month Starz Play video download service to broadband subscribers in the U.S. from a website it has set up for the service. The movies are viewed on the PC using viewer software downloaded from the website.

Films are stored on the PC and may be viewed off line. Films will be automatically deleted from the PC when they are removed from the service. Some titles will expire in a few days and others will be available for months. It will typically take 30 to 90 minutes to download a film. Movies can be watched while they are downloading. The service uses Microsoft digital rights management software and does not permit burning the movies onto a DVD.

Verizon's broadband customers can pay for the Starz Play monthly subscription fee on their Verizon bill. Other broadband users can charge the fee to a credit card.

I have felt for a long time that the Telcos need to get involved with over the top Internet content. I think that this is just the start and that the Telcos will eventually merge unmanaged over the top content with their managed IPTV services.

Venezuela's Cantv IPTV Plans

TV Latam published an article describing the plans of Cantv, the state owned incumbent carrier in Venezuela for IPTV. The company is preparing the market for a 2010 IPTV service launch. It expects to have 800 thousand IPTV subscribers after five years. It plans to achieve a high penetration with subsidized services for the lowest-income sectors and a competitive offering for the other segments.

It is worth reading the TV Latam article because it discusses the political approach that Cantv is taking. As a major petroleum producer, Venezuela would seem to have the resources to pull this off.

Zeugma Introduces Service Delivery Router

Zeugma, a Vancouver based start up, has introduced a service delivery router that combines deep packet inspection with the ability to support applications in a single box. Its objective is to support the deployment of value added services over broadband networks including managed Telco IPTV services and unmanaged over the top Internet TV and video.

Zeugma's market research indicates that more than 75 percent of the people surveyed are interested in buying or renting movies over the Internet. This research also indicates that people are not willing to pay much to begin watching the movie in a few minutes rather than waiting to download the entire movie first. While more than 55 percent would pay an extra $.25, only 40 percent would pay an extra $1.00 for a more immediate experience. On the other hand, more than 60 percent would be willing to watch a 30 second ad for the more immediate service. Zeugma stated that this shows that improved QoS can increase revenues.

The company states that its product's application awareness facilitates the classification of traffic. Its bandwidth manager can allocate or deny resources. It manages QoS and bandwidth on a per subscriber and per flow basis.

Zeugma's system is under evaluation at several major carriers including at BT.

Service management is clearly an important issue for broadband service providers. I don't think that best efforts will be adequate as the number and importance of these services increase.

However, the difficulties of managing video, especially Telco IPTV video should not be underestimated. We published a report Networking Strategies for TelcoTV Services that examines these issues in detail. You can request a free white paper on this subject.

Our conclusion was that as video on demand, replay TV, and other unicast forms of content from managed IPTV services will overwhelm broadband networks with video traffic. We half jokingly state that QoS will not work in this environment because there will not be enough low priority packets to discard.

While the effectiveness of the Zeugma and other similar system may be questionable for video traffic, especially for managed services, I think that they will be key for other services, especially for VoIP. I expect that they will be important on 4G mobile networks where all services, including voice, will be delivered over packet networks.

Chunghwa Telecom Starting Microsoft Deployment

According to an article in the Taiwan Economic News, Chungwha Telecom now has 10 thousand IPTV subscribers on its Microsoft Mediaroom platform. Microsoft and Taiwan's Chunghwa Telecom will launch the IPTV Ecosystem Development Center in Taiwan to focus on the IPTV market. This operation will work with Taiwan`s set-top box makers and content providers to tap markets overseas.

Chunghwa is using Tatung set-top boxes to support its 10 thousand Mediaroom subscribers. It is using Asustek and Hon Hai set-top boxes for its 480 thousand Alcatel-Lucent's OMP middleware, giving it a current total of 490 thousand IPTV subscribers.

This is the start of the insertion of Microsoft's Mediaroom into Chunghwa's IPTV service. It took Chunghwa several years to convert 40 thousand Orca subscribers to Alcatel-Lucent's OMP. It will be interesting to see how this process will work for Mediaroom.

BNS White Paper on Selecting IPTV Middleware

BNS, the IPTV consultancy headquartered in Hong Kong, has published a white paper that provides guidance on how to select middleware.

This white paper provides some practical advice and is worth reading by those starting to think about these issues.

Vote in Deutsche Telekom IPTV Contest

Deutsche Telekom is offering the opportunity to vote for one of the 10 semifinalists for its IPTV interactive application contest at http://www.interactive-tv-award.com/. The status of the contest can be found at http://www.interactive-tv-award.com/dev/.

Hong Kong Broadband has 136K IPTV Subscribers

Hong Kong Broadband, a subsidiary of City Telecom, reached 136 thousand IPTV subscribers at the end of February 2008. It added 8 thousand subscribers during the previous six month period. The company also had 279 thousand broadband subscribers at the same time, adding 32 thousand over the previous six months.

City Telecom dropped the price of its 100 Mbps broadband service in order to increase its subscriber base. This contributed to the increase in its broadband business. Its ARPU across all its services remained flat during the period at about $23 per month. The company sets its broadband prices significantly below PCCW, the incumbent Telco in Hong Kong.

City Telecom is an aggressive competitor in a tough market. It increased its total revenues by nearly 11 percent year over year and has shown a profit over the last 18 months. This is a real achievement.

Belgacom Ends 1Q08 with 349K IPTV Subscribers

Belgacom added 43,931 IPTV subscribers in 1Q08, ending the quarter with 349,250 subscribers. It added 200 thousand IPTV subscribers since the end of 1Q07.

The ARPU for its IPTV service grew to 17.4o euros in 1Q08 compared to 13.40 euros in 4Q07. Its IPTV revenue grew from 8 million euros in 1Q07 to 18 million euros in 1Q08.

Belgacom's IPTV service picked up momentum in 1Q08. It appears to be doing well against the entrenched cable services.

Telefonica at 554K IPTV Subscribers

Telefonica added 42.9 IPTV subscribers in 1Q08 in Spain giving a total of 554.045 thousand Imagenio IPTV subscribers. It estimates that it has more than 13 percent share of the pay TV market in Spain.

Telefonica also added 14 thousand IPTV subscribers in the Czech Republic, giving it a total of 87.2 IPTV subscribes at the end of 1Q08.

Telefonica continues to make steady progress with its IPTV service in Spain an the Czech Republic. It also has large cable networks in South America. It did not report on its nascent IPTV activities in that region.

BT at 250K IPTV Subscribers

BT announced that it had 214 thousand IPTV subscribers at the end of 1Q08, which is an increase of 94 thousand during the quarter. It had 250 thousand IPTV subscribers as of its announcement on May 15, 2008.

BT stated that it added more TV subscribers during 1Q08. It said that Sky satellite added 56 thousand subscribers and Virgin cable added 37 thousand subscribers during 1Q08.

BT stated that 68 percent of its BT Vision subscribers take a premium package when they subscribe to the service. It offers 4,660 hours of on demand content and had an average of 29 views per month per subscriber.

BT had an excellent quarter with its BT Vision IPTV service. It appears that its strategy of supplementing Freeview digital terrestrial broadcast TV with on demand services seems to be working for it. The one question is what kind of ARPU is it generating.

Free Adds 120K IPTV Subscribers

Free in France announced that it added 137 broadband subscribers in 1Q08 giving it a total of 3.014 million broadband subscribers at the end of the quarter. Its base service costs 29.99 euros per month. Its ARPU during the quarter was 36.20 euros per month.

Free enhanced its IPTV service in several ways during 1Q08:

• It introduced a subscription video on demand service that includes HD content for 9.99 euros per month.
• It introduced power line communications as a standard feature for its Freebox HD set-top box/home gateway.
• It introduced the ability for its subscribers to create websites that can be viewed on the TV
• A promotion for the Canalsat premium package at 10 euros per month for the first year rather than the standard price of 20.90 euros per month

Free did not announce its number of unbundled subscribers at the end of 1Q08, which translate directly to IPTV capable subscribers. I estimate based on its broadband numbers that it added about 120 thousand IPTV capable subscribers giving it a total of 2.4 million.

Telekom Austria at 38.6K IPTV Subscribers

Telekom Austria announced that it had 38.6 thousand aonTV IPTV subscribers at the end of 1Q08, an increase of 17.7 thousand during the quarter. It stated that its aonTV service is now available to 52 percent of Austrian households.

Telekom Austria is now making good progress with its IPTV service. This should continue through 2008.

Singtel at 44K IPTV Subscribers

SingTel in Singapore had 44 thousand mio TV IPTV subscribers at the end of 1Q08, an increase of 17 thousand during the quarter.

SingTel's growth remains steady. It also added 17 thousand subscribers in 4Q07.

Tiscali to Expand IPTV Footprint in Italy

Tiscali announced that its IPTV service is now available in nine citiees in Italy. It just added six cities (Bologna, Florence, Genoa, Naples, Palermo and Turin) in addition to the three cities that it launched in December 2007 (Cagliari, Milan and Rome). It can provide IPTV service to 4 million lines today and plans to be able to provide it to 9 million lines by the end of 2008.

Tiscali's IPTV service includes 48 hour time shifting, video on demand, and HD programming. It has content agreements with Disney and Sony.

Tiscali has not announced the number of IPTV subscribers that it serves either in Italy or in France. As usual, I assume that this is because the numbers are nothing to brag about.

Pace Wins BT Order

Pace has won a significant order for set-top boxes from BT for its BT Vision service. Pace recently acquired the IPTV set-top box business from Philips, which has supplied set-top boxes for BT Vision since it started in December 2006. BT also signed a contract for IPTV set-top boxes with Motorola in January 2008.

This is an important piece of business for Pace and a major reason why it acquired the Philips IPTV set-top box business. It is quite natural that BT would bring Motorola in as a second vendor for a service as large as BT Vision is likely to become.

China Telecom Expects 2M Subscribers in 2008

China Telecom's IPTV expects to have 2 million IPTV subscribers by the end of 2008. Shanghai is at 380 thousand IPTV subscribers today and is expected to reach 700 thousand by the end of 2008.

Getting people to pay for IPTV services is an issue in China. There are several dimensions to this issue:

• The Chinese government restricts TV content and prevents many good foreign TV dramas from being shown on TV in the country. People in China are reluctant to pay for TV if they cannot get this kind of content.
• Pirated programming is broadly available in China. People are reluctant to pay for a TV service when they can buy what they want to see on the street.
• People in China believe that TV should be free since the Chinese government has always defined TV as a free service.
• IPTV service providers are not doing a good job of marketing their services. They are not analyzing their consumers.

In spite of this the Chinese market has major advantages.

• The sheer size of the population means that it will generate a very large IPTV subscriber based even with low service penetration.
• The Chinese government is developing IPTV service and is likely to introduce new policies that support the service.
• Chinese viewers want choice, which will help IPTV succeed to the degree that it meets this demand.

The IPTV operators in China have all the problems that IPTV operators have elsewhere. In addition, it has to face the content limitation put on it by the government. This is a serious problem in China. When I was there recently, I saw news broadcasts that were censored with the screen going black when the offending content was broadcast. I was also not able to access this blog! I did not think that I was that dangerous.

China Netcom to Expand IPTV

China Netcom is planning to expand its IPTV trials to 16 cities from the 10 cities in place today.

China Netcom is holding IPTV trials in force. It now has more than one hundred thousand subscribers in these trials. Shanghai Telecom is the only operation in China that I am aware of that is really gaining traction right now. It appears that the other trials are growing, but not dramatically.

I would be interested in comments from anybody with direct knowledge.

IPTV Regulatory Squabble in Argentina

TV Telco Latam has published an article describing the battle between the Telcos and the cable companies over the regulation of IPTV in Argentina. It appears that the cable companies now have the advantage and have won a ruling that prevents the Telcos from offering IPTV.

TV Telco Latam is a good source of information about IPTV in Latin America. I read it regularly.

Telecom Italia has 136K IPTV Subscribers

Telecom Italia ended 1Q08 with 136 thousand IPTV subscribers, an increase of 56 thousand in the quarter. It has set a target do have 300 thousand IPTV subscribers by the end of 2008.

Telecom Italia did not announce the number of IPTV subscribes at its Hansenet subsidiary in Germany.

Telecom Italia made modest progress in IPTV. Its goal of 300 thousand subscribers for 2008 is not that large and should be achievable.

Deutsche Telekom has 154K IPTV Subscribers

Deutsche Telekom announced that it had 154 thousand subscribers at the end of 1Q08. It also announced that it had dropped the price of its starter package by 17 percent in March 2008.

Deutsche Telekom seems to be struggling with IPTV. It previously said that it had 150 thousand signed up at the end of 2007. Apparently, it did little more than install the unfulfilled orders during the first quarter.

I think that Deutsche Telekom must bundle a basic set of IPTV channels into its basic broadband service. This will be straightforward for ADSL-2+ customers but more tricky for VDSL users. It could use ADSL-2+ for the basic offering and VDSL for premium customers.

This approach has worked very well in France. Telia Sonera's IPTV service really took off only after it included IPTV channels in its basic offering. PCCW in Hong Kong has shown how this strategy can significantly increase ARPUs.

IPTV & the Music Industry

I attended the National Association of Recording Merchandisers (NARM) convention in San Francisco this week. This group represents music retailers including record stores as well as music etailers.

It held a Digital NARM conference that focused on the issues that digital media has brought to the music industry. CDs were developed before anybody thought that they could be read on a PC. Consequently, CDs were created without encryption or other copy protection techniques. This has made it easy to rip CDs and pull the tracks off of the CDs. It also enabled Napster peer to peer music sharing that generated a huge amount of distribution of music across the Internet.

While this was going on the revenues of the recording industry dropped by 40 percent, according to one of the speakers. The consensus was that only about 10 percent of the music tracks distributed over the Internet are purchased and generate revenue for the industry.

There were a number of interesting observations that were made by the speakers at the conference:

• The consumer is in charge. The industry has to provide what the consumers want to buy and not vice versa.
• The industry does not understand the degree to which free distribution stimulates sales.
• Several speakers said that it is possible to sell against free music. They pointed out that people buy water in bottles when they can get it free from a fountain. Others thought that was a weak analogy.
• Digital rights management (DRM) has created significant consumer dissatisfaction. Some speakers felt that DRM is dead. Others felt that DRM will be important in the long term, but the rules need to be acceptable to and understood by consumers.
• 80 percent of CDs sell less than 100 copies. Obscurity is more of a problem than piracy for most artists.
• The problem with long tail is discovery. People have to be able to find what is there.

The industry is searching for new business models. Track sales is the dominant method for buying digital music today. There is hope that subscription models will catch on, but there is no evidence that it will. There is also hope that bundling music with the device as Nokia will do with some phones later this year will catch on. (This is effectively a subscription service with the first year included in the price of the phone. Nokia will permit the tracks to be used even after the subscription lapses.)

There was one discussion that applied directly to video on demand, in my mind. A digital music executive stated that the digital content must be included as part of the over all marketing campaign. Digital music sales will be lost if the digital version is not available when the marketing campaign hits its peak.

I think this is a big reason why IPTV video on demand has not caught on. The video on demand release is generally after the DVD release and well after the theatrical release. By the time the video on demand release is made, the marketing campaign for the film has been complete for quite a while. The late video on demand release window assumes that the viewer will remember that he or she wanted to see the film and to wait all that time. This is just not likely to happen that often.

France Telecom at 1.4M IPTV Subscribers

France Telecom ended 1Q08 with 1.407 million IPTV subscribers across all of its European operations, an increase of 164 thousand in the quarter. These numbers break down as follows:

• 1.282 million IPTV subscribers in France with an increase of 133 thousand in 1Q08.
• 49 thousand IPTV subscribers in Poland with an increase of 9 thousand in 1Q08.
• 75 thousand IPTV subscribers in the rest of Europe with an increase of 21 thousand in 1Q08.

France Telecom also stated that it had 10,096 FTTH subscribers at the end of 1Q08 and that its service passed 187,322 homes.

France Telecom continues to make good progress with its IPTV service and is at or near the top of the list of IPTV service providers globally. I believe that France Telecom offers IPTV service in Spain, the Netherlands, and in Slovakia as well as in France and Poland. It plans to introduce IPTV service in the UK in 2008.

Fastweb adds 31.4K IPTV Subscribers in 1Q08

Fastweb added 31.4 thousand IPTV subscribers in 1Q08, which is an increase of 77 percent over the 17.7 thousand IPTV subscribers that it added in 1Q07. It did not announce its total number of IPTV subscribers.

Fastweb credits its increased sales in 4Q07 and 1Q08 to its introduction of a TV only service that does not require a broadband data or VoIP service. It has found that the churn rate of its IPTV subscribers is 24 percent lower than its overall customer base.

Fastweb seems to have breathed new life into its IPTV service with its single play IPTV service.

Swisscom IPTV has 64K Customers in 1Q08

Swisscom stated that it had 64 thousand paying customers at the end of 1Q08, adding 5 thousand during the quarter. The average cost per new customer, including installation, devices, and so on was reduced to under $US950. At the end of February, Swisscom added four HD , and launched an offering for first-time users, without a hard-disk recorder. It stated that its marketing activities were stepped up in April.

IPTV sales Swisscom appear to have slowed down in 1Q08. Stepping up its marketing efforts seems to be an appropriate thing for it to do.

KPN Does Not Announce 1Q08 IPTV Results

KPN announced that it added 56 thousand TV customers in in 1Q08, including both digital terrestrial and IPTV subscribers. It did not announce how many of these new subscribers were IPTV subscribers. It did say that it had stabilized its IPTV platform.

I made this post because I have seen two press statements that KPN added 56 thousand IPTV subscribers. This is wrong. Previously KPN announced that it was adding 1,000 new IPTV subscribers per week at the end of 2007. This probably means that it added about 15 thousand IPTV subscribers in 1Q08 and not 56 thousand.

U.S. Switched Access and ISDN Lines

If there are any old ISDN hands out there like myself you might like to see the charts I just published on my own website http://www.larribeau.com. They show that U.S. BRI and PRI lines seem to have stabilized over the last couple of years. BRI are declining slightly and PRI are now growing slightly. There was a big drop in 2002 through 2004, probably due the conversion of dialup to broadband, but since 2005, the number of PRI has grown.