OTT and IPTV Integration Increasingly Popular

  • Pyramid Research
BOSTON - Many operators see the proliferation of OTT as a threat to their established IPTV business models. They fear that OTT will subvert their role in the pay-TV value chain and cannibalize revenue.

Not according to Pyramid Research’s new report, “OTT Growth Sparks Innovation Multiscreen Video Business Models.” “We’ve found that the opposite is just as likely to be true,” says Pyramid analyst Daniele Tricarico. “We argue that OTT is serving as an innovation stimulus for the pay-TV market, pushing telcos to enhance their IPTV services with more screens. We also find that an increasing number of operators, alongside their managed IPTV services, are directly entering into non-managed OTT environments. This means that more operators are using the open Internet to offer video services to potentially any consumer with a broadband connectivity, being their existing customers or not.”

For example: In the UK, Domino’s Pizza Group saw the value of over-the-top (OTT) online video to boost customer loyalty, and back in October launched the Domino's Pizza Box Office video streaming offer. Customers order a pizza and get a download code to stream a movie at home. This is just another example of how OTT is revolutionizing the way video content is delivered to consumers: Today almost anyone can become a content provider.

OTT in Emerging Markets: Challenges and Opportunities
Operators are warming up to the idea of launching their own OTT services, especially in emerging markets. While IPTV remains a premium service, which requires subscribers to purchase more expensive bundles, OTT is more flexible and only requires a good broadband connection. This means that in the more price-sensitive markets, where there is still strong demand for online video, OTT is becoming an attractive option for users. Besides, OTT services are typically delivered over a wide range of screens and at different price points, including smartphones, tablets and gaming consoles, making them more accessible to different consumer profiles.

In Colombia, for example, ETB has announced that it will shortly launch an OTT service to complement its upcoming IPTV deployment. In Mexico, the OTT service provided by FTTH operator Total play, dubbed Totalmovie, has rapidly become the main competitor to Netflix. It offers video content in Mexico alongside the operators’ IPTV platform and across Latin America by using third-party operator infrastructure. As of October, it had 1.9 million registered users and 5 million unique monthly visitors.

The report forecasts that more Latin American operators launching OTT services. The second largest regional group, Telefonica, is considering positioning OTT commercial offers in several countries. The decision between managed (IPTV) or unmanaged video delivery (OTT) ultimately depends on each country’s infrastructure, competitive environment and operator position. Telefonica has, however, confirmed that there are already ongoing OTT initiatives outside Spain.

In Turkey, TTNET, the ISP of fixed-line incumbent Turk Telekom, has already been quite successful in combining its IPTV and OTT offerings. TTNET wants to add value to the bundles, which in turns helps increase customer loyalty and reduce churn. This is crucial in preventing the decline of Turk Telekom’s fixed-line base. While IPTV is positioned as a premium service, OTT is priced very competitively. As of August this year, TTNET had over 1.2 million OTT and 150,000 IPTV subscriptions.

OTT can provide significant benefits to operators. In the case of TTNET, positioning OTT alongside IPTV is encouraging consumers to break through their broadband allowances, thus creating the need to migrate to higher-value packages. In the case of Totalplay in Mexico, OTT is contributing to the monetization of the operator’s superfast fiber-based network. For both operators, using third-party infrastructure breaks the link between content delivery and network management.

“In the near future,” says Tricarico, “we expect to see significant revenue-generating opportunities associated with VoD, catch-up TV, and targeted advertising, especially when telcos can integrate their OTT and IPTV offerings with interactive and social media functions.”

QoS Issues in Emerging Markets
Using the open Internet for content delivery, however, has its downsides. The main shortcoming with OTT is that the operator is not in control of quality of service (QoS). Especially in emerging markets, quality of service and network speeds vary wildly from country to country, making it challenging to ensure the same quality of experience (QoE) that can be guaranteed through a managed IPTV network. Another challenge for operators is securing in-demand content for OTT platforms. Without doubt content is king, but content is also costly. Unless they are backed by multimedia and broadcasting groups, operators tend to be the weak link in the content production and delivery value chain. But that is a challenge with IPTV too.

“If telcos are serious about developing a pay-TV offering that can resonate with the demand for multiple viewing platforms at different price levels,” says Tricarico, “they need to seriously consider the opportunity of complementing IPTV platforms with OTT.”

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