(7 February 2007 6:00 pm)

MUMBAI: More than half of communications industry executives believe that Internet Protocol Television (IPTV) can generate significant revenue within the first three years of service, according to findings of a survey released by Accenture and the Economist Intelligence Unit.

The survey of nearly 350 executives from telecom, broadcasting and media companies across 46 countries in the US, Europe and Asia revealed industry-wide confidence in the longer-term outlook for IPTV, with 60 percent believing that IPTV will generate significant revenues within three years.

However, confidence in the short-term outlook remains mixed, with slightly more than half (52 per cent) of respondents saying they are not confident in the ability of IPTV to generate significant revenues within the next 12 months. On the other hand, one-fifth (20 per cent) of respondents said they are confident or very confident, and more than one-quarter (28 per cent) said they are somewhat to fairly confident, that IPTV will generate significant revenues within a year.

The report notes that the business case for IPTV, its value-added benefits and its potential remain strong. In the long-term, the key to achieving high performance through IPTV is to be visionary, ambitious and open to innovation from many sources. For the shorter term, the key is to quickly adapt to consumer feedback and jump over technology hurdles.

When asked what they believed would be the principal revenue source for IPTV, about half (46 per cent) of the industry executives surveyed selected advertising. However, network operators, as a subset of all respondents — which included equipment vendors, consumer electronic companies, content providers and broadcasters/studios — disagreed, with three-quarters (74 per cent) of network operators saying they believe that subscription fees for premium content will provide the largest recurring revenue stream, followed by basic content subscription fees and then ad fees.

This difference in opinions reflects the broad uncertainty around how media will be delivered and what customers will be willing to pay for. Carriers are used to subscription revenues and believe that the IPTV experience will soon be comparable to or even better than current video offerings, whereas media executives are more cautious and skeptical of a scenario where a new revenue stream is created so rapidly. The reality is that both revenue streams will be important, but the challenge will be to harness the power of this new technology to create a new video experience that makes consumers and advertisers willing to pay more than they do today.

When asked to identify reasons for pursuing the IPTV market, the greatest number of respondents (42 per cent) cited new revenue streams, followed by acquiring new customers (28 per cent) and increasing sale of broadband access connections (21 per cent).

Overwhelmingly, executives believe that discounted pricing through service bundling will be the primary motivation behind consumer spending. Nearly two-thirds (64 per cent) of all respondents — and three-quarters (74 per cent) of network operators surveyed — said they believe that discounted service bundles provide the greatest enticement to buy IPTV. The ability to move content between devices was also cited as an important enticement, selected by 38 percent of respondents, as was the convenience of a single bill for multiple services, selected by 31 per cent of respondents.

Yet there are obstacles to IPTV adoption. One-quarter (25 per cent) of respondents said that the primary short-term obstacle to IPTV adoption is a quality-of-service issue relating to unproven architectures, low bandwidth and other technology issues. The same number (25 percent) said they believe that quality-of-service issues will be resolved over the next three years, leaving stiffer competition from alternative TV providers as the toughest challenge to the adoption of IPTV. Another challenge to IPTV adoption, cited by 19 percent of respondents, is high subscription fees due to the high cost of network access and equipment.

When asked which types of companies are most likely to generate revenue from IPTV, the vast majority (87 per cent) of respondents selected content providers, followed by telecommunications providers (72 per cent). Not surprising, more than two-thirds (69 per cent) of respondents said that traditional broadcasters have the least to gain from IPTV, a view held strongly by respondents across all company types, including broadcasters themselves.