(3 November 2007 6:00 pm)

MUMBAI: Research firm Canalys forecasts there will be 39.6 million IPTV subscribers worldwide by the end of 2010.

Europe, Middle East and Africa will remain the largest region for IPTV, although its dominance will be reduced as rapid growth in the US is expected – 12.1 million subscribers by the end of 2010.

The potential in the Asia Pacific region will be restricted by regulatory issues. Infrastructure investment is needed to boost developing markets.

The IPTV market will see rapid growth over the next three years, driven by telecom operators' desire to boost ARPU (average revenue per user) and counter the growing threat from competing triple-play providers.

EMEA accounted for two-thirds of global IPTV subscribers at the end of 2006, and will remain the largest market through to 2010, when the region will account for 38 per cent of the worldwide total.

Canalys VP Alessandra Fitzpatrick says, "France is the European IPTV trailblazer, boasting 1.3 million subscribers at the end of 2006. Good, early uptake has been driven by a number of factors, notably low broadband prices, the prevalence of bundling low-cost IPTV service with broadband/telephony packages and limited competition from cable operators."

But the favourable market conditions that have helped IPTV thrive in France are not evident in all markets. In most, high levels of competition from existing services will make it difficult for IPTV providers to compete unless they can differentiate their services, either by providing better quality of service or by maintaining lower subscription fees.

"IPTV providers will have to compete on price in the short term. As a result, deploying TV services may not prove to be a significant revenue generation opportunity, although establishing a position in this emerging sector will be crucial for service providers seeking to protect their positions as prime providers of communication services," Fitzpatrick added.

With Verizon growing rapidly and AT&T moving beyond the infrastructure development phase, Canalys expects US to contribute to 31 per cent of all IPTV subscribers by 2010.

The Asia Pacific region also offers huge potential, but the regulatory environment is restricting development. The IPTV markets in China, Japan and South Korea are heavily constrained at present, although the 2008 Beijing Olympics may prompt Chinese authorities to accelerate plans."

IPTV will be a financial loss leader for many providers over the next five years when the costs involved with rolling out and evolving services are factored in, but if telecom operators are to retain their position as primary providers of consumer communication services, this may be a price they need to pay.

It is difficult to see how the majority of IPTV providers will be able to generate significant profit from services in the near term, especially when the need to be price competitive is considered.

In EMEA and North America, established cable and satellite operators will offer stern competition. Convincing existing pay-TV subscribers to switch provider will not be easy, with most existing IPTV services offering little beyond what is already provided by cable and satellite.