IP TV Market Review February 24, 2006

1
IP TV Market ReviewFebruary 24, 2006

• Bob Larribeau
• Program Director IP TV
• bobl_at_mrgco.com
• 1 415 241 9920

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IP TV Tracking Service
3
Global Forecast

• 36.9 M subscribers in 2009

4
North America

• Verizon
• Rolling out video
• Paced by fiber deployment and local video
  franchise acquisition
• ATT (formerly SBC)
• Aggressive implementation strategy
• Significant schedule dependencies
• BellSouth Market Trial mid 2006

5
Europe

• Incumbents Moving Forward
• France Telecom leading
• Belgacom, BT, Telecom Italia, Telekom Austria
  deploying
• DT and others have plans for 2006
• Competitors are Leading
• Free and FastWeb are global leaders
• Versatel, Video Networks, and others emerging

6
Asia

• Developed Markets Moving Forward
• PCCW in Hong Kong is a global leader
• Softbank and KDDI commercial
• Chunghwa Telecom still confused
• Emerging Markets Becoming Important
• Southeast Asia emerging
• China becoming largest IP TV market
• India emerging as an important market
• A degree of skepticism is appropriate

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IP TV Strategies

• Market Entry
• Competitive carriers
• New Market
• No/weak cable/satellite competition
• Preemption
• Beat cable to the triple play
• Maintain Base
• Respond to competitive losses

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Market Entry Strategy

• Objectives
• Increase telecom competition
• Win new customers
• Strategy Choices
• Bundling
• Pricing
• Services
• Marketing

• Examples
• FastWeb - Italy
• KDDI - Japan
• Softbank Japan
• Free France
• Neuf France
• VNL UK
• Magnet Ireland
• Various - Scandinavia

9
New Market Strategy

• Objectives
• Increase subscriber spending
• Grow Pay TV market
• Strategy Choices
• Full service
• Attractive pricing
• Attract new Pay TV users

• Examples
• France Telecom
• Cyprus Telecom Authority
• Telefonica Spain

10
Preemption Strategy

• Objectives
• Preempt cable triple play
• Increase subscriber spending
• Strategy Choices
• Full service
• Attractive pricing
• Competitive against cable

• Examples
• Chunghwa Telecom Taiwan
• Manitoba Telecom Services Canada
• Sasktel Canada
• SureWest U.S.
• Other U.S. IOCs

11
Strategy to Defend Base

• Objectives
• Retain current subscriber base
• Increase subscriber spending
• Strategy Choices
• Better than cable
• Competitive pricing
• Enhance DSL

• Examples
• PCCW Hong Kong
• SBC U.S.
• BellSouth U.S.
• Belgacom Belgium
• Swisscom Switzerland
• Telia/Sonera - Sweden

12
Services Value Chain
End-to-end Protected
Films (Hollywood, Independent, International)
Aggregators (TVN, ViewNow, HITS, NCTC)
Service Provider
Subscriber
EPG/Service Selection
Link Protected
Protected Linear Channel
On Demand (HBO, Gotuit, Mag Rack)
Link Protected
Unprotected Linear Channel
Link Protected
Protected On Demand
Linear Network (ESPN, MTV, HBO, etc.)
Link Protected
Unprotected On Demand
Games (Viseware, ICT)
Games
Link Protected
Other Content
Link Protected
Other Content
Ad Insertion
Ad Agencies
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Network Value Chain
Video System Integration
VOD Cache
VOD Library
STB
Access Mux/ Ports
Video Head End
Satellite Dishes
STB
STB
Access Mux/ Ports
STB
STB
Backend System Integration
Data Network Integration
Service Assurance
STB
Access Mux/ Ports
Middle ware
OSS/ BSS
CP/ DRM
STB
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Selected Key Issues

• Video On Demand
• Usage will grow significantly with NPVR
• Will drive network architecture
• The Home Network
• In the critical path of the service
• Must manage the home network
• Cost vs. functionality dilemma

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Selected Key Issues

• Content
• We give the RBOCs the same deal we give anybody
  with no customers.
• Offer more channels than cable
• Equal or better video on demand content
• Can create unique offerings but it will not be
  easy

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Selected Key Issues

• Internet Video
• Emerging as an important service
• iPOD downloads
• Direct view services by cable and Internet
  companies
• Confusion factor
• Is IP TV the same as Napster?
• Service providers should take lead in Internet
  Video

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IPDR Agenda

• IP TV Billing is Simple Today
• Broadcast fixed monthly charge
• VOD a couple of transactions per month
• But New Services May Change This
• Transactions
• Video/audio downloads
• Mobile like services
• TV commerce
• Payment system

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IPDR Agenda

• System Monitoring
• Subscriber behavior
• Channel usage
• Channel changing
• EPG/VOD Menu operation
• Network operation
• Congestion in transport and home networks
• Transaction loading in middleware and content
  protection/DRM systems

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IPDR Agenda

• Content Usage Behavior
• Track channel change to the second
• Track VOD viewing patterns
• Near real time tracking possible
• Potentially high value to content owners
• Test marketing campaigns
• Fine grained demographics
• Track market shifts
• PCCW and Neuf Telecom are providing tracking
  information to content owners today