WATPA: FW: European telecommunications companies dream of a future in television with IPTV

European telecommunications companies dream of a future in television with
IPTV

By Associated Press

AMSTERDAM, Netherlands (AP) -- Dutchman Wart Fransen points a remote control
at a little box atop his television and firmly presses down on the button to
change the station.

There's a delay of about a half-second, and then the new channel comes on.
The image is frozen in place for an instant before it begins to run
smoothly.

Fransen is now watching TV over his telephone line, a technological marvel.
But he's not that impressed.

''I use it now and again, definitely for soccer,'' he says of the service
that came bundled with his 40-euro ($50) per month high-speed Internet
connection. ''The remote is really slow. But I think the image is better
than cable.''

European phone companies, like their American and Asian counterparts, are
dreaming of a future in television using a technology known as Internet
Protocol TV, or IPTV. Most of these companies are boosting the capacity of
their copper phone wires with next-generation versions of DSL broadband
technology, though some homes are getting IPTV service over new fiber-optic
cables.

The foray into video is a counter-strike against the cable TV companies that
have broken into the phone business using another IP technology known as
Voice over IP, or VoIP, stealing customers and driving down prices. Yet
despite the obvious business logic of returning fire with television, phone
companies face a greater challenge, as IPTV and video over DSL are
relatively unproven technologies as compared with VoIP.

Even so, while IPTV is just getting off the ground in the United States
through AT&T Inc. and some rural phone companies, European and Asian
carriers have already built a substantial base of television customers.

By the end of 2006, the number of IPTV subscribers in Europe is expected to
reach 3.3 million, up from less than a million a year earlier, the Gartner
Group estimates. The research company forecasts that number will double in
2007 and mushroom to 17 million by the end of 2010.

Hong Kong's PCCW Ltd. is the world's largest IPTV company with more than
half a million customers. France has the most IPTV subscribers of any
country with more than 1.6 million, spread between France Telecom SA and
startups like Iliad SA and Neuf Cegetel SA. Spain's Telefonica SA claims
more than 200,000 users.

More recently, Swisscom AG launched subscription TV in Switzerland, while
Germany's Deutsche Telekom AG introduced the service in Germany, France,
Hungary and Croatia. Both Swisscom and DT, as well as AT&T, are using an
IPTV platform from Microsoft Corp., confident they have resolved software
and hardware glitches that slowed their deployments. Britain's BT Group PLC
is expected to launch Microsoft-based IPTV services soon.

''A number of pieces are falling into place at the same time,'' Gartner
analyst Adam Daum said, calling his firm's projections for the IPTV market
''conservative.''

As compared with the United States, where phone and cable companies are
looking to reap $100 or more per month for a ''triple-play'' of phone,
television and Internet service, most European telecoms are planning to
charge just 30 euros to 50 euros ($38-$63) for the bundle.

Daum said the European companies see IPTV as a tool to lure cable customers
and then generate new revenue later by selling premium services such as
movies on demand and specialty sports packages.

''Many subscribers hate their cable companies, and at least 10-to-15 percent
would be willing to leave immediately if they were offered a choice,'' he
said.

IPTV breaks down a video stream into data packets, similar to those used for
most other online traffic, from e-mail to Web pages and music downloads. The
video packets are sent to a set-top box that acts as a decoder, the end
result looking and feeling a lot like cable TV.

One European telecom frequently cited as an IPTV success story is Italy's
FastWeb SpA, which has 170,000 subscribers and forecasts it will turn a
profit in 2007.

But any number of things could go wrong, as evidenced by VersaTel. The
money-losing Dutch carrier failed to meet its targets and is now in the
process of being acquired by Sweden's Tele2 AB, another alternative telecom.

VersaTel is controlled by tycoon John de Mol, creator of the ''Big Brother''
reality series. It began its IPTV rollout midway through 2005 after buying
exclusive rights to broadcast Dutch soccer games for three seasons.

Sports are seen as the perfect fit for IPTV, since fans are prepared to pay
to watch live games, and matches are not as vulnerable to pirating as
movies: once the final score is known, nobody wants to see anything but the
highlights.

But VersaTel is still shy of the 100,000 subscribers it had targeted by the
end of 2005, suggesting the company may have overestimated the importance of
sports.

Fransen, a VersaTel customer, says he bought his subscription simply because
it was the fastest Internet connection available at that time. The
co-founder of a Web site traffic measurement company called Opentracker.net,
he frequently works from home and the soccer was ''a nice bonus,'' he said.

But he also has kept his slower cable Internet connection as backup for 20
euros ($25) per month, and said he'd rather drop the IPTV service than pay
more.

Meanwhile there's the problem of the remote controls, which got a highly
publicized negative review from the Dutch Consumer Protection Agency.

VersaTel spokesman Remco Meerstra insisted its IPTV rollout was ''going
well,'' and complaints about the remote were misguided. ''It's reacting
fast, but it is slower than normal analogue,'' he said.

There are other potential pitfalls.

One is Microsoft, which despite devoting tremendous energy to IPTV also
hopes its Windows Media Center software will enable computers to fill the
same role as set top boxes, bypassing the telecom companies to watch video
over the Internet.

Another threat comes from Amazon.com Inc. and Apple Computer Inc.'s iTunes,
both of which recently began selling movie downloads. The explosive growth
of free video from YouTube and other Web sites may prove even more dangerous
if consumers find different ways to route that media from computer to TV.

Rudy Roth, a strategist at Royal Philips Electronics NV, one of the world's
largest television and set-top box makers, said some telcos will succeed
with IPTV.

He argues that the video offered by the telecoms will be more reliable and
of better quality than what's currently available on the Internet.

''Bandwidth isn't the only issue. You have to think about quality of service
and ease of use,'' Roth said.

As cable operators do, AT&T and European phone companies are designing their
networks to give preferential treatment to their own video traffic as a way
to ensure quality.

Some critics have called for governments to adopt ''Net Neutrality'' rules
that would restrict such practices so that consumers are free to choose
providers without worries about quality.

But so far, officials in the United States and Europe haven't seen the need
to impose new laws or regulations. In April, the European Commission said it
would ''closely monitor attempts to call into question the neutral character
of the Internet.''

Copyright Technology Review 2006.

http://www.technologyreview.com/Wire/17811/
Received on Tue Nov 21 23:13:33 2006