IPTV has yet to hit mainstream in Russia, but all the signs are that it is set to become a disruptive technology in Pay-TV, says Intec’s Olga Speakes
The Russian Pay-TV sector is currently witnessing intense competition as the major conurbations of Moscow, St Petersburg and surrounding districts have become prime competitive territory for communications service providers, including ISP’s, cable broadband, competitive local exchange carriers, and fixed wireless and satellite operators, fighting for a share of the customer’s wallet. There are eleven cities in Russia with populations in excess of one million. Leading the charge in many of these lucrative markets are industry players like Comcor TV, Comstar United, MGTS, Mostelecom, Golden Telecom, Corbina, and PeterStar.
These companies, amongst many others, are manoeuvring for a competitive position in the growing Russian broadband internet market (user numbers grew 94.4% year-on-year in 2005 according to industry analysts, Global Insight Inc.), and especially in areas that provide the right conditions for a strong uptake of services such as high wealth inhabitants and good last mile infrastructure. Many have committed significant investment to upgrade their networks and to develop their operations beyond voice telephony, increasing the profitability of their access lines and pursuing a strategy of broader, value-added service provision.
This intense competition for broadband internet and the provision of pay-TV services is likely to be good news for subscribers. Competition normally means greater innovation, lower prices, better services and more choice, and we are starting to see signs of this: in recent press reports Corvette Telecom planning to reduce the cost of pay-TV in Moscow; MTU-Intel reporting a successful take-up of its Stream TV brand with over 28,500 subscribers; Corbina announcing that it will launch a long distance network and IPTV; Moscow IPTV expanding its service to 80 channels of entertainment including Chelsea TV and Manchester United TV; and VolgaTelecom continuing its network consolidation strategy.
Those headline grabbing initiatives are just the tip of the iceberg. The last few years have seen a regulatory shakeup of the county’s media market with new ministry posts being appointed and structural changes being made as the market gradually moves towards liberalisation. Combine that with rising levels of income, increasing PC penetration, development of digital terrestrial television (DTT) services by the state, and an appetite for targeted content and interactive packages from the increasingly well-off middle classes , and you could argue the dawn of the Russian Pay-TV market has arrived.
IPTV: New Opportunities for Increasing Telecoms Revenue
Whilst IPTV currently only accounts for a minor share of the Pay-TV market, many see it as a disruptive technology and a viable alternative to cable and satellite, which explains the significant rise in active deployments and test projects by service providers. (Industry Analysts, iSuppli is forecasting IPTV to reach over 105million global subscribers in 2011). The shift of users from cable or satellite TV is likely to be minimal in the short term. However service providers expect the expansion of IPTV subscribers in Russia to come from the demand for high-speed internet access stimulating a rapid uptake of broadband services and from households who currently have broadband lines but do not have a Cable or Satellite TV subscription.
The advent of IPTV comes at a time when traffic cost is decreasing and value-added broadband services are becoming increasingly important in the consumers choice of a broadband carrier. (In 2005 Internet users in Russia grew by 18% to 21.8 million subscribers according to Global Insight. Revenues from internet totalled 38.5 billion roubles, compared to 180 billion roubles from fixed-line telephony.) Service providers view the future of IPTV as a way of increasing the profitability of their access lines by offering ‘sticky’ bundles of phone, television, and internet to their customers in one package. And the promise of IP-delivered services means they can personalise services and create highly interactive offerings that go beyond the conventional restrictions of digital television services.
In this rapidly evolving market, managing the balance between consumer requirements and successful service provision, against a back-drop of intense competition, remains a considerable task and service providers must not underestimate the challenge of rolling out IPTV services. Many need to continue to ramp up their investments in their core networks, software and customer premises equipment for IPTV delivery on a wider scale and to ensure they keep ahead of their cable and satellite rivals. In addition, consumers won’t pay for services that are unreliable or put up with potential latency in the streaming of video services; they require a different level of service experience than is expected for more traditional telecommunications services.
The Challenge of IPTV Service Creation and Delivery
The reality for any new product or technology is that there will be initial teething problems in both the business model and technology. Therefore it is vital that this period is restricted only to the early adopter stage of IPTV rollout and that service providers do not attempt to engage the mainstream market until concepts are proven and reliable. Service providers will also need the ability to adapt their offering as the IPTV roll out occurs and business and operational support systems (BSS/OSS) are expected to play a critical role in this, especially at the mediation, data capture, billing, settlement and customer management layers.
IPTV will create a huge volume of consumer data that can be used to target new services and build a clear picture of consumers and their usage patterns. IPTV will also generate a high number of event data records (EDRs). Capturing this information accurately within the service mediation layer is critical so that the service provider can track each channel change, the channels being watched, which adverts are skipped and so on. This information is necessary to evolve the offering and to more accurately bundle services according to consumer’s usage patterns.
The delivery of program choice is also crucial. Concepts such as ‘catch up TV’ using RSS technology to search an extensive catalogue of past programmes and films is the sort of compelling application that can make IPTV stand out from the competition. BSS/OSS can also help here by enabling service providers to activate new services, content and delivery platforms within a short lead time, provide real-time authentication and approval based on the consumers profile, simplify the purchasing options through real time advice of charge and rating, control the content by restricting access to parameters, manage pre-paid tokens and gift vouchers and settle with a wide range of content partners.
There is also the need to create a simple, convenient and interactive customer experience. This demands fast responses between customer and service provider and a high degree of self management. In this type of environment, service providers’ BSS/OSS must be capable of working seamlessly across multiple technologies, offer real time delivery of selected content and services, enable instant dialogue and communication with the consumer so that they can alter their subscriber and service profiles in real-time, and offer bill payment and subscription through a variety of means including the television itself.
Service providers must also find ways to differentiate themselves from existing television providers. This may be extended through services such as unified messaging (enabling a consumer to read any voicemail messages on the televisions screen rather than having to check the landline and missing messages) and reinforced by the improved experience coming form faster channel changes and improved user guides. However, the differentiation comes not just from the product but the way the product is priced, delivered and bundled, which is much more complex for IPTV than for most traditional services. All of these aspects must be supported by BSS/OSS which means, amongst other things, being able to attract major content providers and manage innovative partnership pricing models, bundle and cross discount with other services, offer complex payment and account capabilities and allow parents to update their profiles and set restrictions.
In conclusion, today’s IPTV imperative is to manage all of these technical challenges and make business processes controlled, repeatable, visible and auditable before IPTV is ready for the mainstream market. This is against a backdrop of intense competition from cable and satellite rivals and the constant search for greater efficiency in all aspects of the service providers business. The opportunity is to do this without the constraints of legacy business practices and operational silos or the need for expensive and complex new technical infrastructures. Recent developments in BSS/OSS are seeing solutions that are flexible, agile, and scalable and can be used as a source of differentiation. Such approaches should be embraced. Controlled, more efficient processes are proven to give service providers the ability to embrace innovation, add value to their organisation and achieve sustainable performance.
Author: Simon Dadswell, Advanced Solutions Marketing Manager, Intec.
*Olga Speakes is Regional Director at Intec Telecom Systems (www.intecbilling.com), world-leading specialists in BSS/OSS systems including charging and billing, mediation and interconnect/wholesale software