1. April 2010
IPTV Perspectives
A collection of analysis and commentary on the
global IPTV industry
Featuring contributions from:

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3. Introduction
The picture looks decidedly mixed for Forum in London will bring together all of us featured in this report, with many
IPTV in 2010. the IPTV industry to discuss how the of us chairing or speaking during the
technology can increase its share of the conference. If you want to know more
According to the latest figures from market and the opportunities it presents about our IPTV analysis, insight, KPIs or
our World Broadband Information to players from across the technology forecasts then please get in touch and one
Service (WBIS), IPTV services from market spectrum. of my colleagues will be happy to take you
telecoms operators only had 5% of the through our coverage and services.
global multichannel-TV market and 2% Along with a few of my fellow analysts
penetration of the world’s households. we’ve put this short report together,
They have struggled to win market share selecting content covering key topics,
from conventional TV and in the major such as content delivery network (CDN) By Rob Gallagher
markets, success stories are unfortunately strategies and games consoles, an – Principal Analyst
rare. However, our research highlights that interesting profile on Viasat, which expects
IPTV has started to win significant share in IPTV to play a key role in driving subscriber
several small and emerging markets. growth, and a detailed look at the lessons
to be learnt from the South Korean market.
And video-over-broadband is not just This report starts with an overview of our
a game telecoms operators can play. latest IPTV market data, which our WBIS
The technology is increasingly being team updated the week before the IPTV
embraced by conventional cable, satellite World Forum.
and terrestrial TV providers as well as
Internet firms and consumer electronics We have a large team of analysts
manufacturers. This year’s IPTV World attending this year’s IPTV event, including
Contributors About Informa Telecoms & Media Contents
This report features contribution from: Informa Telecoms & Media delivers analysis Glimmer of hope for IPTV in select
and insight into the global IPTV sector, markets 04
Rob Gallagher which is based upon our own primary
– Principal Analyst research. Viasat hails IPTV as growth driver 05
rob.gallagher@informa.com
Through our World Broadband Games consoles start to define their
Julia Glotz Information Service (WBIS) our dedicated roles in the TV ecosystem 06
– Senior Analyst team of analysts are tracking KPIs and
julia.glotz@informa.com producing reliable five-year forecasts, all Operator-CDN market blossoms into
of which are searchable and exportable, all manner of varieties 10
Giles Cottle enabling you to analyse the data most
– Senior Analyst relevant to your business. South Korean IPTV numbers on the
giles.cottle@informa.com rise, but questions linger 13
Our Intelligence Centre features 10
Tony Brown topic and geographic-focused channels,
– Senior Analyst including one on television and one
tony.brown@informa.com on broadband & Internet, which house
all of our analysis, insight, opinions and
commentary, as well as presentations from
Informa’s global conferences.
For our clients we are their global research
partner, supporting important decisions
with actionable intelligence.
03

4. Glimmer of hope for IPTV in select Rob Gallagher | Principal Analyst
rob.gallagher@informa.com
markets
IPTV success stories remain rare in many Fig. 2: Global, top 10 countries by IPTV Fig. 3: Global, top 10 operators by IPTV
major markets, as broadband-based subscriptions, 4Q09 subscriptions, 4Q09
TV services from telecoms operators
struggle to take share from conventional Rank Country Subscriptions Operator (country) Subscriptions, 4Q09
TV. But IPTV has gained a foothold in 1 France 9,011,000 Free (France) 3,550,000
several small or emerging markets 2 US 4,948,000 Verizon (US) 2,861,000
and begun to win customers in some 3 China 3,550,000 Orange (France) 2,761,000
developed mid-sized ones, albeit at a 4 South Korea 1,713,000 China Telecom (China) 2,740,000
slow pace. 5 Hong Kong 1,172,000 SFR (France) 2,700,000
6 Japan 938,197 AT&T (US) 2,064,000
Subscriptions to IPTV services stood 7 Germany 859,900 PCCW (Hong Kong) 1,001,000
at 29.7 million at the end of 2009, up 8 Italy 855,000 KT (South Korea) 994,000
from 19.4 million a year earlier (see fig. 9 Spain 798,000 NTT Plala (Japan) 830,000
1). The number of quarterly net new 10 Belgium 752,000 China Unicom (China) 810,000
subscriptions, or net adds, reached a Source: Informa Telecoms & Media Source: Informa Telecoms & Media
record high of 3.2 million in the last three
months of the year.
IPTV has gained significant multichannel- Unsurprisingly, the top 10 providers by
But IPTV still has a long way to go. TV-market share where one or more forms subscriptions were based in the world’s
The technology had only 5% of the of conventional TV is absent or weak, five largest IPTV markets, though there
multichannel-TV market and less than 2% particularly in small or less developed was some movement of their rankings
penetration of the world’s households, markets, such as Iceland (81.0%), Qatar during the year.
despite services being available in over 50 (80.0%), Cyprus (67.0%), Slovenia
countries. (35.0%), Croatia (25.0%), Estonia (25.0%), France’s Free kept the top spot, but Verizon
Montenegro (23.5%) and Greece (23.5%). of the US overtook China Telecom to reach
And just four countries accounted for number two. China Telecom was relegated
nearly two-thirds of all IPTV subscriptions: Services also began to take the majority further to number four, after being
France, the US, China and South Korea (see of net adds in some more competitive overtaken by Orange France. Germany’s
fig. 2). In many other major markets, IPTV mid-sized markets in 2009, including Deutsche Telekom, at number 11, was
made slow progress against cable, satellite Switzerland, Belgium, Singapore and the largest provider by subscriptions
and terrestrial TV competition. Portugal. outside of the big-five markets, followed
by Belgacom of Belgium and Spain’s
Telefonica.
Fig. 1: Global, IPTV subscriptions and net additions,
4Q07-4Q09 The providers with the highest levels of
household penetration were: Hong Kong’s
PCCW (43.7%), Iceland Telecom (38.5%),
CYTA of Cyprus (23.2%), Estonia’s Elion
(22.5%), and Belgacom (16.7%).
This article features IPTV data from WBIS and has been taken
from the Intelligence Centre, the platform through which
Informa delivers all of its topic, country and company insight
and commentary. For more information, please visit:
www.intelligencecentre.net
Source: Informa Telecoms & Media
04

5. Viasat hails IPTV as growth driver Julia Glotz | Senior Analyst
julia.glotz@informa.com
Viasat, the pay-television operator Average revenue per user (ARPU) for
owned by Sweden’s Modern Times DTH premium subscribers was SEK4,435
Group, expects IPTV to play an (US$620) for the fourth quarter of 2009, a
increasingly important role in driving 9% year-on-year increase, which Albrecht
subscriber growth in its Nordic said was largely driven by price increases
operations over the next year. on some subscription packages and
increased uptake in “value-added” services
Most of Viasat’s premium subscriber such as digital-video recorders and high-
growth in the region in 2009 came from definition channels.
IPTV, which accounted for 60,000 of a
total of 69,000 net additions with the Albrecht expected premium DTH ARPU to
rest coming from direct-to-home (DTH) continue to grow by “low- to mid-single-
satellite. digit percentage points” over the next year.
During the fourth quarter of 2009, Viasat Operating income for Modern Times
added a net 21,000 new premium pay- Group’s Nordic pay-television business was
television subscribers – 10,000 DTH and up 5% year-on-year at SEK725 million at
11,000 IPTV. The company ended 2009 the end of 2009.
with a total of 823,000 premium pay-TV
customers, compared to 754,000 premium Viasat’s “emerging markets” pay-television
subscribers at the end of 2008 (see fig. 1). division, which operates DTH services in
the Baltic states and Ukraine and which
Fig. 1: Modern Times Group, pay TV subscriber also distributes pay-TV packages through
growth, Nordic region, Dec-08 to Dec-09 (000s) Estonian IPTV operator Elion, reported
a 33% year-on-year increase in net sales
Dec-08 Sep-09 Dec-09
to SEK875 million compared to SEK658
Premium subscribers 754 802 823
million in 2008. Operating income for the
– Of which DTH satellite 676 675 685
year was SEK 168 million, up from SEK106
– Of which IPTV 78 128 138
million a year ago.
Basic DTH satellite subscribers 69 48 45
Premium DTH ARPU (SEK) 4,077 4,401 4,435
Fig. 2: Modern Times Group, pay TV subscriber
Note: SEK1=US$0.14
growth, emerging markets, Dec-08 to Dec-09 (000s)
Source: Modern Times Group
Dec-08 Sep-09 Dec-09
Premium DTH subscribers 218 207 216
Basic DTH subscribers 11 22 24
Modern Times Group president and chief
Mini-pay TV subscriptions 36,469 39,620 40,778
executive Hans-Holger Albrecht said that
premium-subscription growth in the Source: Modern Times Group
fourth quarter had been driven by more
households taking digital-satellite services
as analog-terrestrial signals were switched Baltic and Ukrainian premium DTH
off in Denmark (November 1) and Norway subscriptions increased by 9,000 in the
(December 1) as well as by continued fourth quarter of 2009 but were flat
demand for IPTV. year-on-year, with 216,000 at the end of
December 2009 compared with 218,000
Albrecht expected IPTV to continue to be at the end of 2008. Basic DTH and “mini-
a key factor in driving subscriber growth pay” subscriptions were both up, reaching
in the Nordic region in 2010. “We expect a respective 24,000 and 40.78 million
continuing subscriber acquisitions with subscriptions (see fig. 2).
increasing weighting on IPTV in terms of
This piece of analysis has been taken from the Intelligence
subscriber growth,” he told a telephone Centre, the platform through which Informa delivers all of its
conference on Modern Times Group’s full- topic, country and company insight and commentary. For
year results. more information, please visit:
www.intelligencecentre.net
05

6. Games consoles start to define their Giles Cottle | Senior Analyst
giles.cottle@informa.com
roles in the TV ecosystem
• Informa Telecoms & Media counts 25 Fig. 1: Nongame services offered by the big three
third-party pay or catch-up TV services games consoles, Feb-10
that have launched, or will launch, on
Console Web service Social Video-on-demand
the three major games consoles.
Nintendo Wii Offers photo sharing, shopping, In-house services including a Nintendo offers Wii no Maa, a social
news and weather forecasts and message board and the Everybody VOD service that offers cartoons and
• Sony’s more open approach to a Web browser. Other features,
including a food-delivery service, are
Votes channel are available;
Nintendo has yet to strike any deals
other family-friendly shows from
major content providers, in Japan.
PlayStation means it has been able to included in Japan. with third-party social networks or
media providers, however.
offer more services than Microsoft’s
Sony PlayStation 3 PS3 users can access Home, Home is Sony's PS3-based online Sony sells VOD content via the
Xbox 360. the console's virtual world and community. Users can create avatars, PlayStation store in the US, the
community, the PlayStation store which live within Home and can UK, France, Germany, Spain and
and other services. The service also interact with the avatars of other Japan. VidZone, a service that
• The proliferation and use of existing includes a Web browser. users. Users can also access several allows users to watch music videos
social-media sites via the PS3's Web free, is available across Europe and
technologies and platforms, including browser. Australasia.
Microsoft’s Mediaroom and Silverlight
Xbox 360 Xbox Live users can play online Twitter and Facebook are available Zune, Microsoft's VOD service, was
and Adobe’s Flash, will determine which against each other and download full in the majority of countries in made available across Europe and
providers launch on which platforms. games and other additional content.
Unlike the PS3 and Wii, Xbox Live
which Xbox Live has launched.
Music-discovery service Last.fm is
Australia, having previously been
available only in the US.
does not include or support a Web available in the UK and US and will
browser. soon launch in Germany. Pioneering
• Consoles are unlikely to usurp TV interactive live game show 1 vs 100
platforms as the main method by which is available in the UK and US.
services can be accessed. Source: Informa Telecoms & Media
Introduction connected home. The headline-grabbing their pay TV platforms – satellite – mean
deals have included Facebook and it is difficult to offer a true on-demand
The idea of the games consoles as a Twitter, which are available on Xbox Live service. Instantly being able to offer on-
connected device that allows for far more in several countries, and Netflix, whose demand content to Microsoft’s estimated
than game-playing is not a new idea. Watch Instantly video-streaming service is 2.5 million Xbox Live homes in the UK will
After all, it was back in 2002 when Informa available via all three major consoles. be extremely appealing.
Telecoms & Media reported on news of
a corporate restructuring at Sony that But outside the US, the big move has Multiroom viewing or STB replacement:
resulted in the creation of a Broadband been the inclusion of major third-party TV PCCW says that one of the main reasons
Strategy Group within the company. services by the main consoles, including it is offering Now TV via the PS3 is that it
The group was charged with pushing catch-up TV services provided by will enable people to watch its service on
the evolution of Sony’s PS2 console as a broadcasters and pay-TV services usually a second set. This will appeal to customers,
broadband-based entertainment-delivery delivered via satellite (DTH) or IPTV (see because such a service is usually
medium. fig. 2). something that operators charge for. It is
particularly apt in Hong Kong, because
Several years and one generation of many users live in small apartments and
consoles later, and it’s becoming clear Analysis space is at a premium, meaning any
that games consoles will be, if they device providing multiple services usually
aren’t already, one of the key players Motivations for offering services via a has an advantage.
in the connected home. In no way is console vary greatly
this more obvious than in the types of Creating a splash: Well-funded
services available via the devices (see fig. There is only ever one ultimate reason communications providers that are new to
1). Microsoft, Sony and Nintendo have for a broadcaster or operator to offer the TV market can use consoles to boost
been gradually ramping up the features services via new platforms: to go where their TV efforts. KT of South Korea was
of their Xbox 360, PlayStation 3 and Wii its audience is, so it can reach as many the first operator to launch a service via a
consoles, including providing their own eyeballs as possible. But beyond this, there games console, but it was something of
VOD libraries. are some subtleties and nuances that a TV laggard when it did so. Legislation
can hasten an operator’s decision to offer prohibited the operator from launching
Where the picture gets really interesting these services: linear services, and its on-demand service
is in the provision of third-party services. came after that of rival SK Broadband,
Ultimately, the extent to which consoles On-demand on the cheap: Sky in the UK then branded Hanaro Telecom. Launching
work with third parties will determine and Canal in France have persevered with over the PS3 was a natural step, given that
just how ingrained they become in the the Xbox 360 because the limitations of persuading consumers to install and pay
06

7. Fig. 2: Global, pay-TV and catch-up services offered Fig. 3: iPlayer, program requests by platform,
via games consoles, Jan-10 Dec-09
Country Service provider Service Platform
Australia ABC iView PS3
Bulgaria AXN AXN Player PS3
Czech Republic Animax Animax Player PS3
Czech Republic AXN AXN Player PS3
France Canal Canal+ Xbox 360
Germany ZDF ZDF Mediathek PS3
Hong Kong PCCW Now TV PS3
Hungary Animax AXN Player PS3
Hungary AXN Animax Player PS3
Ireland RTE RTE Player PS3
Netherlands NOS NOS Journaal PS3
New Zealand TVNZ TVNZ ondemand PS3
Poland AXN AXN Player PS3
Portugal Vodafone Casa TV Xbox 360
Romania AXN AXN Player PS3
Romania Animax Animax Player PS3
Slovakia Animax Animax Player PS3
Slovakia AXN AXN Player PS3
South Korea KT Qook TV PS3
Spain Antenna 3 Atenna3videos PS3
Spain La Sexta Misexta.tv PS3
Spain RTVE RTVE a la carta PS3
UK BBC iPlayer Wii, PS3
UK BSkyB Sky Player Xbox 360
US AT&T U-Verse Xbox 360
Source: Informa Telecoms & Media
Note: Includes services announced but not yet launched
Source: Informa Telecoms & Media
broadcasters is that they can bring a
“lost generation” of viewers back to the
for another settop box simply to access third-party broadcasters in these markets TV. Broadcasters reason that if they bring
on-demand viewing was also going to will be difficult, because the costs of their services to the console, they will
be a hard sell. Vodafone Portugal also offering the service will be high compared be able to win back viewers who have
launched its Casa TV service via Xbox Live with their potential benefits. abandoned the TV for gaming. But that is
only a few months after it launched the a pretty major assumption to make. Most
service. Consoles attract new viewers, but there gamers are technology-savvy people and
is some cannibalization from existing are arguably those who would still watch
Sony’s vertically integrated approach: sources via the PC. It is likely that many of these
Some eyebrows were initially raised when “lost” viewers have abandoned TV because
Sony channels AXN and Animax were Viewing catch-up services via games it simply does not interest them as a
included as dedicated catch-up services consoles is popular. Months after launch, medium, rather than because they cannot
on the PlayStation Network. Informa the PS3 now accounts for a significant access it in the way they want too.
estimates that, by the end of 2009, about proportion of iPlayer program requests
2 million PS3 consoles were sold in (see fig. 3). And in Australia, ABC achieved It is also clear that at least some viewers of
Europe outside the Big Five countries. The 89,000 views a week only days after the catch-up TV via the console are churning
potential audience for viewing Animax iView service officially launched via the from other platforms. An analysis of iPlayer
and AXN can therefore be assumed to PS3, having achieved only 83 views when data provided by the BBC shows that
be extremely small. These launches most the service was available via the console the number of iPlayer requests via PCs
likely represent an opportunity for Sony but not promoted (see fig. 4). and Macs dropped in the month the PS3
to experiment with offering catch-up TV launched.
services in smaller markets. Signing up One reason games consoles appeal to
07

8. Fig. 4: Australia, iView visits via PS3, Nov-09 broadcasters used Silverlight to show
live streaming of the Olympic Games, to
great acclaim. NOS of the Netherlands
uses Flash for its VOD service that is being
made available via the PS3. But it uses
Silverlight for live streaming because, it
says, it is much cheaper.
Less settop-box subsidization means
lower capex and higher ARPU for
operators
Although Microsoft Mediaroom customers
offering services over the Xbox 360 will
Source: Informa Telecoms & Media not be able to let their subscribers use the
device as a primary settop box, Qook TV
and Now TV subscribers can use the PS3
Technology restraints are underpinning Silverlight’s big competitor, Adobe Flash, as their primary settop box. And of course
which services launch on which is not supported on Xbox Live but is the whole reason for satellite providers
platforms supported on the Sony PS3, which in turn such as Sky and Canalsat to launch via
does not support Silverlight. This means the Xbox 360 is to offer services without
Much has been made of the fact that that broadcasters using Flash for online- requiring users to have a conventional
Microsoft has launched only paid-for video services can more easily integrate settop box.
third-party video services over Xbox Live, their services into the PlayStation Network.
while Sony has embraced free catch-up TV This is made even easier by the fact that, Offering content without needing to
for the PS3. At first glance, these strategies unlike the Xbox, the PS3 has a browser, provide a box could save operators a
mirror both companies’ online strategies via which several services that are not significant amount, since the cost of
for their consoles. The Sony PlayStation officially supported are actually watchable. providing settop boxes is a major drain
Network is free for all PlayStation users; Although the BBC described its unofficial on opex for TV providers. Sky also charges
Xbox 360 users must pay US$50 a year for version of iPlayer as “clunky,” Informa users to access its service via Xbox,
Xbox Live Gold membership to access the Telecoms & Media has used several other meaning it can still charge for multiroom
majority of the service’s features. But the services via the PSN where the quality services without having to provide the
split is not one simply between free and could at least be described as reasonable. device. For satellite operators, however,
pay: For a start, Sony offers at least two this saving is not likely to outweigh the
pay services – Qook TV in South Korea and The respective strengths and use-cases cost of delivering its linear programming
Now TV in PCCW – via the PS3. for Flash and Silverlight also help explain via broadband instead of broadcast, which
the reason pay services are on Xbox Live is a far cheaper distribution mechanism.
The main issues underpinning which and free services are on the PS3. The vast
platform they chose are technical, not majority of free catch-up TV services use Wider footprint or better quality of
strategic. Microsoft has two key advantages Flash (see fig. 5). It remains a strong video service?
in the online-video and IPTV ecosystems: platform and has much higher penetration
Mediaroom, its middleware technology for than Silverlight does, being installed on Whereas Sky Player is available to any
managed IPTV providers, and Silverlight, about 98% of all PCs, compared with customers of any broadband operator,
its online-video platform, which is used by Silverlight’s penetration of around 50%. the services from PCCW and AT&T will be
many service providers offering streaming available only to each operator’s respective
video over the Internet. The two IPTV But Silverlight has a key advantage broadband customers. The former
providers it is offering services for – AT&T over Flash in offering paid-for content: approach enables the operator to extend
and Vodafone Portugal – are Mediaroom Microsoft’s strong heritage in offering its footprint far beyond its customer base.
customers. Microsoft will not be able to DRM. Silverlight’s DRM is considered But it also presents problems of delivery,
provide IPTV services via the Xbox for extremely robust, whereas Adobe only and it is much more difficult to deliver
non-Mediaroom customers. Likewise, Sky’s began adding DRM to Flash in 2008. video content “over the top” than via a
Sky Player and Canal’s Foot+ both use managed network. Offering HD to the
Silverlight, making integration with Xbox Silverlight is also widely considered a TV set, for example, is difficult over an
Live much more straightforward. stronger live-streaming platform; several unmanaged broadband network. And
08

9. guaranteeing good quality of service is Fig. 5: Use of Microsoft Silverlight and Adobe Flash
difficult when both the network and the by selected online-video services, Feb-10
settop box are in the hands of third parties.
Service Country Free or pay Technology
RTL Now Germany Free Flash
Rai TV Italy Free Silverlight
The Informa view
TVE Spain Free Flash
SVT Play Sweden Free Flash
Service providers will choose the path
Viasat on Demand Sweden Free Flash
of least technical resistance
4oD UK Free Flash
BBC iPlayer UK Free Flash
Although service providers want to reach
Demand Five UK Free Flash
as many users as possible, some will
M6 Reply UK Free Flash
choose technical simplicity over eyeballs
TV2 Denmark Pay Silverlight
when it comes to deciding which console
Canal Foot+ France Pay Silverlight
they want to offer a service via.
Mediaset Italy Pay Silverlight
Sky Player UK Pay Silverlight
The fates of Adobe’s Flash and Microsoft’s
Silverlight and Mediaroom will therefore Source: Informa Telecoms & Media
decide which services will launch where
and which platforms become dominant
in offering paid-for services. The next Expect Microsoft to start offering some a pay TV platform can reasonably be
IPTV service offered over Xbox Live will free video services on Xbox Live assumed to be 100%, whereas many
be another Mediaroom customer, with games-console users will not have
German incumbent Deutsche Telekom It will take a fairly large shift in market plugged their consoles in – only 59% of
a likely target. Sony, meanwhile, has a dynamics for numerous free services PS3 homes are connected to the Net – or
number of Flash-powered catch-up TV to appear on Xbox Live. It would be might simply not be interested.
services it can still woo. inconceivable for Microsoft to support
Flash on Xbox Live, and it is equally The pay TV audience is also bigger than
The Nintendo Wii is likely to remain more inconceivable for service providers across the console audience. In no country in
peripheral, simply because of the efforts Europe to offer services in both Flash Europe can the most popular games
broadcasters must make to get their and Silverlight or to switch en masse console claim to have a larger user base
services on the platform. to Silverlight, simply to reach console than the most popular games pay TV
audiences. platform.
Offering services via the PS3 is relatively
cheap for catch-up TV providers. The But Informa believes that some free Finally, it is technically simpler and
BBC, for example, rebuilt its application to services will launch. The stumbling cheaper to deliver services via IPTV than
optimize it, but it was based on the same block for iPlayer’s appearing on Xbox via a console. To deliver services via Virgin
underlying technologies – Flash and HTML 360 is not that it cannot be charged for Media, broadcasters simply need to
– as the Web version. but that the service cannot be used to upload their content into the broadcaster’s
upsell a product – in this case, Microsoft’s system, as opposed to creating a new
With the Wii, the BBC had to abandon Xbox Live. Commercial broadcasters will application or coding. It is simply another
HTML completely, because the console not have this concern. And some free TV program delivered on-demand. One
was not powerful enough to provide a Silverlight-powered services, such as Italian indication of this is that although cash-
good user experience. Instead, the BBC broadcaster Rai’s catch-up service, could strapped ITV has gone on record as saying
had to develop a new application using be offered via Xbox Live. it is cost-prohibitive to develop for lots
FlashLite and integrate it with the Wii’s of platforms, it does appear on cable
H.264 video player. The maximum level Consoles will play second fiddle to TV operator Virgin Media’s VOD service.
the Wii could deliver was 700Kbps – less platforms in offering services
This piece of analysis has been taken from the Intelligence
than the speed at which regular-definition Centre, the platform through which Informa delivers all of its
iPlayer content was delivered – so a lot of Broadcasters, especially smaller ones topic, country and company insight and commentary. For
work also had to be done on encoding the without the resources to develop more information, please visit:
www.intelligencecentre.net
video. for multiple platforms, will turn to TV
platforms first for one of three reasons.
First, the audience for catch-up TV via
09

10. Operator-CDN market blossoms into all Rob Gallagher | Principal Analyst
rob.gallagher@informa.com
manner of varieties
Content-delivery-network (CDN) services Fig. 1: Global, number of operator CDN services,
promise to address one of the most 2006-2009
pressing problems facing the broadband
industry: How network operators can
work with Internet and media firms to
support the growing burden of video
and other bandwidth-hungry services
traveling over their infrastructure.
Several new models have emerged over
the past year, suggesting there’s no one-
size-fits-all approach for operator CDNs.
Content-delivery-network (CDN) services
aim to help content providers deliver
their content in the most effective way
possible. CDN providers place servers
on networks around the globe, which Source: Informa Telecoms & Media
content providers use to store, or “cache,”
their content. These servers then deliver
the content to nearby Internet users, Market drivers with the highest-speed connections
rather than the content provider’s servers. into “supernodes” for serving content to
This enables content providers to save Offering CDN services is a necessity other users, causing network congestion
significantly on bandwidth, while users get for operators, according to speakers and higher transit costs for operators.
a better quality of service. at Informa Telecoms & Media’s CDN This problem will only get worse as
Strategies Summit, held in London in operators migrate subscribers to superfast
The CDN market was pioneered by October 2009 (see fig. 3). connections based on fiber-to-the-x
Internet startups including Akamai, infrastructure, BT Wholesale says.
Limelight Networks and CDNetworks. Most operators and vendors at the event
Telecoms operators have historically agreed that Internet traffic would grow But speakers at the summit also agreed
allowed these companies to place caching at a compound annual growth rate of that online-video services present a
servers on their networks free of charge, over 40% over the next five or so years, valuable opportunity to operators looking
because it reduces their own bandwidth largely because of the growing popularity to enter the CDN market. Whereas the
burden. of online video services. The resulting Web services that drove the first wave
congestion could force operators into of growth for traditional CDNs – such
But a number of major operators are costly upgrades at all levels of their as Akamai – were aimed at a global
taking a more hands-on approach to the networks if they seek to address the audience, a growing number of online-
CDN market. 2009 has been a particularly problem simply by expanding bandwidth video services are restricted to a particular
busy year, with at least 13 launching or alone, they said. Telefonica International country or region for reasons to do with
announcing plans to offer services (see Wholesale Services added that this would language, culture and content licensing.
fig. 1). There is now an array of different include upgrades to some submarine In Europe, for example, many of the most
products from a variety of operators, cables, once notorious for their abundance popular online-video services are offered
including major national telecoms of spare capacity after the dot-com boom. by TV broadcasters, which are allowed to
incumbents, regional and international provide their content only within their
carriers and even some cable operators But merely throwing bandwidth at the national borders because of regulations
(see fig. 2). problem would not address some of the or agreements with program makers (see
fundamental challenges posed by the way fig. 4).
And operator interest is unlikely to modern online-video services operate,
diminish. Telecom Italia and TDC are according to BT Wholesale. Many use Operators say they have three main
interested in entering the market. Jet so-called bit-rate-adaptive technologies, advantages over the likes of Akamai in
Stream, a Netherlands-based provider of which adjust the level of service to use terms of serving these types of customer.
CDN services and software to operators the maximum amount of bandwidth First, they can place caching servers closer
KPN, Telenet and Ziggo, says all telecoms available. Several also use technologies to consumers than the traditional CDNs
operators will sooner or later have their borrowed from the world of peer-to-peer could ever hope to, and thereby offer a
own CDNs. file-sharing to turn broadband subscribers greater quality of service.
10

11. Fig. 2: Global, operator CDN services, Nov-09
Operator Service name Type of operator Home market CDN coverage
AT&T Intelligent Content Distribution Service Regional incumbent and international US US, European Union, Japan, Hong
carrier Kong, China, Taiwan
Bell Canada Bell Content Delivery Network Regional incumbent Canada Canada
BT Wholesale Wholesale Content Connect National incumbent wholesale UK UK
operator
Deutsche Telekom n/a National incumbent Germany Germany
Deutsche Telekom ICSS Content Delivery Solution International carrier Germany North America, Europe, Asia, Australia
France Telecom n/a National incumbent France France
Global Crossing CDN Solution International carrier US Global
Interoute Media Services International carrier UK Europe
KPN n/a National incumbent Europe, US, Asia Western Europe, US
Level 3 Content Delivery Network International carrier US North America, Europe
NTT Communications Smart Content Delivery International carrier Japan US, Europe
Pacnet Media Delivery Service International carrier Hong Kong and Singapore Asia Pacific
PCCW Solutions Content Delivery Network Integration International carrier Hong Kong Asia Pacific
Solutions
Reliance Globalcom Application Delivery Network/Content International carrier India India
Delivery Network
Tata Communications CDN Services International carrier India Europe, Asia, North America, India
Telecom Italia Sparkle Content Acceleration Network International carrier Italy Europe
Telefonica International Wholesale Services n/a (under construction) International carrier Spain Europe, US, Americas
Telenet n/a Cable operator Belgium Belgium
TeliaSonera International Carrier Media Distribution Service International carrier Sweden and Finland Europe, US
Verizon n/a Regional incumbent and international US US
carrier
Ziggo n/a Cable operator Netherlands Netherlands
Source: Companies, Informa Telecoms & Media
Second, they can design their CDNs from into their networks, to save costs on both Market segmentation
scratch to handle online-video traffic. sides. BT Wholesale’s trial of its Wholesale
CDN-system vendor Velocix says that Content Connect service involves caching There are already signs that there is no
traditional CDNs were built largely to content from the BBC’s iPlayer online one-size-fits-all strategy for operator CDNs.
accelerate the delivery of Web pages and catch-up-TV service. Telecom Italia is Aside from the more marked difference
file downloads and that some have had discussing a similar arrangement with in network assets, operators are taking
to construct separate CDNs to deal with Italy’s national TV broadcasters. different approaches to the national CDN
online video. market depending on their position in the
But two of the most high-profile online broadband and content markets.
Finally, the operators’ costs will be based video services, the BBC’s iPlayer and NBC’s
on operating regional rather than global Hulu, both use Akamai for CDN services. Orange France, for example, is building
infrastructure, so they might be able to offer And operators admit that the limited a CDN largely to support the growing
more-attractive pricing to regional content reach of their networks could become a burden of traffic from its highly successful
providers. “Why would a content provider weakness in future. IPTV service. Because its on-demand
choose for a global CDN if 90 percent of his platform is popular with consumers, it
traffic stays in one region?” Jet Stream says. Already a number of national and is under less pressure from over-the-top
international operators are looking into video providers seeking to bypass it,
There is some evidence that operators interconnecting or peering their CDNs though the operator does plan to also
are making some progress in this regard. to extend the reach of their respective offer a range of wholesale services to third
Telenet and Ziggo are using their CDNs to services. But much of this work is parties.
offload traffic from broadcasters deeper fragmented and embryonic.
11

12. Fig. 3: Operator and vendor predictions about the Fig. 4: Europe, on-demand audiovisual Internet
impact of internet video, Nov-09 services by country of reception, Dec-08
Country No. of services
Austria 6
Deutsche Telekom: Internet traffic will increase at a compound annual growth rate of 43% between 2008
Belgium 14
and 2014, reaching 63.5 million terabytes (TB) a month. Traffic from PC- and TV-based Internet video
services will grow at a CAGR of 72%. Bulgaria 1
Cisco: Consumer Internet traffic will grow at a compound annual growth rate of 41% between 2007 and Cyprus 1
2012, reaching just under 20,000 petabytes (PB) a month. By 2012, 90% of this traffic will be generated
by PC- and TV-based Internet video services and video communication services. Czech Republic 3
BT Wholesale: The BBC iPlayer online catch-up TV service is consuming 12GB of data every second. Denmark 13
Broadband peak throughput per UK consumer grew from 18Kbps in March 2007 to 33Kbps in Estonia 2
March 2009. Web video traffic is predicted to grow at a rate equal to tripling current traffic by 2010 to
greater than 140Kbps per line. Finland 10
Huawei: To cope with the growth of online video, an operator would have to multiply the bandwidth of its France 72
network by four at the edge layer, by 20 at the regional layer, and by 120 at the core. By using caching, the
Germany 49
operator would have to multiply the bandwidth of the regional and core layers by only six and 12, respectively.
Telefonica International Wholesale Services: Existing submarine cable capacity will be depleted on Hungary 7
some routes by 2012, with those running between Europe and Asia most likely the first to be affected. Iceland 2
Submarine cables and core-network equipment haven’t sufficienly evolved over the past few years, meaning
new cables that use exisiting technology may provide capacity for only a few years and with no positive Ireland 8
return on investment.
Italy 16
Luxembourg 5
Netherlands 34
Norway 11
Poland 6
Portugal 2
Russia 2
Source: Informa Telecoms & Media
Slovakia 4
Slovenia 2
Spain 20
Similarly, cable operators Telenet and CDNs, but others have taken on the
Sweden 15
Ziggo are using their CDNs mostly to ambitious task of building their own.
Switzerland 10
support their own video services, such as Vendors and operators that have built
Turkey 2
GarageTV and Zizone. Verizon, meanwhile, their own CDNs say resale will prove to be
UK 76
developed its CDN largely to bundle third- a short-term option, since the operator’s
party online-video services with its IPTV involvement will add little in the eyes of
packages. content providers that a traditional CDN Source: European Audiovisual Observatory
provider couldn’t offer already.
The operators’ ability to pull off such
strategies will depend on their strength A number, meanwhile, have gone for was “under water,” according to Velocix,
in the content market. Certainly, the low the halfway-house option of establishing meaning that each service cost more to
penetration of IPTV in most countries partnerships to integrate traditional provide than the customer was paying.
suggests that many telecoms operators CDNs into their networks. Operators of And toward the end of last year, Internap
will have to accept that the content all varieties are looking to team up with wrote off US$99.7 million in goodwill from
providers will dictate how they use their video- and content-management-system the value of its CDN unit, which it created
CDNs. vendors to add an extra layer of value on by acquiring VitalStream for about US$217
top of their basic CDN services. million in October 2006.
This piece of analysis has been taken from the Intelligence
Market entry Perhaps surprisingly, few operators Centre, the platform through which Informa delivers all of its
have chosen to buy their way into the topic, country and company insight and commentary. For
Operators’ belief in the opportunities CDN market, with the only recent such more information, please visit:
www.intelligencecentre.net
presented by CDN services is reflected move being Tata Communications’
in their urgency to enter the market, US$11.5 million investment in BitGravity.
but each has taken a slightly different Today’s CDN market is widely held to be
approach. overcrowded and in need of consolidation,
but there are questions about the value of
Some, eager to start competing, have some companies. Every single deal of one
decided to resell the services of traditional CDN provider recently acquired by a rival
12

13. South Korean IPTV numbers on the rise, Tony Brown | Senior Analyst
tony.brown@informa.com
but questions linger
South Korea’s three IPTV players are Fig. 2: South Korea, IPTV-platform comparisons
gaining momentum, having shown
Operator Service Linear channels VOD programs Interactive applications
strong subscription growth recently.
KT Qook TV 86 72,000 57
But the operators remain frustrated
SK Broadband HanaTV 89 46,000 60
by their inability to access about 40 of
LG Dacom MyLGTV 75 10,000 4
the country’s leading cable channels, a
restriction that will most likely hinder Source: Companies
their long-term growth prospects.
On the face of it, IPTV looks to be doing operator SK Broadband offers 89 live the government should intervene and
nicely in South Korea, with take-up channels. Digital cable services typically force the program providers to supply
growing strongly (see fig. 1) and at a faster offer well over 150 channels. their channels, while market leader KT is
rate than digital-cable or DTH services. still against the idea of legislation.
South Korea’s trio of IPTV players – KT, SK The cable-program providers and their
Broadband and LG Dacom – had more allies in the cable MSO market have J. Sebastian Lee, vice president of KT’s
than 1.7 million subscriptions at end-2009. argued that they are not intentionally media-business-planning department,
However, the refusal of the country’s withholding the channels from the told Informa Telecoms & Media that KT
leading cable-program providers to supply IPTV operators. Instead, they say they was still talking to the program providers
IPTV operators with some of their key are not supplying the channels simply and that he was still hopeful of being able
channels is still a serious concern. because IPTV does not have cable’s to secure carriage of the channels before
market penetration and is therefore a less too long.
In all, the program providers are desirable distribution platform.
withholding about 40 channels, including “We are still trying to get those important
several crucial sports channels and local A counterview, suggested by many IPTV- cable channels, and we are getting very
news channels, and their absence is operator executives, is that the program close,” he says. “The main reason that
being keenly felt by IPTV operators. Not providers are deliberately withholding their we are getting closer to an agreement
only does it block IPTV operators from channels to try to hold back IPTV growth is that the IPTV subscriber base is
competing on a level playing field with and protect the cable MSOs’ digital rollouts. growing strongly, which is having an
cable TV operators in terms of content, impact on changing the view of the
but it also forces them to charge lower cable-program providers. In addition, we
subscription prices. Cat and mouse have also resolved some of the financial
disagreements that we had with the
KT offers 86 live channels and more than The country’s IPTV operators are divided cable-program providers.”
70,000 VOD programs on its Qook TV over what course of action should be
service (see fig. 2), while second-ranked taken on the contentious issue. Some say Even if KT and its fellow IPTV operators
are unable to secure a carriage deal for
Fig. 1: South Korea, full IPTV subscriptions by the missing cable channels, Lee says it is
operator, 4Q08-4Q09 unlikely that the Korean Communications
Commission or any other government
body will step in to end the long-running
dispute.
“The KCC uses the US regulator, the
Federal Communications Commission,
as a benchmark for its own policies,” he
says. “If you look at the US market, you
will see that the FCC does not directly
involve itself in programming deals
between companies in the cable or DTH
markets, so, as a result, I really don’t see any
intervention forthcoming from the KCC on
this issue.”
Source: Companies, Informa Telecoms & Media
That view is echoed by, Yoo S. Yang, the
13

14. chief telecommunications advisor to be decided just by providing existing that the country’s pay TV market is likely
the president, who told Informa that the broadcasting services but also by the to be big enough for the rival technology
government was not keen on legislating various interactive services that they platforms to coexist.
its way out of the problem by forcing the can provide that are not available in the
program providers to supply their content current cable TV market,” he says. “If you look at the situation in the market,
to the IPTV operators. the number of cable TV subscribers has
In response, KT’s Lee says that although not really changed that much since
“Because the IPTV operators have relatively interactive applications provide IPTV full IPTV services entered the market in
a small number of subscribers compared operators with a point of difference January 2009,” he says. “In fact, over that
to cable operators, cable-program with cable MSOs, the absence of some time we have seen the IPTV market and
providers are cautious in supplying their channels – particularly sports channels – is the DTH market increase their subscriber
best channels to the IPTV operators,” Yang a big disadvantage for the IPTV operators. numbers, so it does not seem that the pay
says. “Each program provider makes its TV market is being damaged by the entry
decision mainly based on its cost-benefit- “Along with SKB and LG Dacom, we of IPTV services.”
analysis result, so it really is a matter of produce our own sports channel, IPSN,
how quickly the IPTV operators can secure but the problem is that we cannot get Yang concedes, however, that the
enough subscribers to attract the program the exclusive content that is on the cable digitization efforts of the country’s
providers. Therefore, it really depends on sports channels,” he says. “We don’t have cable TV operators, along with the IPTV
the state of the market as to whether the the rights for all of the really major sports operators’ determination to expand their
refusal continues or not.” events that are popular with viewers, so subscription bases, will lead to fiercer
people do not really see IPSN as a major competition.
He said the government would not act sports channel, and that is a real problem
“as long as there is no anticompetitive for us.” “The entire pay TV market is showing signs
behavior among the program providers.” of steady growth, and going forward it is
likely that the increased competition in
Yang says that the government is planning How big can IPTV get? the market will create a change in market
to introduce new amendments to the share amongst the players,” he says.
Broadcasting Act explicitly outlawing IPTV operators’ entry into the pay TV
anticompetitive behavior from the cable- market was fiercely opposed by the cable It is the subject of market share that is of
program providers or MSOs but that the TV operators, which said the government most interest to the IPTV operators. KT
current situation does not constitute would be fragmenting the pay TV market says that although its full IPTV services
anticompetitive behavior. just as they were trying to increase have gotten off to a strong start, taking
penetration of their digital cable-TV significant market share from the well-
“The government deems it more desirable services. established MSOs will be difficult. KT had
to leave it up to market players for just under 1 million full IPTV subscriptions
decision-making with regard to content Their fears appear to have been at end-2009, and Lee says the company is
sharing rather than to intervene with largely unfounded, with Ben Way, hoping to have 2 million by end-2010.
regulations,” he says. “At the moment representative director for Macquarie
the IPTV operators do have access to Korea, the major shareholder of MSO C&M “The cable TV operators already hold
most of the cable channels, and they Communications, telling Informa that around 80 percent of the pay TV market,
are still in talks in progress between the the launch of IPTV services has had little and it is hard to imagine that they will
IPTV operators and the cable-program impact on C&M’s business. lose very much of that market share,” KT’s
providers to supply some of the key Lee says. “At the moment we have 6.8
missing channels, such as the sports “Our churn rate is the lowest that it has million broadband subscribers, and we are
channels.” been for the last five years, so the advent trying to expand those numbers. And we
of IPTV to date is really just increasing the are trying to get 50-percent-plus of our
Yang also says the IPTV operators are size of the market,” he says. “It is not in any broadband subscribers to take the IPTV
by no means doomed to failure if they way taking away from our numbers. The service. When you think of how strong
are unable to gain carriage right for the launch of IPTV has not really had a direct the cable TV operators are, just getting 50
missing channels from the cable-program effect on our business. In fact, our ARPU percent of our broadband subscribers to
providers. has actually expanded again this year.” take our IPTV service still represents a very
big challenge for us.”
“The key thing to remember is that That view is echoed by Yang, who says
the success of IPTV operators will not the evidence from the market suggests
14

15. Fig. 3: South Korea, IPTV investments by operator,
2008-2012
Source: Companies
Going it alone but they must not fall into the trap of
overpaying for the missing channels
Some cable operators have mischievously and thereby making it impossible to
suggested that the IPTV players are not run their IPTV operations profitably. It
serious about staying in the market on would be unwise for the IPTV operators
a long-term basis and that they are only to feel that they only need gain carriage
in the IPTV business to appease the of the missing cable channels to make
government, which sees the technology everything right again in the world.
as a potentially big export product for the
country’s technology firms. Even if they possess the cable channels,
KT and its fellow IPTV operators still face
Lee scoffs at such suggestions, pointing a tough challenge to win subscribers in a
out that KT has already invested over market that is still basically dominated by
US$450 million in its IPTV business (see fig. cheap analog cable services and where
3) and is poised to spend another US$1 many people still view cable TV as a utility.
billion over the next three years.
The challenge for KT, SK Broadband and
The problem for KT and its fellow IPTV LG Dacom is to figure out how to take
players, which are set to invest an IPTV beyond the traditional cable TV
additional US$1.3 billion themselves in the offering and offer a genuinely different
next three years, is that although they are and compelling service. Once they do
serious about a long-term future in the that, the cable MSOs will really have reason
pay TV market, they need to ensure that to worry.
their encouraging start does not blind
This piece of analysis has been taken from the Intelligence
them to the long-term problems they face. Centre, the platform through which Informa delivers all of its
topic, country and company insight and commentary. For
Although KT is making encouraging more information, please visit:
www.intelligencecentre.net
noises about securing carriage of the
missing cable channels, it remains far from
certain that a deal will be done and –
more importantly – on what terms a deal
would be struck.
The IPTV operators – especially KT – have
far deeper pockets than their cable rivals,
15

16. Informa Telecoms & Media has analyst
teams all over the world: USA, Brazil, UK,
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