IPTV_issue1

IPTV – A Wholesale Strategy Sean Hartley
The University of London MSc
in Telecom Engineering for BT
IPTV - A
Wholesale
Strategy
Sean Hartley
MSc Dissertation Final Submission. 27/11/2006 Page 1 of 133

Contents
CONTENTS....................................................................................................................2
SUMMARY......................................................................................................................5
DECLARATION..............................................................................................................6
ACKNOWLEDGEMENTS..............................................................................................7
ABBREVIATIONS..........................................................................................................8
INTRODUCTION..........................................................................................................10
1 IPTV............................................................................................................................14
2 THE IPTV DISTRIBUTION NETWORK.....................................................................18
3 CASE STUDIES.........................................................................................................31
4 UK MARKET OPPORTUNITIES................................................................................90
5 ADVERTISING.........................................................................................................113
6 CONCLUSIONS AND RECOMMENDATIONS........................................................120
BIBLIOGRAPHY........................................................................................................128
APPENDICES.............................................................................................................130
REFERENCES...........................................................................................................131
Figures
FIGURE 1: THE IPTV VALUE CHAIN...........................................................................15
FIGURE 2: EXAMPLE IPTV NETWORK OVERVIEW..................................................19
FIGURE 3: RELATIVE FREQUENCIES AVERAGED OVER A 5 SECOND WINDOW
FOR CONSTANT QUALITY ENCODING OF A STANDARD DEFINITION VIDEO
SEQUENCE. SOURCE BT............................................................................................21

FIGURE 4: THE SERVICE OVERLAY NETWORK. SOURCE: REDBACK.................25
FIGURE 5: FULLY CONVERGED NETWORK SOURCE: REDBACK........................26
FIGURE 6: PARTIALLY CONVERGED NETWORK. SOURCE: REDBACK...............27
FIGURE 7: POTENTIAL LLU EXCHANGE ROLL OUT PLANS AND FORECAST LLU
LINES. SOURCE BTW PORTFOLIO STRATEGY TEAM (PRODUCED FROM
PUBLICLY AVAILABLE DATA)....................................................................................95
FIGURE 8: 21CN NETWORK OVERVIEW. SOURCE BT..........................................130

Tables
TABLE 1: TOP 10 IPTV MARKETS 2004, BASED ON SUBSCRIBER VOLUMES.
SOURCE INFORMA TELECOMS AND MEDIA............................................................31
TABLE 2: UK BROADBAND MARKET SHARE MARCH 2006. SOURCE BT...........93
TABLE 3: UK ONLINE ADVERTISING REVENUES BY INVENTORY, 2002-2006.
SOURCE ENDERS.......................................................................................................115

Summary
Using Internet Protocol Television (IPTV) as an enabler to drive up revenues from broadband in
the UK will not be an easy task. Over 3001
IPTV services are currently being trialled or have
already launched throughout the world. With the possible exception of PCCW in Hong Kong,
none of these has yet launched at significant scale so there is no proven business model.
In the UK, the TV industry is well established and consumers are already well served with a
multitude of offerings. Much of this is “free” via traditional terrestrial providers, whilst the Pay-
TV sector is dominated by BSkyB with its near stranglehold on key content rights ownership.
Offering more of the same services via a new medium is not enough. To produce demand, IPTV
providers must offer attractive content and pricing. Consumers are interested in content and
what it costs them – they’re not interested in the media that deliver it. But content is not the only
battleground; IPTV providers must also exploit the features and technical possibilities available
in order to differentiate from other media e.g. using the existence of a return path for interactive
TV.
For BT Wholesale, the challenge is to make IPTV available and worthwhile to the Internet
Service Provider (ISP) sector in order to combat the threat from broadband providers using
Local Loop Unbundling. BTW also needs to ensure that it doesn’t set itself up purely as a
conduit and allow all the revenue to flow from the consumer at one end of the value chain to the
content provider at the other end.
A potential method for achieving this is through exploiting the advertising opportunities offered
by the Internet such as the ability to target advertisements at distinct customer segments rather
than the mass market advertising seen on traditional TV channels.
1
IPTV: A Global Analysis – Informa Telecoms and Media, August 2005 – Page 13.

Declaration
This dissertation is a result of my independent investigation. The portions of the report that are
indebted to other sources have been referenced in the normal way.
This dissertation has not already been accepted in substance for any degree and is not being
concurrently submitted in candidature for any degree.
Signed:
Sean Hartley
Date: 26th
November 2006

Acknowledgements
Thank you to my wife Amanda, Beatrice Osborn, and Kim Allen for having the patience to sit
through the early versions of my presentation. The feedback and advice given enabled me to
optimise the content and keep to time. Also for the support they’ve given me throughout the
entire MSc programme.
Thanks also to my former colleagues in the BT Wholesale Portfolio Strategy team where much
of the information on broadband in this dissertation originated.

Abbreviations
3G Third generation of mobile communications technology
ABC American Broadcasting Company (USA)
ADSL Asymetric Digital Subscriber Line
altnet Alternative network provider (as opposed to incumbent)
ANFP Access Network Frequency Plan
AOL America On Line
ARPU Average Revenue per User
ATV Asia Television Limited (Hong Kong)
BBC British Broadcasting Corporation
BRAS Broadband Remote Access Server
BTR BT Retail
BTW BT Wholesale
C&W Cable and Wireless (UK)
CATV Cable Television / Community Access Television
CBC Canadian Broadcasting Corporation
CBS Columbia Broadcasting System (USA)
CEO Chief Executive Officer
CHT Chung Hwa Telecom (Taiwan)
CMT Comisión del Mercado de las Telecomunicaciones (Spain)
CPS Carrier Pre-Selection
CPW Car Phone Warehouse (UK)
CTRC Canadian Radio-television Telecommunications Commission
DISH Digital Information Sky Highway (EchoStar Communications USA)
DSL Digital Subscriber Line
DSLAM Digital Subscriber Line Access Multiplexer
DTH Direct to Home
DTT Digital Terrestrial Television
DVD Digital Versatile Disc / Digital Video Disc
ESPN Entertainment and Sports Programming Network (USA)
EWT/TSS German CATV Provider
FCC Federal Communications Commission (USA)
FT France Telecom
FTA Free to Air
FTTC Fibre to the Cabinet/Kerb
FTTH Fibre to the Home
FTTN Fibre to the Node
FTTP Fibre to the Premises
HBO Home Box Office (USA)
HBOS Halifax Bank of Scotland (UK)
HDTV High Definition Television
HGC Hutchinson Global Communications (Hong Kong)
HKBN Hong Kong Broadband Network
IM Instant Messaging
IP Internet Protocol
IPTV Internet Protocol Television
ISP Internet Service Provider
ITV Independent Television (UK)
KDDI Japanese telco. (Formed through the merger of DDI, KDD, and IDO Corp)
KIT Kingston Interactive Television (UK)
LLU Local Loop Unbundling
M6 Métropole 6 (France)

Mbs Megabit per second
MGM Metro Goldwyn Mayer (USA)
MoD Multimedia-on-Demand
MPEG Moving Picture Expert Group
MPLS Multi Protocol Label Switching
MTS Manitoba Telecom Services (Canada)
NBC National Broadcasting Corporation (USA)
NC Numericable French CATV Operator
NPVR Network Personal Video Recorder
NTL National Transcommunications Limited (UK)
NTT Nippon Telegraph & Telephone Corporation (Japan)
ODTV OnDemand TV (Japan)
OLTV On-Line TV (Japan)
ONO Spanish CATV Operator
PBS Public Broadcasting Service USA)
PC Personal Computer
PCCW Pacific Century Cyber Works (Hong Kong)
PPV Pay per View
PSTN Public Service Telephone Network
PVR Personal Video Recorder
QSC Quality Service Communications (Germany)
RCN Residential Communications Network (USA)
SBC Southwestern Bell Corporation (USA)
SDTV Standard Definition TV
SRC La Société Radio-Canada
STB Set Top Box
telco Telecommunications provider
TF1 Télévision Française 1
TIM Telecom Italia Media
TPS Télévision Par Satellite (France)
TTV Terrestrial Television
TVB Television Broadcasts Limited (Hong Kong)
UPC France United Pan-Europe Communications France
UPN United Paramount Network (USA)
VCR Video Cassette Recorder
VNL Video Networks Limited
VoD Video on Demand
VoIP Voice over Internet Protocol
VPN Virtual Private Network
WBN Wolfe Bank Newspaper (USA)
WiFi Wireless Fidelity (WLAN using the 802.11b protocol)

Introduction
In common with other incumbent telecommunications providers (telcos) BT Wholesale (BTW)
has a major problem. Local Loop Unbundling (LLU) has increased the amount of competition,
revenues from fixed line voice calls are declining as consumers switch to mobile and Voice over
Internet Protocol (VoIP), and although broadband internet access penetration is still rising the
price is falling. Therefore, there is a need to discover, develop, and launch, the services that will
generate new revenue streams. But is IPTV one of those Services?
Bundled offerings of broadband internet, telephony, and TV (often termed triple-play) have
often been seen by telcos as a way of driving broadband growth and encroaching into the
territory of TV broadcasting. However, BSkyB’s acquisition of Easynet turns this the other way
round and allows a TV broadcaster to offer triple-play. And it’s not just any broadcaster; it’s the
one that owns the rights to the majority of key content in the UK – most notably Premiership
football. As long as it can make a Local Loop Unbundling (LLU) business model work, BSkyB
is better positioned than any Telco in the UK for offering consumer desirable packages of triple
play.
Further threats to BTW business come from Broadband providers building their networks out to
local BT exchanges and reaching their consumers via unbundled local loops, and the merger of
Telewest and NTL creating a possible resurgence in the cable (CATV) sector.
The purpose of this dissertation is twofold. Firstly, to establish whether IPTV services are viable
in the UK:
o will they work – can telco networks deliver IPTV services?
o will they sell – do consumers want them and are they willing to pay for them?
o competition – can they compete against other TV media?
o broadband – will they drive growth for the broadband industry in terms of user volumes
and average revenue per user (ARPU)?
Secondly, even if the answers to all these points are positive then how does BTW exploit this to
make IPTV an opportunity and not a threat? This poses another set of questions:
o How can BTW use IPTV services to make its broadband products more attractive to
Internet Service Providers (ISPs) than LLU?
o How can the ISP sector (which includes BT Retail) use these services to compete against
the LLU sector (which includes BSkyB), and the consolidated CATV sector?

o How can the ISP sector compete against other TV Media – some of which e.g. BSkyB
and NTL/Telewest are also broadband competitors (indicating some degree of
convergence between the telco and TV industries already)?
o How can BTW gain revenue from such services? Many internet services involve
payment transactions between consumers and service providers which completely by-
pass the telco providing the broadband service.
My approach to answering these questions was to look at other countries where IPTV services
have already been launched to see if any have been successful and, if so, what the factors were
that have enabled that success. Where services have been successful I found that it was quite
often down to telcos exploiting local market conditions such as: government subsidy of Set Top
Boxes (STBs), densely populated high rise areas making broadband cheap and easy to provide,
dominant Pay TV providers obliged to provide their rivals with premium content at a reasonable
rate, high volumes of consumers with no access to CATV or Direct to Home (DTH) services,
etc. These factors do not apply in the UK.
I then examined the UK TV and broadband markets to establish what opportunities actually did
exist in a TV market where one supplier dominates premium content provision and is ruthless
about exploiting it, and a broadband market which is so competitive that suppliers are (creating
an illusion of) giving it away for free when consumers take other services from them.
But to start this dissertation, it is first necessary to understand what IPTV actually is. In Chapter
1, I’ve done this by describing the TV value chain and the elements – content provision,
aggregation, packaging, distribution, and consumer equipment – that make up the chain.
As we shall see, telcos can move into other segments of the value chain but the natural starting
point is that of distribution since the main differentiator between IPTV and other TV media is in
the way that it is distributed i.e. over a telecommunications network. So, in Chapter 2 I’ve
described the main elements involved in an IPTV enabled network – head end, distribution,
aggregation, access and home network. Depending on requirements and technologies used there
are many different ways of designing a network. Three examples of network design are
described as well as compression standards and multicasting as these have an important role to
play in managing bandwidth requirements.

The case studies (as mentioned previously) are contained in Chapter 3. I looked at the top ten
IPTV markets (in terms of subscriber volumes), nine of which are detailed here (the tenth being
the UK). For each of the countries I have compiled information on the local broadband market,
TV market, IPTV providers, and what I believe to be the outlook for IPTV services.
This leads into Chapter 4 which focuses on the UK. Again, the broadband and TV markets are
analysed although in a greater depth than those covered in the previous chapter. I’ve also
included a section on triple-play; partly because it is a term that can often mean different things
to different people – so there is a need to be clear about what is meant by triple-play in the
context of this dissertation – and partly because the ability to provide “triple-play” will not be
enough to provide success; it’s the quality and commercial wrap of the bundled services within
the triple-play that will determine success or failure. This chapter also examines the options for
BTW in terms of where and how it can play in the various segments of the value chain.
To make IPTV services commercially viable it is important to realise the role that advertising
has to play. This has always been a traditional revenue stream for TV companies worldwide (the
BBC being an obvious exception), and in the days before Pay TV it was often the main or only
source of funding available to TV broadcasters. Advertising is also a key factor in successful
Internet companies, so this dissertation would not be complete without looking at the role
advertising can play in IPTV services; this is dealt with in Chapter 5.
Chapter 6 concludes by making recommendations for the UK broadband industry as a whole,
and recommendations specific to BTW.
Before we move onto the main body of this dissertation I should first explain a bit about myself
and my background. I began working for BT as an apprentice in 1982 – the company was a state
owned monopoly, telephone exchanges were of the electro-mechanical (Strowger) variety and
voice was still the dominant service. As an engineer my duties included exchange construction
(replacing Strowger units with electronic switches which have since been superseded by digital
exchanges), customer apparatus maintenance and repair (in the London Docklands when Canary
Wharf was nothing more than a flat concrete peninsula) and Telecom Red (providing secure
alarm lines via the telephone network).

As a manager I started in Quality Management and put together the QMS (Quality Management
System) that enabled the Network Build division to achieve ISO9001 registration as a stand
alone unit. I have now worked as a product manager in BTW for six years and presently manage
Direct Access (calls terminating on the BT network having originated on another network) and
Number Translation Services (which generally covers telephone numbers beginning with 08 or
09).

1 IPTV
1.1 Introduction
This chapter provides an overview of what IPTV is and describes various types of services that
can be offered using this medium. The TV value chain is explained as is potential telco
involvement in the components of the chain.
1.2 What is IPTV?
Various media are in use for the transmission of television services including: Terrestrial (TTV),
Digital Terrestrial (DTT), Cable (CATV) and Satellite (also known as Direct To Home [DTH]).
IPTV uses Internet Protocol (IP) to transmit television and other video services over broadband
networks. There are two main types of service:
o Broadcast/Multichannel – this is the viewing of content in real-time in the same way as
traditional TV. Programmes may be pre-recorded by the content provider or shown live.
Either way, the viewer has to “tune in” at the time of broadcast and not at a time of their
choosing (although the use of video recorders and recordable DVD players does allow
for later viewing provided they have been set to record at the appropriate time).
o Video on Demand (VoD) – this is the viewing of the viewer’s choice of content at the
viewer’s choice of time. In the same way that a consumer can buy or rent a movie on
video or DVD and watch it at a time convenient to them, they can download content
from the Internet. VoD can take one of two main forms:
• Downloading – where a video file is downloaded from the content provider’s
server onto a hard drive for later viewing;
• Streaming – where a video file is viewed directly from the content provider’s
server so is effectively a live video transmission. The file may or may not be
stored on the consumer’s hard drive for future viewing.
Giving the viewer full control over when they can watch content is a key differentiator from
traditional TV media. In addition, it allows for targeted programming and advertising which will
be explored further in chapter 5.
1.3 The TV Value Chain
In order to understand the commercial possibilities of IPTV it is first necessary to understand the
key stages involved in providing TV services. There are five main sections to the value chain:
Content, Aggregation, Packaging, Distribution, and Consumption (consumer apparatus, home
network, etc).

Figure 1: The IPTV Value Chain2
1.3.1 Content Providers
At the top of the chain is content. This could be movies, sports events, documentaries, news,
drama, comedy, etc. Content producers are responsible for actually making the content whilst
copyright holders actually own the content – in many cases these will be one and the same but
not always. Examples of content providers include:
o traditional broadcasters e.g. BBC, ITV, etc;
o Pay-TV broadcasters e.g. Sky Sports;
o Movie studios e.g. Universal, 20th
Century Fox, Disney;
o Independent producers e.g. Pearson Television (programmes include The Bill, and Birds
of a Feather) and Hat Trick Productions (Have I got News For You, and Father Ted);
1.3.2 Aggregation
Aggregation involves acquiring the necessary content and arranging it into channels. Channels
have to be branded (e.g. BBC1, ITV2, Sky Movies), advertising space marketed, sold and
inserted, and distribution of the channel arranged. An example of this would be where BSkyB
takes sports content it has produced itself along with content purchased from other suppliers,
adds in commercials, brands it as Sky Sports 1 and then sells it to a CATV provider as well as
offering it over its own network.
1.3.3 Packaging
Packaging involves arranging channels into multichannel offerings. The packager then has to
market these offerings and arrange for them to be distributed. For example, a CATV Provider
may package together channels from Sky, the BBC, and ITV and brand the package as their own
for distribution to consumers attached to the CATV network. The packager also owns the
customer relationship so is responsible for billing the end-user.
1.3.4 Distribution
This involves the physical delivery of a TV signal to a customer reception device, although it
could also be said to include the process of delivering DVDs and/or video cassettes to
2
Adapted from IPTV Business Case and Business Model – Alcatel (Michel Defloor) 2nd March 2006.

consumers either through retail/rental outlets or via postal services. Distributors are responsible
for providing the network infrastructure and maintaining it. This part of the value chain is where
the differentiation between IPTV and other forms of TV media comes in as it involves using a
telecommunications network.
1.3.5 Consumption
The market here is for the provision of consumer equipment. This includes reception devices
such as Televisions (TVs), Set Top Boxes (STBs), Modems, Video cassette Recorders (VCRs),
and DVD players. It also includes Personal Computers (PCs), as content can be viewed on a PC
(via a modem), and games consoles. Consumers may not wish to view the content on the device
on which it was downloaded so need some form of home network to enable them to transfer
data. Content can be transported between devices in a variety of ways such as WiFi, Powerline,
co-axial cable, phone line, or storage devices such as discs or memory sticks.
1.4 The Role of the Telco
The obvious position in the value chain for Telcos is that of distribution. This is the key
differentiator from other broadcast media as the Telco owns and manages the network(s).
However, Telcos can move up the value chain by aggregating and packaging content and thus
move into what has traditionally been part of the TV industry. They can also exploit the bottom
level of the chain by providing the consumers with the equipment they need to download, store,
and view content. For example, BT Home Computing has provided home computing initiative
schemes to employers including HBOS and United Utilities. These schemes enable
organisations to offer their staff computing packages which come with the benefit of tax relief.
Such schemes could be expanded to include plasma screens or High Definition (HDTV) TV sets
as part of a package (although the removal of tax relief in the 2006 budget makes such schemes
less attractive). Moving into other areas of the value chain will also avoid the pitfall of revenues
flowing from consumer to packager with a minimal return for the network provider.
Telcos can also bundle IPTV services with their telephony and broadband internet access
products to offer “triple-play” bundles. This differentiator gives them an advantage over other,
single-play, TV media.

1.5 Summary and Conclusion
IPTV provides another medium for the transmission of television type services which can be
viewed in real-time and/or on demand. The TV value chain is comprised of the following
segments: Content, Aggregation, Packaging, Distribution, and Consumption.
Telcos have the obvious ability to operate in the distribution segment, but there are opportunities
for moving into segments both up and down the value chain. Telcos need to understand where
the revenue opportunities are; providing a distribution network that allows revenue to flow from
consumers to higher points on the chain may not be the most commercially viable business
model. It will also make it harder to compete with, for example, BSkyB who have an
involvement throughout the value chain. If telcos can move into other parts of the value chain it
will allow enable them to obtain a greater share of the available revenue.
As distribution is the main differentiator between IPTV and other media we now need to
understand more about the distribution network and what telcos need to have in place in order to
provide IPTV services.

2 The IPTV Distribution Network
2.1 Introduction
This chapter gives an overview of the network requirements for providing IPTV. Telco
networks were originally designed to provide voice services and have been enhanced to some
extent to take into account data services. IPTV, which has its own requirements, did not form
part of any design considerations. IPTV puts increased demands on the network requiring high
bandwidth, low latency, availability (resilience) scalability (as consumer demand increases), and
flexibility as requirements change. This chapter examines the high level network components
required for IPTV, architectures, and the higher application requirements and factors to
consider.
2.2 Network Overview
Although architectures for delivering video services vary, I have identified 5 main elements: the
video services network (or head end), the distribution network, the aggregation network, the
access network, and the home network. I have identified these from BT’s 21CN network
topology (see figure 8) and the network examples identified by Redback (see figures 4-6)

Figure 2: Example IPTV Network Overview
2.2.1 Video Service Network
The head end is a location where content is aggregated for distribution as VoD or TV channels.
Content arrives from various sources using different media such as Direct Broadcast Satellite
(DBS). The “raw” content is then fed into an encoding platform and converted using a
compression format. Broadcast channels are encoded as a single programme transport stream
and are allocated a specific channel ID. VoD content is stored encoded on video servers.
As content delivery is via the Internet it can be fed into the network at any location so head ends
and video servers can be centralized or distributed. The factors affecting the amount of
centralisation/distribution appropriate to a particular network include: server costs, management

complexity (i.e. managing multiple sites instead of one), transport costs, and the amount of
resilience required.

2.2.1.1 Encoding/Compression
Digital video files consist of huge amounts of data. According to Gartner, one minute of
uncompressed digital video requires 1.3GB of storage and a data rate of 160Mbps for Standard
Definition TV (SDTV)3
. However, these figures should be treated with extreme caution as
bitrate frequency can fluctuate significantly depending on the type of content. Factors such as
the type of content (fast moving or slow) and resolution (number of lines) can cause a great deal
of variance. This can be seen in figure 3.
Const quality encoding (qp=28)
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
0 10 20 30 40 50 60 70 80 90 100
Time (secs)
Bits/s
Average over 3 frames (0.12 secs)
Sliding window average over 192 frames (7.68 secs)
Figure 3: Relative Frequencies averaged over a 5 second window for constant quality encoding of a standard
definition video sequence. Source BT4
Compression is used to make it easier to stream large files from one location to another and to
reduce network bandwidth requirements. It also reduces storage requirements meaning that disc
drives can hold more content and features such as Personal Video Recorders (PVRs) are more
economical. The most common methods of compression are:
o MPEG-2 – defined by the Moving Picture Expert Group5
. A universally recognised and
applied standard for coding digital video signals. According to Gartner, one minute of
MPEG-2 compressed digital video only requires 72MB of storage and a data rate of
9.6Mbps6
. This standard is very common amongst IPTV operators.
o MPEG-4 – on average 50% more efficient, in terms of bandwidth for the same picture
quality, than MPEG2. However, requires twice as much processing power which causes
limitations with some consumer equipmentError: Reference source not found.
o Windows Media Video 9 – developed for use with Windows Media Player applications;
Microsoft now trying to establish it as a stand-alone video codec.
3
Pros and Cons of Standard vs. Proprietary Video Compression – Gartner. 30th September 2005. P.3.
4
Video Coding and Delivery for Next Generation IPTV – BT (Steve Appleby, Mike Nilsson, Pat Mulroy, Barry
Crabtree, and Richard Jeffrey.)
5
www.mpeg.org
6
Pros and Cons of Standard vs. Proprietary Video Compression – Gartner. 30th September 2005. P.3.

o AVS – Proposed Chinese standard.

2.2.2 Distribution and Aggregation
There is no single network design for delivering content from the head end to the appropriate
Digital Subscriber Line Access Multiplexer (DSLAM) or its attached router. Before discussing
some various network designs it is worth having a quick look at multicast.
There are three different address types used to transport IP packets from one computer to
another:
o Unicast addressing is used for communicating between two individual hosts. One copy
of each packet travels across the network connecting the two hosts.
o Broadcast addressing is used for communicating between one host and all other hosts on
the a network simultaneously. The transmitting host uses a destination address that
instructs the network to duplicate each packet and deliver it to every host on the network.
o Multicast addressing is used when a host wants to communicate with a specific subset
of the hosts on a network. The transmitting host uses a class D address which instructs
the network to duplicate each packet and to deliver it to every host with that particular
class D address. An individual host has a “normal” address i.e. class A, B, or C and any
number of class D addresses each identifying it as a member of a particular multicast
group.
Multicasting provides efficient transmission of a data stream where it is being sent to multiple
users. Enabling routers and switches to control the replication and delivery of data streams
reduces the number of connections to the transmission source (as opposed to unicast) and
restricts data forwarding to only those hosts who want or are entitled to it (as opposed to
broadcast). This reduces bandwidth requirements for transmission to a large number of hosts
and reduces server requirements to support streaming data. For example, if a TV channel is
being broadcast to 10,000 users then 10,000 unicast connections would require each packet to be
replicated and sent 10,000 times from the source host. Multicasting enables the host to transmit
the data stream only once with the network duplicating it only where required.
For IPTV, multicasting has obvious benefits for provision of broadcast services and also for
push type VoD services where content is downloaded to multiple users in one transaction (as
with T-Online – see chapter 9.1.5.3.1). The question when designing a network is where should
multicast replication be done, with logic saying it should be the last aggregation point i.e. the

DSLAM to save on bandwidth. However, pushing network intelligence out to such extremities
adds to the cost of the equipment so it’s very much a question of balance.

2.2.3 Network Examples
Redback has identified three main types: the Service Overlay Network, the Fully Converged
Network, and the Partially Converged Network.
2.2.3.1 The Service Overlay Network
Figure 4: The Service Overlay Network. Source: Redback7
In the Service Overlay Network, IP intelligence is pushed into the DSLAMs which directly
connect into the backbone IP network. Per-subscriber multicasting is done at the DSLAM with
high speed internet traffic being directed towards the Broadband Remote Access Server(BRAS).
Because there is no single point of control for subscriber traffic, IPTV and Internet traffic enter
the access network via different points and can interfere with each other. This makes application
Quality of Service (QoS) control both unpredictable and inadequate. Many operators who
initially designed their networks this way have now moved towards the Partially Converged
model because of this.
7
Adapted from Designing Access Network for Triple Play Services - Redback.

2.2.3.2 The Fully Converged Network
Figure 5: Fully Converged Network Source: Redback8
In the Fully Converged Network, the DSLAMs are directly connected to the Service Gateway –
often using direct fibre links. This is the first device containing the subscriber and IP
intelligence and is the point at which subscriber multicasting takes place. This is a simple
network design and is popular with network operators who have installed fibre to the kerb or
neighbourhood in their access network (see chapter 2.2.7).
8

2.2.3.3 The Partially Converged Network
Figure 6: Partially Converged Network. Source: Redback9
In the Partially Converged Network the DSLAM has no IP intelligence. Traffic is aggregated
into a Service Gateway which is a converged edge device implementing full BRAS and Edge
Routing functionality. The Service Gateway is also the first device to contain subscriber and IP
intelligence. This network design is popular with network operators who do not have fibre in
their access network. It should be noted that it is also possible for a network operator to design
and build a combination of a fully converged and a partially converged network based on where
fibre is and isn’t deployed in the access network.
2.2.4 Access Network
The access network links subscribers with their local exchange. The “local loop” may be copper,
fibre (Fibre To The Home [FTTH] or Fibre To The Premises [FTTP]), or a combination of the
two (Fibre To The Cabinet/Kerb [FTTC], Fibre To The Node [FTTN]. Fibre offers far greater
speeds but is very expensive to deploy especially where local copper networks are already in
place and able to deal with the majority of its subscribers needs.
9

IPTV consists of high bitrate signals and a telco’s ability to provide as many of its subscribers as
possible with fast broadband speeds depends on a number of factors including:
o the network topology – e.g. copper, FFTH, FTTC, etc;
o the length of the local loop;
o the quality of the loop – i.e. dimensions of the conductors, quality of connections, faults,
etc;
o crosstalk – the amount of crosstalk is directly related to “cable fill”. The higher the
proportion of pairs in a cable carrying Digital Subscriber Lines (DSL), the shorter the
reach. The problem of crosstalk increases with frequency i.e. higher frequencies means a
greater crosstalk problem;
o noise – picked up the environment (e.g. radio interference) and from sources in the home
or the premises;
o Access Network Frequency Plan (ANFP) – how frequencies are allocated to dervices.
o The technology used e.g. type of xDSL, method of compression, equipment vendors.
2.2.5 Home Network
Traditionally, consumer devices have operated in isolation – for example, a TV has an aerial
connected to it and it plugs into the mains, whilst a PC connects to the phone line for Internet
services. However the growth of households with multiple PCs with their peripherals and the
convergence of services – such as IPTV – has created the requirement for home networks.
Physically connecting network elements with wires works fine when they are located close by,
but using cable to string together a modem in one room with an STB in another room is
unsightly and possibly dangerous.
A DSL channel terminates at a subscriber’s premises on a modem. This modem may be built
into the PC or be a separate unit, but either way IPTV content can be viewed on the PC. Should
the subscriber wish to view the content on a TV (as is most likely) the modem will need to be
connected to an STB which in turn needs to be connected to the TV. (N.B some manufacturers

are already producing combined modems/STBs.) Should the subscriber wish to view content on
another TV elsewhere in the premises, it will also need to be connected to the STB. As well as
the unsatisfactory method of physically cabling these devices together, other possibilities
include the use of powerline, co-axial cable, telephone wires, and wireless technologies such as
WiFi.
The merits of these particular technologies are not discussed here, but the question for Telcos is
whether or not they wish to operate in this area of the value chain and to what extent. Broadband
offerings often include routers and/or modems and IPTV offerings usually include the STB as
part of the deal – BT Vision for example offers a hybrid STB that can receive VoD content from
the Internet and broadcast services via DTT.
2.3 Summary and Conclusion
An end-to-end distribution network consists of a head end, distribution, aggregation, access, and
home network elements. In designing a network architecture, consideration must be given to
many factors including: the type of encoding/compression to be used, where subscriber
multicasting should take place, bandwidth requirements, and the present and future make-up of
the access network.
Balancing network investment against consumer demand, to justify that investment, is difficult
to achieve; and is not without risk. For example, pushing fibre into the access network would
enable faster broadband services to be deployed and increase the reach of those services to
consumers who live too far from their local exchange to receive such services at present. But

local access networks are expensive to build which has previously proved to be a barrier to entry
– hence the introduction of LLU. The CATV sector built its own access network but the debt
incurred in doing so has been a burden in its efforts to compete.
Similarly pushing multicasting further out to the network edge will save on bandwidth
requirements but it does increase the cost of the equipment needed. Multicasting from the
DSLAM, for example, will not be cost effective if only a handful of subscribers can be attracted
at each location.
For BT, this suggests an incremental approach to developing services and attracting subscribers.
Where fibre in the access network or multicasting at the network edge can be justified then it
should be. The network must evolve to meet demand rather than have significant investment on
a national scale in the hope that demand will justify it.
We’ve now established what IPTV is and the technology required to provide it. In order to
understand the commercial factors required to make IPTV successful it is necessary to look at
some examples of services that have already launched.

3 Case Studies
3.1 Introduction
This chapter looks at the top 10 IPTV markets (in terms of subscriber volumes) to assess success
so far, and future potential. The “top 10” is based on those identified by Informa Telecoms and
Media on data as at year end 2004. Where more recent data is available it has been included in
the relevant country section. For reasons of brevity only Hong Kong, France, Italy, and Spain
are described with the USA, Canada, Japan, Germany, and Taiwan, included in the appendices
for completeness. The UK is dealt with separately in Chapter 4.
Number of TV
Households (,000)
IPTV Subscribers
(,000)
Penetration of TV
Households (%)
Hong Kong 2,187 475 21.72
USA 109,159 273 0.25
France 22,313 184 0.82
Italy 21,143 174 0.82
Canada 12,316 123 0.99
Japan 43,439 77 0.18
Germany 34,540 67 0.19
Taiwan 6,213 35 0.56
UK 24,711 20 0.08
Spain 13,173 6 0.05
Table 1: Top 10 IPTV Markets 2004, based on subscriber volumes. Source Informa Telecoms and Media10
10
IPTV: A Global Analysis – Informa Telecoms and Media, August 2005 – Page 13.

3.2 Hong Kong
Population 6.9 Million11
Households 2.2 Million12
Broadband Subscribers 1.5 Million13
CATV TV 31.0%
Illegal TV 4.5%
DTH 0.4%14
Broadband TV Penetration 20.0%
Total Pay TV penetration 55.0%
Figures are for 2004
Penetration rates are for Total Households.
Source: Gartner15
(except where stated).
3.2.1 Broadband
The Hong Kong broadband market offers consumers a large range of prices, technologies,
speeds, and services. Broadband has been successful because of its ubiquity, low prices, and the
number of different offerings. The densely populated high rise environment makes fibre an
economic solution for broadband provision; at the end of 2004 there were 580,000 subscribers
connected by this method16
. The main broadband providers are:
o PCCW – former incumbent. Uses a fibre-optic backbone with DSL as the last-mile
connection. It can reach 95% of households and offer speeds of up to 6Mbs. Its stated
goal is to increase speed to 25Mbs.
o Hutchinson Global Communications (HGC) – has a mainly fibred network with a
reach to 50% of households. HGC plan to increase this to 80-90% over the next few
years. Approximately 80% of HGC’s subscribers get access via VDSL or metro
Ethernet. The remainder use ADSL or powerline.
o Cable – operate a hybrid fibre coaxial cable network i.e. a fibre optic trunk connected to
in-building coaxial networks.
o Hong Kong Broadband Network (HKBN) – has a fully fibred network and is in the
process of pushing it out to 80% of households. Planning to launch a 100Mbs and a
1Gbps service.
11
http://www.cia.gov/cia/publications/factbook/geos/hk.html
12
IPTV: A Global Analysis – Informa Telecoms and Media August 2005 Page 16
13
IPTV: A Global Analysis – Informa telecoms and Media. August 2005 Page 77.
14
Hong Kong boosts cable content – from Screen Digest’s Global Media Intelligence issue 408, Page 259
September 2005.
15
Market Focus: Broadband TV Market Booms in Hong Kong – Gartner December 2004. See Table 2-2 and page 7
for cable and illegal figures.
16
IPTV & VoD market analysis – Ovum July 2005. Page 18

3.2.2 TV Market
There are four TTV channels in Honk Kong provided by two commercial broadcasters: TVB
and ATV. DTT is planned to launch in 2007 with analogue switch-off planned for 2012.
Consumers in many Hong Kong buildings are also able to view free channels from Star TV’s
Asian satellite broadcasts. Using a master antenna system, consumers are able to receive Star
TV’s basic channels. This service is not paid for – although tenants are charged for the master
antenna system as part of their building management payments – but by increasing the number
of free to air channels it acts as an inhibiter to the growth of the Pay TV market.
The CATV sector is occupied by a single operator – i-Cable. i-Cable’s network passes
approximately 1.2 million households (55%) and has 682,000 customers. It is also believed that
a further 59,000 consumers illegally tap into i-Cable’s network using pirate decoders17
. i-Cable
revamped its sports offerings in 2004 and acquired rights for the English Premiership football
matches and NBA basketball. At the same time it also launched 22 new channels for inclusion in
its basic premium subscription package, giving it a total offering of 92 channels. However, at
the same time it lost the desirable sports channels ESPN and Star Sports.
DTH is provided by SuperSun which is owned by Galaxy Satellite Broadcasting. SuperSun
launched in August 2003 and offers its 30,000 subscribers 40 television channels18
. It has
recently obtained rights from Yes TV for two 24-hour European football channels. Coverage in
apartment blocks has limited its ability to grow, but it is planning to offer IPTV over the HGC
broadband network to improve its coverage (see below).
3.2.3 IPTV Offerings
IPTV services are presently offered by two providers: PCCW and Hong Kong Broadband. Both
have focussed on providing multichannel Pay TV and are not offering VoD. A third offering is
planned by HGC who intend broadcasting SuperSun TV channels.
17
Market Focus: Broadband TV Market Booms in Hong Kong – Gartner December 2004. Page 7.
18
Hong Kong boosts cable content – from Screen Digest’s Global Media Intelligence issue 408, Page 259
September 2005

3.2.3.1 Now Broadband TV (Owned by PCCW)
PCCW launched Now Broadband TV in September 2003. It was seen as a way of meeting the
threat from i-Cable who had announced the launch of their triple-play strategy. In terms of
household penetration, and penetration of its broadband subscribers, it is the most successful
provider of IPTV over DSL.
Customers must first subscribe to PCCW’s Netvigator broadband service; there is no further
subscription. Subscribers are provided with a free STB which allows access to some low-value
channels (the STB is estimated to cost PCCW US$50-60 per unit19
). Further content is available
on an “a la carte” basis allowing subscribers to select content on a channel by channel and
month by month basis. This method does make it easier to rapidly drive up a subscriber base by
removing the pricing access barrier. However, it also allows consumers to sign up only for small
offerings – perhaps only one or two channels, which has an adverse effect on Average Revenue
Per User (ARPU). So although the claimed number of subscribers may look impressive, it
doesn’t tell the whole story.
The original service had 22 channels including MGM, Hallmark and Discovery. By the start of
2005 this had risen to 70 channels including Nickelodeon, BBC Prime, and channels from
Central China Television. It has since won control of the sports channels ESPN and Star Sports,
the movie channels HBO, Cinemax, and Star Movies, which were all previously owned by i-
Cable. Rights have also been obtained from Star Group to broadcast its 11 movie and
19
IPTV: A Global Analysis – Informa Telecoms and Media Page 78 August 2005.

entertainment channels. PCCW appears to be going head to head with i-Cable for premium
content whilst (at present) undercutting them on price.
Since launch the service has been very successful. 2004 saw spectacular growth with
subscriptions growing by 146% (albeit from a small base). PCCW also appear to have bonded
the relationship between their broadband subscribers and Now Broadband TV with the result
that they claim to have halved their churn rate to less than 1% and increased their broadband
market share20
. At the end of 2004, PCCW announced that it had an installed base of 361,000
subscribers (although 416,000 customers had signed up).
Estimates of paying customers range from 47%21
to 53%22
. This needs to increase for the
business model to work properly although PCCW claim that 85% of all new subscribers use Pay
TV23
. (To try to combat this, PCCW has introduced mini-packs of content and claims a 58%
take-up rate23
.) ARPU for customers who signed up for Pay TV channels increased from US$8
per month to US$13 between March and December23
. (Gartner states US$13.50Error: Reference
source not found.) However, averaging the ARPU across all 361,000 subscribers gives an
average of US$7.22Error: Reference source not found – a decrease.
3.2.3.2 HKBN Digital TV (Owned by City Telecom)
HKBN also provide a free STB, and subscribers receive a multichannel package for $16 month.
IPTV is seen as a value added product to augment its fixed line and Broadband offerings.
HKBN has taken a price competitive approach and has focussed on providing cheap, local
content – the competition is seen as daytime free-to-air TV so it’s positioned as an add on to
TTV.
51 channels are offered over an all-fibre/Ethernet network. This service had attracted 39,000
subscribers24
by the end of March 2005.
20
PCCW’s Now Broadband TV: defensive strategy pays off – Ovum July 2005 P.4
21
22
PCCW’s Low-Cost IPTV Entry Strategy Produces Early Encouraging Results – Gartner April 2005 P.3.
23
24
IPTV: A Global Analysis – Informa Telecoms & Media August 2005 P.79

3.2.3.3 HGC
HGC have announced that they intend to launch an IPTV service. The plan is to distribute
Galaxy’s SuperSun channels via their network. One of the key shareholders is Hong Kong’s
biggest free-to-air broadcaster TVB and the key differential is thought to be their ability to
utilise and exploit their extensive Chinese language library. SuperSun channels will be bundled
with broadband. Galaxy plans to offer SuperSun on the HGC network at a cheaper rate than on
its DTH platform.
3.2.4 IPTV Outlook
Gartner predicts that the broadband Pay TV market will grow to US$200 million by 2008 and
will flatten out at about US$235 million by 2010. It is expected that VoD will be introduced to
provide another, smaller, revenue stream and will be worth about US$82 million by 2010. The
CATV Pay TV market is worth US$223 million currently, with advertising accounting for 7%
of that25
.
i-Cable is well established in the Pay TV market and is still the biggest player. Having
dominated the Pay TV market for so long, they appear to have been caught out by the rapid rise
of Now Broadband TV. However, they are responding aggressively and have recently launched
a VoIP product as part of a triple-play offering. Although they lost some prime content to
PCCW in 2005 they are still a potent threat.
PCCW has been successful in maintaining its market share and reducing churn. However, it has
not yet seen a growth in ARPU across its total IPTV subscribers. To do this they must increase
the volume of subscribers who take up Pay TV options. It does appear that PCCW has
recognised and is addressing this problem. By the end of 2005, Now Broadband TV had grown
to a subscriber base of 549,000 with a target of reaching 750,000 by the end of 200626
. PCCW
has also become the first operator in Hong Kong to offer quadruple play by acquiring mobile
operator Sunday Communications. They have also concentrated on up-selling services (i.e.
premium content) to existing customers and moving them away from the a la carte and mini-
25
Market Focus: Broadband TV Market Booms in Hong Kong – Gartner December 2004. P.2
26
IPTV Market Analysis – Ovum August 2006 P.18.

packs of content. PCCW is reported to be planning a speed upgrade to 25Mbs27
which will allow
it to enhance its TV services by offering services such as HDTV, PVR, and interactive gaming.
The high level of FTTH means that there will be pressure on the network owners (i.e. HKBN
and HGC) to exploit available capacity so a decent return on investment can be made. Although
HKBN Digital TV also grew in 2005 to 103,000 subscribersError: Reference source not found,
its strategy of targeting the lower end of the TV market is unlikely to provide such a return –
something HGC should take note of. (HGC’s TV Pay Vision service has now launched but
subscriber/revenue figures are not yet available.)
PCCW has used IPTV to drive up its broadband subscriber volume by making it easy and cost
effective for consumers to use the service i.e. there is no subscription fee barrier. As consumers
have grown used to the service they have increased usage and been persuaded to upgrade to
premium content. Further enhancements to the service are now planned. Using its first mover
advantage , this incremental approach has worked well for PCCW. It will be very difficult w for
HGC and HKBN to follow this strategy now that PCCW has gained acceptance for IPTV. They
may find it easier to attract subscribers away from i-Cable.
The Hong Kong Pay TV market is small, saturated, and very competitive. 2005’s content war is
an indicator of things to come as key content rights become available and there is a danger that
SPs could overstretch themselves by paying too much to secure premium content.
27
IPTV & VoD Market Analysis – Ovum July 2005 P.19

3.3 USA
Households 111.6 Million
(2004)
TV Households 108.4
Total CATV Penetration 67.0%
Total DTH Penetration 20.3%
Broadband TV Penetration 0.24%30
(2004)
Total Pay TV (Multichannel TV) 87.8%
Penetration Rates are for TV Households
Source: iDate. The World Television Market 200431
(except where stated)
3.3.1 Broadband market
Unusually, CATV modem is the most widespread method of internet access. 60% of the
broadband subscribers in the USA receive service this way. However, the proportion of DSL
connections is increasing and has now reached 11.6 million. A further 0.6 million subscribers
are served by Ethernet LAN/FTTH. The main players are:
o Verizon – the largest US Telco which is incumbent in 13 states and has local access
networks in 14 others. Offers DSL speeds of up to 3Mbs, and 15Mbs over FTTH (which
is only available in the city of Keller, Texas). Verizon has 2.9 Million subscribers.
o SBC – Incumbent in five states in the South West but with acquisitions has now
stretched its footprint to cover 13 states. SBC has over a third of the DSL market with
4.2 million subscribers, and offers speeds of up to 3Mbs.
o BellSouth – business mainly focussed in the nine states in which it is the incumbent. Has
approximately 1.7 million ADSL customers and offers speeds of up to 3Mbps.
3.3.2 TV Market
The USA is the world’s largest TV market; turnover exceeded US$100 billion in 200232
. TTV is
made up of four major networks (ABC, CBS, NBC, and Fox), 2 minor networks (UPN and
WBN), over 1,200 commercial stations, and a public service network (PBS) that serves over 350
stations. Most of the commercial stations are owned by or affiliated to the networks so broadcast
a mixture of the network’s programmes and their own local content. The PBS stations are
28
http://www.cia.gov/cia/publications/factbook/geos/us.html
29
IPTV A Global Analysis – Informa Telecoms &Media August 2005 Page 60
30
IPTV A Global Analysis – Informa Telecoms & Media August 2005 Page 13. 273,000 subscribers taken as a
percentage of TV Households.
31
The World Television Market 2004 – iDate. Table 244 Page 219
32
The World Television Market 2004 – iDate Page 219

owned by local associations, universities, States, and municipalities. The major networks are
also available via CATV and DTH.
DTT launched in 1998 with the aim of providing HDTV. However, the lack of HDTV monitors
with a built in tuner for terrestrial reception has created a low take up.
CATV is the most dominant method of delivery with 97% of households passed by a network.
Of the main players, Comcast is the biggest with almost 30% of the market followed by Time
Warner with about 15%. Charter Communications, Cox Communications, and RCN make up
the rest of the main players. CATV operators are regulatory obliged to broadcast CATV
channels (i.e. channels set up for CATV but not owned by the operators), and charge the channel
owners a monthly fee per subscriber and per channel (the channels rely on advertising for
revenue. Premium channels are an exception to this and charges are based on subscription
revenues.
There are two DTH operators – DirecTV (34% owned by News Corp) and the DISH network
(owned by EchoStar).
CATV operators are required to pay local government franchise right fees which cost the
industry in excess of $2 billion per annum. Whilst the FCC decides on whether IPTV services
should be classified as a CATV service and be subjected to the tax, or not, it is difficult for the
IPTV market to take off. (DTH is exempt.)
3.3.3.1 Verizon
Verizon launched its FiOS (Fibre Optic Services) in September 2005. Originally the service was
only available to residents in Kellor Texas, but has since been rolled out in parts of California,
Florida, Massachusetts, New York, and Virginia. Verizon plans to provide FTTH to 3 million
homes by mid-2006 throughout the states in which it operates so that it can offer the service
wider. Verizon is banking on the capabilities of its FTTP network keeping the company ahead
of the competition for many years33
.
33
IPTV: A Breakthrough for US Telcos – Analysys. 2005. Page 14.

Verizon offers 180 channels plus access to 600 VoD titles for US$39.95 per month (some VoD
content costs extra). Motorola provide the STBs which have DVR functions and also allow
HDTV to be viewed. Triple-play bundles are also available. Although Verizon appear to be
pitching at high income households, an entry level service is also available (which gives
subscribers 35 local and weather channels for US$12.95) and offerings and prices are
competitive when pitched against CATV and DTH34
.
3.3.3.2 SBC
SBC does offer TV services at present but that is through a partnership with DTH operator
EchoStar - not IPTV. SBC has 400,000 such subscribers (mainly in rural areas) so has been
reasonably successful with this35
. However, this is seen as a stop gap offering and SBC has
announced plans for “Project Lightspeed” to deploy fibre in the access network to around 18
million homes by the end of 200736
. SBC are planning to give away the STBs (worth US$125
each) as part of the subscription price and expect to reach 18 million households and generate
revenues of US$500-US$600 by 200837
.
A product launch in San Antonio Texas is expected sometime in 2006.
3.3.3.3 Bell South
Bell South also offers TV services through a partnership with a DTH operator – DirecTV. Using
FTTC, Bell South already passes 1.1 million homes and plans to increase this by 150,000 –
200,000 per year. IPTV trials began in 2005 and a commercial launch is expected sometime in
2006.
3.3.4 IPTV Outlook
At this stage it’s too early to say whether IPTV will be a success in the USA or not. Telcos are
making significant investment in their networks – Lightspeed is costing SBC between US$4 and
US$6 billion dollars whilst Verizon is spending in excess of US$3 billion (at an average cost of
US$1,200 per house passed)38
. These plans certainly sound very ambitious and making a return
34
Verizon Rolls Out FiOS TV – Strategy Analytics Insight Broadband Media and Communications. 28th September
2005
35
IPTV: a breakthrough for US telcos – Analysys. 2005. Page 3
36
SBC – Ovum. March 2005. Page 8
37
IPTV: A Global Analysis – Informa Telecoms & Media. August 2005. Page 60
38
IPTV: a breakthrough for US telcos – Analysys. 2005. Page 3

on this will require a significant amount of growth either through IPTV or something else.
However, whether IPTV can make inroads into CATV’s dominance of the Pay TV market
remains to be seen particularly as the CATV companies fight back with their own triple-play
offerings to their very large and well-established customer base on networks that are already in
place.

3.4 France
Population 60.2 Million
TV Households 24.7 Million
Broadband Internet Households (excl CATV) 6.3 Million
Digital CATV Penetration 4.34%
Analogue CATV Penetration 14.58%
Total DTH Penetration (pay) 5.09%
Total Analogue Terrestrial Penetration (pay) 9.85%
IPTV Penetration 0.65%
Pay TV Penetration 41.39%
Figures are for 2004.
Penetration rates are for TV Households.
Source: Screen Digest39
3.4.1 Broadband
France is the second biggest broadband market in Europe. Delays in the availability of
unmetered dial-up Internet access and a market competitive enough to stimulate price cuts have
played a major part in this. The main broadband providers are:
o Wanadoo – owned by incumbent operator France Telecom. Largest broadband provider
with 2.9 Million subscribers. By April 2004, 82% of France’s exchanges had been
upgraded to support DSL Coverage with plans to expand this to 100% by 2006.
Wanadoo offers speeds of up to 8Mbs available.
o Free – owned by Iliad. Second largest broadband provider with 106,400 subscribers.
Free bundles telephony, TV and Internet access and offers speeds of up to 20Mbs.
o Neuf Cegetel – formed by a merger between Cegetel (699,000 subscribers) and Neuf
Telecom (440,000 subscribers) in 2005. ADSL services are available nationally but high
speeds (up to 20Mbs) are only available in metropolitan areas.
Subscriber figures are for end of year 200440
3.4.2 TV Market
Many free to air channels are available with providers including the public broadcaster France
Television, TF1, M6, and Canal Plus. Canal Plus also provides a premium channel which can be
received by analogue TTV (as well as other media) provided consumers pay a subscription and
purchase an STB. Subscriptions via this method are declining as consumers migrate to IPTV.
39
European IPTV: Market assessment and forecast – Screen Digest. November 2005. P.49
40
European Broadband pricing networks. Published by Quantum Web Ltd April 2005 Pages 74-78

DTT was launched in March 2005; 14 channels are now available. Initially it was only
obtainable by 30% households but this is expected to increase to 85% by 2007. Pay TV options
are expected to be added in 2006. Initial take-up has been good which is probably due to the low
Pay TV penetration in France. Many households with access to analogue TTV only are able to
increase the number of free channels available for the modest price of an STB.
There are two DTH providers: Canal Satellite (owned by Canal Plus) and TPS which have 2.68
million and 1.35 million subscribers respectively. Although competitors both providers’
offerings are similar. For example, both have access to Hollywood movies and top sports events.
Bidding and allocation for key football rights tends to be a battlefield with the regulator usually
having to intervene.
France has the third lowest CATV penetration in Europe (after Spain and the UK).
Consolidation – forced by strong competition from DTH providers – has produced two main
CATV operators: UPC France and NC Numericable. Neither of these has a triple play offering;
indeed NC Numericable doesn’t even offer telephony. CATV Internet take-up has also been
slow.
France has three operators offering IPTV services. In addition, DTH operators TPS and Canal
Plus Group could also be said to be IPTV providers as they allow their content to be broadcast
via this medium. However, this dissertation focuses on providers of the media.
3.4.3.1 MaLigneTV (France Telecom)
The MaLigneTV platform was launched by FT in December 2003. The service combines VoD
with IPTV packages of Pay TV offerings from Canal Plus, and DTH providers Canal Satellite,
and TPS. FT is also looking to expand into other European markets using its subsidiary,
Wanadoo.

Consumers pay a one off connection fee of €64, plus a monthly subscription fee of €16 for
which they receive an STB and access to the VoD service. Content for VoD is provided through
deals with Canal Plus amongst others. Prices for VoD content range from €0.5 to €5.
FT initially focussed on getting the technical side right and used IPTV as a vehicle for providing
content by third party suppliers. However, to enhance their VoD offering they have since
entered into direct negotiations with Hollywood companies and have concluded a deal with
Warner Brothers.
Pay TV content from Canal Plus, Canal Satellite, or TPS is available through further
subscription fees. Although FT sets the price for MaLigneTV, the content providers set the
subscription rates to their services which are billed separately. So, the consumer receives a bill
from FT for the basic service and a separate bill from the content provider.
Canal Satellite and TPS do not make all their channels available – partly due to technical
limitations and partly as a means to differentiate between IPTV and their own DTH media, but
those that are available are priced the same.
The majority of subscribers are subscribing to a Pay TV package. Less than 1% are taking the
basic VoD service only. Research has shown that 45% of subscribers are new to Pay TV –
therefore the Pay TV package providers (i.e. DTH providers) have been able to grow their
overall subscriber base with only a small proportion migrating from DTH41
.
MaLigneTV and Internet access are separate and consumers do not need to buy both. “Double-
play” packages of VoD, IPTV and broadband Internet access are also available as is a triple-play
offering of MaLigneTV, Broadband Internet, and VoIP is also available. This combination of
41
European IPTV: Market Assessment and Forecast. Published by Screen Digest November 2005. P.63

offerings has given MaLigneTV a subscriber base of FT 116,000 subscribersError: Reference
source not found.
FT is planning to launch a HDTV service in summer 2006 with content again provided by Canal
Plus and TPS.
FT is planning 100% ADSL coverage by 2006. Roll out of ADSL2+ began in Paris in December
2004 offering speeds of up to 18Mbs. A dedicated bandwidth of 4.6Mbs is used for video
signals. Video is encoded in MPEG-2 but MPEG-4 is being investigated for use with HDTV.
In the access network, each DSLAM is dedicated to either of the Pay TV operators. Therefore,
consumers cannot access packages from both providers on the same telephone line.
3.4.3.2 Free Telecom
Free offers triple-play through an integrated Freebox modem and STB for a single flat free. For
€29.99 per month, consumers receive:
o Basic package of 90 digital TV channels
o Broadband Internet
o Free local and National phone callers
o Router and WiFi
Premium packages are available for further subscription between €1.95 and €14.99. Canal
Satellite and Canal Plus Le Bouquet are available; these are at the same rate as on DTH and
MaLigneTV – as with MaLigneTV, billing is taken care of by Canal. Prior to the agreement
with Canal Plus, Free had not really seen Pay TV as a key part of its strategy to attract
customers.
The STB or “Freebox triple-play box” can be plugged directly into the TV set making it cheaper
to deploy than STBs, and enabling all subscribers to sample the TV service. In March 2004,

Free began giving these to all new customers in and in August of the same year began recalling
older Freeboxes from customers. By June 2005 approximately 90% of subscribers possessed a
triple-play box.
Free does not offer a VoD services at present although it does plan to do so. They are
negotiating with content providers but no details have yet been made available.
Free uses unbundled lines with ADSL, and was the first broadband provider to start rolling out
ADSL2+ in October 2004. This allows them to offer speeds of up to 20Mbs. Plans are in place
to upgrade 100% of the network to ADSL2+. IPTV is delivered at 3.5Mbs using MPEG-2
compression.
ADSL2+ enabled Free to trial HDTV broadcasts. There are plans to turn this into a commercial
offering but Free are not saying when. Two HDTV channels are being broadcasting – one using
MPEG-2 compression and one using the MPEG-4 system.
Free’s triple-play or nothing strategy has been successful in reducing churn to below 1%. It
effectively gives away 90 free channels on top of broadband. No other IPTV provider gives
away basic channels for nothing on top of broadband, nor offers triple-play so cheaply. This
strategy has made Free the most successful IPTV operator with 130,000 subscribers42
. However,
in order to maintain progress Free will need to keep innovating so will need new services like
VoD and NPVR in the future.
3.4.3.3 Neuf TV (Neuf telecom)
Neuf ADSL is available for €14.90 per month. Subscribers have the option of taking up Neuf
TV for an additional €6 per month allowing them access to the “Neuf Selection Package” of 40
channels. Further premium packages are available costing between €2 and €11 per month and
individual premium channels between €0.5 and €11 per month.
The low subscription fee indicates that Neuf is positioning the service as a churn reducer. As
well as a triple-play offering options such as broadband only or IPTV plus broadband are
42

available. Although the Neuf triple-play package is more expensive than that of Free, their other
offerings are more cost effective for subscribers who do not want a full triple-play package.
Neuf uses a hybrid STB (included in the €6 price) which also allows access to DTT. Neuf has
been unable to obtain rights for popular commercial channels TF1 and M6 (as the owners of
these channels also own TPS and don’t want to cannibalise their DTH business – although they
are available on DTT). Offering an STB with a DTT receiver enables Neuf to by-pass this
restriction.
Neuf has agreements with Canal Plus and TPS to carry their packages. In common with other
networks, customers are billed separately by the content providers. No VoD service is available
but there are apparently plans to introduce one – no details available at present.
Neuf owns a 22,000km fibre backbone network and use unbundled lines for customer access.
The network is fully IP. ADSL2+ is being rolled out enabling speeds of up to 20Mbs. The
compression method used is MPG-2
By the end of June 2005, Neuf had built up a base of 35,000 subscribers43
. Its bundles are priced
attractively compared to CATV, but will need to come up with a VoD and NPVR offering to
keep its offering attractive. Further growth may be obtained if the IPTV service is extended to
Cegetel’s users with which it merged in 2005.
3.4.4 IPTV Outlook
France continues to be Europe’s most developed IPTV market; at the end of 2005 the total
number of IPTV users had reached 470,00044
.
Threats to further growth include the launch of DTT although it remains to be seen how
attractive its Pay TV packages will be.
By allowing access to their content, the DTH operators appear to be viewing IPTV as a
complementing their media. A lot of potential subscribers in urban areas cannot erect satellite
43
44
IPTV Market Analysis – Ovum. 31st August 2006. P.12

dishes in their apartments. Using IPTV as a distribution method enables DTH operators to reach
these subscribers and compete against CATV companies offering triple-play. However, FT is
already negotiating its own content deals for its VoD service. Should IPTV continue growing at
its present rate then the DTH providers may find that they can be out bid for content by the
providers they’ve helped to grow. Some interesting content battles may lie ahead.
Another future issue may arise should IPTV provision to households barred from DTH reach
saturation point. To continue growing will they then look to attract those who do have the choice
away from DTH?
To further add to this story TPS and Canal have recently announced that they are in the process
of merging – so there will only be one premium content provider. It’s reasonable to assume that
the rapid growth of IPTV, and the launch of DTT, has been a driver behind this. It will also be
interesting to see what the regulatory authorities make of this and whether they force the newly
merged provider to offer their content at a reasonable rate to other TV providers (as in Italy).
IPTV growth has also been helped by CATV: low penetration, little triple-play available, and no
VoD, making CATV a poor competitor. Unless the CATV companies start putting together
some attractive and innovative packages it will remain that way.
The three IPTV providers described in this section are all clearly differentiated and are not
merely following each other: Free with its triple-play one size fits all offering, Neuf with its
hybrid STB and low-cost approach, and MaLigneTV with its VoD up front solution. All appeal
to different niches. Pay TV in France has a low penetration rate which has been seen as an
opportunity for IPTV and there is still plenty of scope for further growth. All three providers
continue to grow but FT has now overtaken Free in terms of subscribers:
o As part of FT’s re-branding strategy, MaLigneTV is now known as “TV by Orange”. Its
subscriber base had reached 229,000 subscribers by March 200645
. FT continues to
develop its content division and now has a large degree of direct involvement in the
higher value segments of the TV value chain (figure 1). Such a strategy lessens FT’s
reliance on TPS and Canal for premium content.
o Free has now offering VoD using Canal Plus’ “CanalPlay”. At the end of 2005, Free had
195,000 users. Impressive growth but is no longer France’s biggest IPTV provider. Its
45
IPTV Market Analysis – Ovum. 31st August 2006. P.14

very attractive packages enabled it to grow its initial subscriber base very rapidly but it
will need to keep innovating if it is to compete with FT.
o Neuf doubled its number of subscribers to 70,000 in 2005. Again impressive, but is in
danger of getting left behind by FT.
Because of the market conditions and the fact that there are three strong IPTV providers
competing against each other, IPTV will continue to grow in France. Whether all three providers
can stay in the market long term remains to be seen. A lot may well depend on the newly
merged TPS/Canal i.e. regulatory conditions placed on them, and their strategy for dealing with
all, or individual, IPTV providers.

3.5 Italy
Population 57.8 million
Households 23.1 million
TV Households 21.9 million
CATV Penetration N/A
DTH Penetration (pay) 14.57%
DTH Penetration (free) 4.39%
DTT Penetration (free) 5.21%
IPTV Penetration 0.77%
Total Pay TV Penetration 15.34%
Figures are for 2004.
Penetration rates are for TV Households.
Source: Screen Digest46
3.5.1 Broadband
Italy is one of Europe’s fastest growing markets. It got off to a slow start mainly due to
conservative adoption attitudes and the high costs involved. However, the introduction of low-
cost subscription-free access has begun to make a difference. Because of the average local loop
length and the high number of local exchanges (11,00047
) ADSL works particularly well in Italy.
The main broadband players are:
o Telecom Italia – former incumbent. ADSL is available to 90% of the population, and
Telecom Italia has 3,115,000 broadband subscribers.
46
European IPTV: Market assessment and forecast – Screen Digest. November 2005. P.81
47
DSL and Cable Modem Services in Europe – Published by Gartner February 2005. P.19

o Wind Telecomunicazione – offers speeds of up to 2Mbs in 170 cities and districts.
Wind has 336,000 subscribers.
o FastWeb – Using direct fibre/cable modem, FastWeb offers speeds of up to 10Mbs.
Available in major cities (Milan, Rome, Turin, Genoa, Naples, Bologna, and Reggio
Emilia) and has a subscriber base of 496,019. Plans to increase its footprint from 27% of
the population to 45% by the end of 200648
.
o Tiscali – 210,000 subscribers. Tiscali offers 10 different ADSL packages with speeds of
up to 12Mbs.
Subscriber figures are for end of year 200449
.
3.5.2 TV Market
Eight free- to-air channels are offered via TTV: three by public broadcaster RAI, three by
Mediaset, and two by Telecom Italia.
Free DTT launched in December 2003 and offers more than 20 channels. To make the service
more attractive the Italian government introduced a subsidy to finance one million STBs capable
of supporting e-government services. Growth of DDT has recently been driven by a Pay Per
View (PPV) soccer service. Mediaset is also planning to introduce similar cards for movies and
events. Analogue is due for switch off in 2006.
Following the merger of Telepiu and Stream to form Sky Italia, there is only one DTH provider.
Sky holds the rights to key sports and movies, but as part of the EC anti-trust waiver that
48
Fastweb: the next steps – Published by Ovum. August 2005. Page 4.
49
European Broadband pricing networks. Published by Quantum Web Ltd April 2005 Pages 74-78

allowed the merger to take place, Sky is obliged to make its channels available to other TV
operators.
There is no CATV sector in Italy.
3.5.3.1 FastWeb
Until recently overtaken by operators in France and Spain, FastWeb was the most successful
IPTV service in Europe. Since 2001, FastWeb has been providing a triple-play of broadband
Internet, telephony and IPTV. The key points of their business model are:
o Single connection offering broadcast IPTV, VoD, voice, and broadband Internet;
o Fast broadband Internet access – FastWeb is currently the only ISP in Italy offering
speeds of up to 4Mbps and 10Mbps. This has been a key part of the company’s strategic
positioning;
o Consumers pay €25 for a “base” package which gives them 150 minutes of voice and
300 minutes of Broadband access. (This is pitched against Telecom Italia who charge
€15 for line rental only)
To access IPTV, consumers have to buy (for €99) or rent (for €7 a month) an STB. STBs are
subsidised by the Italian government at €150 per unit. This is to help drive up digital take-up
and enable analogue switch off. With an STB, the consumer then has access to free-to-air digital
channels, can subscribe to VoD channels, and access Pay TV offerings. (FastWeb retails Sky

Italia’s Pay TV line up). Content packages cost between €5.90 and €46 per month. A virtual
NPVR is available allowing consumers to store, pause, re-wind and fast-forward programmes.
FastWeb has content agreements include those with 20th
Century Fox, and Universal Studios.
They also have access to Serie A and Serie B football rights through Sky Italia.
FastWeb have built a network fully geared up for delivering video. They developed their own IP
based hardware and software using Bitband server technology as none of the IP technology
solutions on the market offered the features and capabilities they were looking for. Middleware
and MPG-2 encoding was put together in house. The network is fully IP and has enabled
FastWeb to make the claim that they were the first operator in the world to offer triple-play. As
of the year end 2004, 61% of customers subscribed to DSL and 39% to fibre50
. The network
delivers 6Mbs; 2Mbs is used for delivering TV and 4Mbs is used for Internet access. The fibre
network delivers 10Mbs.
Affordable broadband and telephony has enabled FastWeb to make general penetration - 20% of
customers take voice and TV without Broadband The lack of a CATV sector and the subsidising
50
IPTV: A Global Analysis – Informa Telecoms and Media August 2005. Page 122

of STBs have also been key drivers. However, all these positive factors alone would not have
enabled FastWeb to be successful; access to Sky Italia’s content and being able to re-sell them
competitively has been key.
In June 2005, subscriptions stood at 190,00051
, but growth does appear to be slowing down.
3.5.3.2 Telecom Italia
Telecom Italia began rolling out IPTV in December 2005. Initially, the service was only offered
in Rome, Milan, Bologna and Palermo, with an aim is to reach 250 cities and towns within the
first twelve months52
. The roll-out followed free trials which began in July 2005.
According to Ovum TI has been astute in not jumping in too soon and letting FastWeb lay the
groundwork for consumer acceptance of IPTV and triple-play, and has also waited for
broadband to start penetrating the mass marketError: Reference source not found. It is too early
to assess whether this statement is true or not.
51
European IPTV: Market Assessment and Forecast – Published by Screen Digest November 2005. P.85
52
The on-demand wave gathers pace as Telecom Italia gets into TV – Ovum Euroview – 30/11/2005

Telecom Italia has concluded deals with major Hollywood companies including Time Warner
and Paramount. The VoD service will start off with 100-150 movies which will increase by 30
each month up to the target number of 600. Through Telecom Italia Media (TIM) – which owns
a stake in MTV Italy – Telecom Italia also has access to the MTV football portfolio so will be
able to offer live Serie A and Serie B football matches.
TIM is also involved in DTT so Telecom Italia will not be competing directly with free-to-air
channels. The strategy would appear to be one of increasing the take-up of premium content.
Telecom Italia’s basic triple-play offering is priced at €45 per month which is more expensive
than FastWeb. With both having access to blockbuster movies and the all important Serie A and
Serie B football it will be interesting to see how Telecom Italia can provide enough
differentiation to justify their more expensive offering.

3.5.4 IPTV Outlook
Pay TV penetration in Italy is still low so there is plenty of market for both FastWeb and
Telecom Italia to go after. With no CATV sector, the only real rival would appear to be Sky
Italia. Wind is rumoured to be launching a VoD service and Tiscali are also tipped to enter the
market. However, the bigger threat is likely to come from DTT. Mediaset (owned by Prime
Minister Burlusconi) are heavily involved in DTT and there is a possibility of political
interference.
Telecom Italia was estimated to have reached 50,000 subscribers as of June 200653
.
FastWeb’s launch of IPTV was well ahead of most of Europe and the company has been seen as
one of the world’s leading providers. On a cautionary note, FastWeb’s Q1 2005 results showed a
fall in ARPU from the previous year in TV/video revenue from €357 to €342 per annum54
. This
prompts Ovum to ask the question “if FastWeb, a definitive leader in the IP TV market, finds it
difficult to grow and even sustain revenue, what hope for less wily players in other markets?” 55
.
FastWeb reported broadband 874,000 customers as of June 2006 with around 160,000 IPTV
subscribers56
. Based on the 2004 figures this suggests that the number of IPTV subscribers has
actually fallen whilst broadband itself has significantly increased; or that the 2004 figures were
inaccurate.
In a further move, FastWeb and Sky Italia announced a tie up which will allow FastWeb to offer
its viewers a more complete offer of Sky programmes than rival Telecom Italia57
. The deal also
allows Sky Italia to offer its subscribers telephony and broadband using FastWeb’s
infrastructure.
What does seem apparent is that to make IPTV work, Pay TV packages are essential – VoD
alone will not produce desired returns. Also, telecoms services such as broadband Internet and
53
IPTV Market Analysis – Ovum – 31/08/2006. P.21
54
Fastweb: on track, despite higher loss, but fall in video contribution – Ovum Euroview – 16/05/2005
55
Italy’s Fastweb, Sky clinch TV programming deal – Reuters 9th October 2006
56
IPTV Market Analysis – Ovum – 31/08/2006. Page 21
57
Italy’s Fastweb, Sky clinch TV programming deal – Reuters 9th October 2006

telephony are likely to generate more revenues. At present, FastWeb’s telecoms margin is 70-75
%, and their video services margin is 50%58
. This probably explains why FastWeb is now
planning to launch a Broadband only product. This will involve unbundling Telecom Italia’s
local loops with Telecom Italia keeping the voice part of the line. This will allow FastWeb to
provide service to consumers who do not wish to have triple play or who live too far from their
local exchange to receive the normal triple play service.
58
Fastweb: the next steps – Published by Ovum. August 2005. Page 4.

3.6 Canada
IPTV Penetration 1.01%61
Total Pay TV Penetration 92.4%
3.6.1 Broadband market
The geographical nature of Canada – its division into provinces – has created a telecoms
industry structure largely made up of provincial incumbents with interests elsewhere in the
country from acquisitions. The main broadband players are:
o Bell Canada – the oldest and largest telecoms company in Canada. It is the incumbent
operator in the provinces Ontario and Quebec but has presence throughout the country
through its holdings in companies such as Aliant. Bell Canada has 1.8 million broadband
59
http://www.cia.gov/cia/publications/factbook/geos/ca.html
60
IPTV A Global Analysis – Informa Telecoms & Media August 2005 Page 57
61
IPTV A Global Analysis – Informa Telecoms & Media August 2005 Page 13. 123,000 subscribers taken as a
percentage of TV households.
62
The World Television Market 2004 – iDate. Table 236 Page 213.

subscribers and is already involved in the TV market through its ownership of
ExpressVu and CTV.
o Manitoba Telecom Services (MTS) – incumbent operator in the province of Manitoba
with 104,000 subscribers. The only serious competition it faces is from Shaw cable.
o SaskTel – based in the province of Saskatchewan.
o TELUS - the result of a merger between BC Telecom (incumbent in British Columbia)
and Telus corporation (incumbent in Alberta). TELUS also has a strong presence in
Quebec through its acquisition of QuebecTel. TELUS has 712,000 broadband
subscribers63
.
Source for subscriber figures: Informa Telecoms & Media64
except where stated.
3.6.2 TV Market
Due to the mature nature of the CATV networks and the Pay TV market, only 7.6% of
households rely solely on TTV. Commercial channels are provided by state owned CBC and
SRC which offers English language and French language services respectively. CTV (70%
owned by Bell Canada), Global Television Network, and channels run by Rogers Media and
Shaw Communications make up the rest of this sector. Channels tend not to be available
nationally (many are broadcast only to the respective French and English speaking
communities), but all are available via CATV and DTH.
63
TELUS Internet and Network Services – Published by Gartner. 7th June 2005.
64
IPTV A Global Analysis – Informa Telecoms & Media August 2005. Page 59

The Canadian regulator – Canadian Radio-television Telecommunications Commission (CTRC)
– is encouraging broadcasters to build new transmitters to provide DTT covering the same area
as their analogue transmitters. However, there are no plans as of yet to de-commission analogue.
The CATV sector is well established and very strong. 90% of households are passed by CATV.
As a response to digital offerings from DTH companies, the CATV operators have formed
various alliances and have undertaken major mergers to give them a stronger position in the
switch to digital technology. The two main players are Rogers Media and Shaw
Communications.
DTH began with households subscribing to DTH offerings from the USA which created a
“grey” market. The strong presence of the neighbouring USA DTH offerings and the ubiquity of
CATV has limited the growth of the two Canadian DTH companies: ExpressVu (owned by Bell
Canada) and Star Choice (owned by Shaw Communications). But DTH is digital and this has
helped to lure customers away from CATV – CATV penetration has declined since the
introduction of DTH in 1997.
Through their holdings in various media, Rogers Communications, Shaw Communications, and
Bell Canada Enterprises are the three main players in the Pay TV sector. It should also be noted

that CRTC has set very strict rules on what content any TV provider must offer e.g. limited US
channels and specific levels of Canadian content.
3.6.3.1 Max (SaskTel)
SaskTel launched its Max service in September 2002 and claims to offer the lowest price point
for TV and VoD via DSL. The service is only available in the nine urban areas of Saskatchewan
to existing long-distance or mobile customers.
Max offers 30 TV channels, VoD, and 1.5Mb broadband for C$34.95 per month plus a C$99 set
up charge. Further packages can be added on top up to a maximum of 300 channels for C$99.
The content line-up is similar to what’s available via DTH TV65
.
SaskTel has done deals with major studios including Sony, Warner Brothers, and 20th
Century
Fox, and by the end of 2004 had attracted 25,000 subscribers66
.
3.6.3.2 Manitoba
Manitoba Telecom launched its TV-over-DSL service in January 2003 to its customers in
Winnipeg. It followed this with a VoD service in June 2005. MTS offers 20 channel packages
ranging from C$24.99 a month to C$49.99 a month, with VoD content costing between C$0.99
to C$4.99.
Manitoba Telecom Services (MTS) passes 87% of homes in Winnipeg and has 50,000 subs67
.
Gives it a 20% Pay TV market share in Winnipeg. Three-quarters of these also subscribe to
broadband. SaskTel has 41,500 subs in nine locations in Saskatchewan. 40% Pay TV market in
these locations. Almost all subscribe to broadband which offers speeds of up to 8Mbs to around
200,000 homesError: Reference source not found.
65
Sasktel: blazing a Canadian trail with IPTV – Ovum. November 2004
66
IPTV: AGlobal Analysis – Informa Telecoms and Media. August 2005 Page 57
67
Top Three Issues for Canadian Carriers Reflect Global Trend – Gartner 8th February 2006.

3.6.3.3 Bell Canada
In June 2003 Bell Canada launched Surf and Watch which bundles broadband Intenet with
ExpressVu digital Pay TV services (via DTH) on a single bill. However, Bell has now been
allowed a licence to offer PPV services via DSL and is trialling the service to subscribers in
apartment blocks.
3.6.4 IPTV Outlook
SaskTel and Manitoba have been quite successful so far because they were able to exploit the
advantage of their digital networks against the weaknesses of the CATV companies analogue
networks. They’ve also been successful in very small, local geographic areas. It remains to be
seen whether this can be replicated on a larger footprint.
CATV remains dominant in the Pay TV market and they are fighting back with triple-play
offerings. The largest CATV player – Rogers – is also Canada’s biggest wireless player and able
to offer quadruple play.

It is also not yet apparent how Bell Canada plans to fit IPTV in with its existing TV interests.
For example, will it enable them to reach consumers in apartment blocks that can’t be reached
via DTH, or will it replace DTH?
TELUS is also reported to be planning to launch a VoD service, but as of yet there are no further
details.

3.7 Japan
Broadband Internet Households (excl CATV) 13.2 Million
IPTV Penetration 0.16%69
Total Pay TV Penetration (Multichannel) 68.6%
3.7.1 Broadband Market
Japan has over 40 DSL providers. The Japanese government, through its e-Japan project has
made the roll out of broadband a priority and has set the price of access to NTT’s local loops at
US$1.4 per month. Backhaul has also been classified as “special telecommunication equipment”
by the Japanese regulator which has forced NTT to leas out the optical fibre of its backbone
network as well71
. This has lead to a very competitive market with an average performance/price
ratio of 8Mbs for under $US19 per month. As 32% of the population lives in 4.5% of the
country (mainly in apartment buildings) FTTH has proved an optimal way of deploying
broadband. Out of a total of 15.9 million broadband subscribers, 1.4 million are FTTH (and 2.7
million are cable modem)72
. The main players are:
o NTT – the incumbent operator with 4.4 million DSL lines and over 1 million FTTH
connections make NTT the leading broadband provider in Japan. NTT is barred by
regulation from providing broadcast TV over DSL. NTT is divided in NTT West and
NTT East.
o Yahoo! Broadband – the leading shareholder in this company is Softbank which
acquired Japan Telecom in November 2004 making it the leading ISP. In June 2004
Yahoo! Broadband boasted 4.3 million subscribers. Basic services are 8Mbs but to
compete with NTT’s high speeds it has introduced download speeds of 26 Mbps and 45
Mbps.
68
http://www.cia.gov/cia/publications/factbook/geos/ja.html
69
IPTV: A Global Analysis – Informa Telecoms & Media – August 2005. Page 13. 77,000 subscribers taken as a
percentage of TV households.
70
The World Television Market 2004 – iDate. Table 46. Page 49
71
Softbank and Yahoo! BB: Behind the Growth Story – Ovum. July 2005. Page 3
72
Quarter 2 2004. The World Internet Access and Broadband Market – iDate 2004. Table 15 Page 72

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