For an entertainment and media hungry market like India, internet protocol television (IPTV) is poised to spice up the viewing habits of the population at large.
Telecom regulator Telecom Regulatory Authority of India (Trai) released its recommendations on the policy framework surrounding IPTV in January 2008. Recent reports indicate that the policy being announced is most likely in line with the recommendations in allowing telcos, cable operators and ISPs (with specified network) to provide IPTV services to customers; and allowing broadcasters to provide content to such providers.
The first issue to be considered actually is whether this is a ?communications? space issue or a ?media? space issue. The Trai recommendations paper indicates that telecom operators are being seen as ?carriers? for content created and delivered by broadcasters and other players in the media space.
The responsibility for content is envisaged to be with the ?creater?, and in the event that the telco or an ISP commissions or creates original content, the carrier is expected to comply with all necessary broadcasting/media/ technology related guidelines issued by relevant functional ministries and regulators. Thus, while from a policy perspective, the content creation and carriage are being structured as two distinct activities, it will be interesting to see how the market on the ground develops?is true convergence happening with carriers getting into the content space?or not.
Even globally, IPTV has currently seen rather low level of penetration?near 1-5% globally, with Asia Pacific leading at 3% and EMEA and the US at far lower sub 2% and 1.5% respectively. This low penetration is attributed primarily to the combination of availability of service and consumer understanding.
In India, the television industry has grown at a very healthy 21% over the last four years, including 13% in 2007 over the prior year. The total revenue of Rs 226 billion in 2007 is expected to continue to grow at similar rates, to touch Rs 600 billion in 2012.
The key constituents of this revenue are television distribution with a 63% share in 2012, (up from 60% in 2007) and television advertising at 33% in 2012 (down from 35% in 2007) of this vibrant market.
Cable TV clearly is the king, with DTH households being less than 5% of cable TV households. Currently, with hardly any differentiated offerings, attracting customer to a different platform is seen as a challenge. IPTV too is likely to face a similar challenge?in communicating to customers, the differentiation and the value proposition. Breaking the price barrier currently set by cable TV will be the allied challenge.
The current recommendations allow cable TV operators to provide IPTV services with no further licensing; though the FDI cap for cable operators stands at 49% versus 74% for telcos.
While cable operators are not subjected to any revenue share, ISPs are subject to a 6% revenue share, while telecos? revenue share ranges from 6-10%. Thus, a similar service from the end-user perspective is likely to be delivered with varying cost structures and operating structures.
The expectation is that, until the time the regulations converge, the three different categories of service providers will structure their offerings through varied bundles and resultantly differing business models.
Given the segmented customer market place from demographics, awareness and affordability, it is also likely that differentiated offerings are proposed for the different clusters.
The opportunity in the market place, and possibility in the future of cable carrying voice not ruled out, does create an interesting scenario of further consolidation in the cable industry and large foreign players entering, albeit as minority stakeholders, to help an existing cable player to move up the value chain to IPTV.
This will of course significantly raise the already heated competition scenario, and also raise the bar in customer offerings.
Given the somewhat differentiated regulatory framework and operating structures, it is likely that a range of operating models including loose alliance, partnerships and complete outsourcing for content and possibly carriage emerges.
Just as the killer application for telephony in India is still seen as voice, it is likely that the most viable IPTV strategy may well be a hybrid approach?delivery of vanilla broadcast TV over cable or satellite and using the IPTV medium as the platform for higher priced premium on demand and interactive content, at least in the near to medium term.
It is to be seen how soon the market forces drive convergence in the regulatory scenario, and how well the regulations keep pace with technology-driven and customer and innovation-led market developments.
?The writer is India leader for infocom practice, PricewaterhouseCoopers