The future for Internet protocol television (IPTV) services distributed by telecommunications service providers received a boost earlier this month when Gov. Rick Perry of Texas signed into law a bill that opens the doors for a more aggressive rollout of IPTV. The new law eliminates the need for a telco to obtain individual franchise rights from hundreds of municipalities in the state and could service as a catalyst for other states to follow suit, opening the door for new revenue streams for satellite operators.

If the Texas law does indeed serve as the first door in opening up the IPTV market, SES Americom will have hit the market at just about the right time as it seeks customers for its new IP Prime service. The new service is a centralized, satellite-delivered IPTV distribution solution that will enable telcos to bundle standard- and high- definition programming with voice and broadband services.

The IPTV market “is something we have been following for the past two years very closely,” Bryan McGuirk, president of SES Americom’s North American media solutions, told Satellite News. “IP Prime has been in development for nearly that long. The whole trend toward IP is changing the way our customers do business. We felt needed to develop this new technology protocol to be there for our customers.”

McGuirk said the evolution of SES Americom’s IP Prime service in some ways mirrors the growth of another video distribution platform: direct-to-home (DTH) satellite television services, which received a boost from the advent of MPEG technology.

“The original MPEG wave created a wave of innovation, [the] launch of new channels and a new paradigm and a new group of pay-TV operators,” McGuirk said. “We see a parallel to today. This evolution of new technology and MPEG-4 combined with telcos getting into video really gives them an opportunity to create a differentiated service and offer with virtually unlimited bandwidth a lot of new channels and bring new services to market.”

IP Prime

In its initial iteration, IP Prime will originate from SES Americom’s IPTV Broadcast Center in Vernon Valley, N.J., where video and audio will be received and processed for distribution via satellite and fiber to telco video hubs nationwide. SES Americom will use its AMC-9 satellite for the IP Prime platform.

The key part of the IP Prime platform that SES Americom believes will make it an attractive platform is that SES is taking the lead in handing the MPEG-4 encoding process before video is distributed to telcos. Video is “formatted differently so it will be for a different then what we do for the cable industry,” McGuirk said. With SES Americom handling the encoding, telcos “can put their capital where it shows — in acquiring new subscribers.”

The Satellite Opportunity

With satellite’s natural fit as a point-to-multipoint distribution service, there is an opportunity for satellite operators to tap into this emerging market, one that Northern Sky Research is predicting will have cumulative revenues of $1.6 billion between 2005 and 2010.

“We believe it is a niche market [but] it is a good one for [satellite companies] to tap into,” Northern Sky Research Senior Analyst Jose del Rosario told Satellite News.

del Rosario identified five potential revenue opportunities for satellite companies: leasing transponder space, transponder leasing plus network management and other services (similar to what IP Prime is offering), content aggregation, partnerships with broadband terrestrial service providers and partnerships between satellite service providers such as DirecTV and Direcway.

“We think in the IPTV via satellite business, the real revenue streams come from the revenue slices you get from distribution of content,” del Rosario said, noting that if a satellite company owns the distribution rights to the content it is distributing, it will gain a regular source of revenues. Conversely, he said revenues from service provisions are not going to be that high.

The U.S. Market

While the Texas decision has the potential to lead other states to follow suit, companies within the IPTV market are expecting it to be a while before IPTV can become a legitimate competitor to other means of delivering services.

Mauro Bonomi, CEO of Minerva Networks, which fields MPEG encoders, decoders, DVB-to-IP demultiplexers and video service management software, as well as redundancy management systems, expects to see IPTV roll out in rural areas faster than in big cities. “In rural America, a majority will have access in three years,” he told Broadband Business Forecast, sister publication to Satellite News. Rural providers are able to provide the service using ADSL2 because the competition from cable companies, which are expected to fight tooth and nail to prevent telcos from rolling out IPTV “is not as fierce as it is in urban areas. [However], I think a majority of the U.S. will have access (to IPTV) in the next five years.”

U.K.-based Ant Software Ltd. President and CEO Simon Woodward is less optimistic. “We’ve got to be 10 to 15 years away from the majority” of Americans having access to IPTV, he said, not because of technical or business issues but because “the U.S. is the victim of clearly a great deal of battling between cable and telcos” who are going to “use both legislative and commercial methods to defend their own delivery methods.”

“Satellites are positioned for what the [National Rural Telecommunications Cooperative] likes to do” in serving the telecom needs of rural America, del Rosario said. “If you look at the major telcos, they are looking at [other terrestrial technologies] so satellite is really outside of their purview. If you look at the households in the United States that are targets or what the IPTV folks can tap, most of them are in urban and suburban areas and [telcos] probably are going to update their infrastructure so that they can own the customer right off. For the United States, at least, it is rural. It is a healthy market, but compared to what the market potential is overall for IPTV, it is very niche.”

–Gregory Twachtman and Stuart Zipper

(Jose del Rosario, Northern Sky Research, jdelrosario@northernskyresearch.com; Paul Sims, SES Americom, 678-576-6126)