Time to take another look at IPTV.

The latest report from eMarketer, IPTV: The Global Picture, projects that the total number of broadband households worldwide will grow to approximately 422 million by 2010. Of that number, 139 million will have sufficient bandwidth to receive IPTV. This excludes cable broadband subscribers who are unlikely to be offered an alternative method of receiving their TV programming soon.

“That takes care of the first essential ingredient required for IPTV growth: bandwidth,” says Ben Macklin, eMarketer senior analyst and the author of the report. “The second ingredient needed to launch IPTV is a favorable regulatory environment. Unfortunately, in countries such as Japan and South Korea, the two leading broadband nations in the world, IPTV has not come to market because of a lack of regulatory clarity as to whether IPTV falls under the category of Internet service or broadcast service.”

Once broadband and regulatory hurdles are cleared, IPTV providers will still need to assess their value proposition, and this will vary significantly between countries depending on the history and dynamics of the particular TV market.

“In countries such as Spain, Italy, France and Hong Kong, the leading broadband access providers are utilizing IPTV as an aggressive play to move into underserved pay-TV markets,” says Mr Macklin. “IPTV has genuine revenue potential in these markets rather than merely being a churn reducer.”

eMarketer forecasts strong IPTV growth in the US, with the total number of subscribers projected to reach 8.7 million subscribers by 2010, rising from a low base of 300,000 in 2005. However, in both the US and the UK, the value proposition is less clear, and it is likely that telecom operators will use IPTV, at least initially, merely as a defensive play.

“With such a high multichannel TV penetration already in the US and UK, IPTV is unlikely to offer anything new that existing subscribers of cable or satellite TV services do not already receive. The revenue potential for IPTV as a stand-alone product is limited at best,” says Mr Macklin. “However, as a part of a bundle of services, which includes broadband and fixed and mobile voice, the value of IPTV will be in its ability to reduce churn and to perhaps recoup some revenue lost to cable companies offering voice services.”

While the first incarnations of IPTV in the US are likely to be extremely underwhelming, this should not undermine the long-term potential of IPTV. The combination of high-quality video content (both user-generated and professionally produced) with the search and retrieve capabilities of the Web has the potential to radically disrupt the existing TV model.

“It is likely that it won’t be until 2010 and beyond, when the second generation of IPTV services becomes available, that a distinct product will emerge that is perhaps less like TV, and more like the Web,” says Mr Macklin.

Courtesy of http://www.emarketer.com