IPTVReality Check Europe and Asia

The Americas Executive Institute 2007

Lars BodenheimerVP Technology & Network Engineering

Detecon, Inc.

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IPTV Evolution

“[IPTV] is a process where our distributors [franchised operators]

take our linear networks and chop up the signals into little packets

and send them out over a secure network and put it back together

for their customers.”

[Sean Riley, Senior Vice President of Sales for Fox]

“[NGTV] is a TV offering that goes beyond what MSOs, satellite

providers and Telcos are currently offering. Its contours are being

defined everyday by, among others, network operators, content

owners, internet brands, consumer electronic manufacturers and

viewers. NGTV will definitely expand to encompass a form of

WebTV and it will also be mobile.

[Detecon, Inc.]

IPTV will evolve from a pure IP based TV service to a multimedia, multiplatform

and multitask based “Next Generation TV”

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IPTV Platform

A carrier that provides 1G/2G IPTV services will implement, integrated, or

otherwise realize one or more of the building blocks below

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IPTV is seeing constant growth all over the world, but Europe is expected to keep

its leading position for the next few years

IPTV - who is leading, who is following?

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IPTV - deployments worldwide

A mix of incumbent and local players determine the current IPTV service

provider landscape

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IPTV – different regional drivers and inhibitors

16 Point-Text

Western Europe

� Free-TV

� High usage

� Early start

� Often weak cable operators

� Killer content Soccer

Asia

� Largest populations

� Islands of the highest broadband penetration levels

� Ocean of poor network infrastructure

Latin America

� IPTV barely laid out yet due to high regulatory hurdles

� Telcos have better land line coverage than cable providers

USA

� Pay TV

� High ARPU, high usage

� Cable operators’ 3Play

� “I love my TiVO!”

� TV is plural

The situation differs significantly from continent to continent as well as

sometimes country to country

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IPTV is facing strong competition especially by Terrestrial Television in Europe

but is gaining more momentum

IPTV in Western Europe

0.13 0.8 1.653.25

44.644.143.542.7

29.329.53029.5

22.524.524.623.9

32.9

42.5

47.2

22.5

0

5

10

15

20

25

30

35

40

45

50

2004 2005 2006 2007

Terrestrial Television Satellite Subscribers CATV Subscribers

IPTV Subscribers Total Broadband Subscribers

TV watchers and broadband subscribers in France, Germany, Italy and Spain (2004 – 2007, million households)Source: InfoCom 2007

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IPTV in Western Europe

Source: Detecon Research, Company Websites, Ovum 2007, Screen Digest 2007

While FastWeb and Orange.TV represent the biggest, earliest and most innovative

IPTV markets, DT faces a substantially more difficult task

Offer

Channels

Key Features

Technology

Price

Marketshare

FastWebTV + (1x, 2x, 4x)Triple-Play

All national channels, VoD, Soccer on PPV basis

Recommendation SystemInternet by TV HD, VoD, PVR

DSL, FTTH/FTTOIPTV Platform self developed

20 € (single)65 € (Triple-Play)

72.2%(1 million + BB subs)

FastWeb

Triple Play

All DTT Channels, Very good Pay-TV and VoD Offer

HDTV and VoD Content optimized for Cell and PC

ADSL 2+, FTTHPlatform mainly Thomson

29,95 € (8 MBit)Plenty of extra fees

~ 50 %

Orange.TV

Triple-Play

70 (100) TV Channels + VoD + Soccer Option

HD, Timeshifted TV, DVR, TV Archiv, Printed TV Guide

Microsoft TVVDSL2

59,95 € Basic74,95 € Plus

N/A

T-Home

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� IPTV Launch 2003 (1st)

� 230,000 IPTV subscribers (21% of its broadband customers, one of the highest rates worldwide)

� World leader in terms of IPTV ARPU contribution to broadband revenue (Residential ARPU is EUR 61)

� Strong innovator

� Worlds first Triple Play provider (2003)

� Simple pricing system

� FastWebTV (IPTV Only Service)

� Successful local and child-content

� 400.000 IPTV subscribers as of June 2007

� Household penetration: 5%(2010: 13%)

� Fairly limited terrestrial TV service (switch off in 2008)

� No cable operators

� Goverment subsidised set-top boxes for DTT

� Triple-Play popularity restricted

Italy

Italy / FastWeb

After its start FastWeb became the leading reference worldwide for how to create

and build IPTV services

FastWeb

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ContentWise represents the next step for IPTV. From building up and expanding

the IPTV portfolio, to leveraging and streamlining what there is

ContentWise Recommendation System (Italy)

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� 2.55 m IPTV subscribers as of June 2007 (2010: 3,4m)

� Household penetration: 13.7%

� Weak cable coverage of 30% and high willingness to pay for TV

� Two satellite players, open to IPTV as a delivery channel (now merged though)

� Strong emphasis on locally-produced content.

� Analog TT to be switched off in 2012

France

� Launched in 2004 (1st)

� 0.975 m subscribers (Q3 2007)

� Adopted Price, content and features due to strong competition

� Premium content packages incorporating TPS and Canal+ Pay-TV programs

� Flexible service options

� Technique support better than competitors

� Agreements to offer an exclusive variety of channels

Orange.TV

France / Orange (France Telecom)

France is the biggest and one of the most competitive IPTV markets worldwide

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� 218,000 IPTV subscribers as of June 2007 (2010: 3,195M)

� Household penetration: 1%(2010: 8%)

� Highest avaiability of FreeTV in EU and low priced, widely available CATV (->regulation)

� Price is key Factor

� Little interest in features

� Unawareness of VoD and personalized programming guide

� Analog TT to be switched off in 2011

Germany

� Launched Q4 2006 (2nd)

� Number of subscribers: N/A believed to be less than 100,000

� IPTV coverage: 15M HH

� Goal of 1M Triple-Play customers end 2007 had to be reduced to 100k–200k (2010: 1.5M)

� Weak performance addressed with

� 25% price cut

� New features

� Bundesliga special

� Technical and regulatory Problems

T-Home

Germany / Deutsche Telekom

Germany is so far a very difficult market for IPTV, but despite initial problems,

strong growth is expected for the next years

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IPTV in Asia

Source: Detecon Research, Company Websites, Ovum 2007

The situation for IPTV differs greatly among Asian countries. Where the worlds

highest broadband penetrations border regions of poor network infrastructure

Offer

Channels

Key Features

Technology

Price

Marketshare

Triple Play (Qadruple)Now TV (independent)

131 channels (50 exlusive)

Program „a la carte“TV + VAS

ADSL+, FTTHSelf developed

Free+ price by extra channel

70 %(49 % among all TV offers)

PCCW

Triple Play

SMG Channels5600h VoD

PVR, 48h Timeshift TV

ADSL, FTTNUTStarcom, ZTE

60yuan ($7.42)(Shanghai)

~ 55% (Estimate)

China Telecom

Triple-Pay(Quadruple future)

36+ Channels, or 1000 VoD titles

Video GamingTV-Base Service

ADSL, (FTTH)UTStarcom

33 $ Basic+ Extra Services

N/A

Yahoo!BB

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PCCW has written a success story with an early launch of IPTV, maintaining a

fairly high ARPU compared to other providers in Asia

Hong Kong PCCW

World biggest Provider

� 878,000 IPTV subscribers (End 2006)

� IPTV Household penetration 39.3% at the end of 2006

� Over 1.74 M broadband households (78% penetration rate)

� Broadcasting Bill in 2000

� Only few Free-TV channels

� Intense broadband competition

� High population density

� Hong Kong is the only market with IPTV ARPUs above those of cable and satellite Pay-TV market leader

Hong Kong

� Launched 09/2003

� 758,000 subscribers (End 2006)

� ARPU: $21

� Initial setbacks

� Free IPTV channels included in every broadband subscription

� World leading InnovatorSplit-screen: Soccer + VAS

� “a la carte” subscription model

� IPTV drives PCCWs wirelinebusiness

� Offers IPTV consulting now

PCCW - Now TV

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� ~ 500,000 IPTV subscribers (estimated)

� Broadband penetration: 13%

� Beijing Olympic Games 2008

� Content is heavily regulated

� Hughe market, little infrastructure and buying power

� Cable TV ARPU is low at Rmb15-20 (US$1.8-2.4) for access to over 50 channels

� Regulatory obstacles for IPTV

� Roughly 2200 cable TV operators

China

� Launched 05/2005

� 221,000 IPTV subscribers by the end of 2006, predominantly in Shanghai

� Initial start with a 5000 user IPTV network, which had a capacity of 100,000 concurrent media streams

� Shanghai followed supporting 100,000 customers (today 7 deployments)

� Emphasis on basic features like Live TV, VoD and timeshift PVR

� Partnered with Shanghai Media Group for content

China Telecom

China / China Telecom

Different go-to-market approach necessary, unique market, regulatory poorness

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� 1M estimated IPTV subscribers

� Broadband penetration: 52%

� One of the worlds best developed broadband infrastructure

� Low broadband prices

� End 2006 Japan had 26.7 M broadband customers (30% FTTH)

� High interest in new techniques

� Despite this overall Pay-TV channels are underperforming (Sattelite, Cable)

Japan

� Launched Q2 2003 (2nd)

� Number of subscribers: N/A

� Most innovative Player on the japanes market

� Flexible pricing, 36 TV Channels or 1000 VoD titles per month to choose from + „a la carte“

� G-Cluster (Gaming)

� TV-Base Service

� Quardrupel-Play (all these services shall come to handsets)

BB.TV

Japan / Yahoo!BB

Although great technological potential and innovation affine people, Japanese

show surprisingly little interest in IPTV so far

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Offices in Germany:Bonn (HQ), Dresden, Eschborn, Munich

International locations:

Abu Dhabi, Bangkok, Johannesburg, Mexico City, Beijing, Reston, Riyadh, San Mateo, Singapore, Zurich

Foundation:

1954 Diebold

1977 DETECON

Turnover 2006:

EUR 148 million

650 consultants

Detecon at a Glance

Our international presence ensures your international success. Our regional offices

support you throughout the world and are suiting the dynamic growth in ICT markets.

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Research Methodology

Secondary Research

� Technology reports

� Market, industry and competition analyses

� Company and country specific information

� Analysts‘ reports

Primary Research

� 650 consultants

� >3200 projects

� 120 countries

� Strategic workshops

� Users Clinic

We have been involved in Telco TV projects since the 214 Waiver of the FCC in

1992 and in Germany with the videotext and T-Vision.

No formal Delphi forecasting, no Oxford style debate, some wisdom of crowd. The opinion in this presentation is those of the authors and do not necessarily reflect the official position of any other entity affiliated with Detecon, Inc.

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Think forward

Your contact:

Lars Bodenheimer

Vice PresidentTechnology & Network Engineering

Detecon, Inc.12007 Sunrise Valley Drive, Suite 105

Reston, VA 20191 USA(703) 480-0812 Phone

lars.bodenheimer@detecon.comwww.deteconusa.com