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Tue 2 Nov 2010 12:00 AM

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On the button

IPTV is huge. Billions of dollars are being hedged on IP services each year, and the Middle East is one of the world’s most exciting marketplaces. Digital Broadcast speaks to big names and newcomers, asking how the region can increase penetration, and what factors are driving success.

On the button
The IPTV Forums are allowing firms the chance to meet and discuss the many ways of expanding and monetising IP services.
On the button
Experts are sceptical of the way some operators, such as Google, appear to be facing off with traditional broadcasters.

IPTV is huge. Billions of dollars are being hedged on IP services
each year, and the Middle East is one of the world’s
most exciting marketplaces. Digital Broadcast speaks to big names and newcomers,
asking how the region can increase penetration, and what factors are driving success.

IPTV is already a huge industry in the Middle
East. Almost every operator provides some sort of IP service, with
nations across the region gearing up for huge infrastructural overhauls. It doesn’t
need saying that IPTV is revolutionising television, with interactivity and on-demand
options becoming prerequisite for consumers. In fact, IPTV has spawned its very
own series of popular trade shows – the IPTV Forums – which have toured the world
visiting Rio, Istanbul, Hong Kong and, this month,
Dubai, bringing
the industry’s leaders together for workshops, debates and far more. “Featuring
a Competition for Application Developers, with attractive prizes for the shortlisted
companies, and a Special Focus Day on Monetising OTT Streaming, the IPTV Forum Middle
East & Africa 2010 has become essential for any company serious about their
participation in the Middle East and African TV
markets,” says a show spokesperson.

“The Middle East has around
55 million subscribers to IPTV now, and that grew from around 12 million a few years
ago,” says Booz & Company analyst Hadi Raad. “Forecasts indicate that this group
will grow to around 100 million subscribers by 2014. In 2014 the market should grow
to around USD 18 billion from around USD 10bn this year, so the growth opportunity
is considerable. This means there is a significant growth potential for fixed telecoms
operators who are witnessing drops in fixed line revenue, even when broadband connectivity
is being commoditised.”

It’s not as if the telcos didn’t see it coming. “In the region
today Etisalat, du, Qtel and recently STC are offering home IPTV services,” adds
Raad. Etisalat’s eVision, for example, which commands 45 per cent of the UAE market,
is soon to become eLife, offering IPTV over a fibre to the home (FTTH) network.
It’s expected to reach 1m homes by next year – no mean feat in a nation with fewer
than five million inhabitants. But there are many more big-name telcos taking the
IPTV plunge, not least Ericsson, which believes its hybrid End-to-Endless (E2E)
solution could provide viewers with a truly universal IP deal. “E2E is a new strategic
approach that redefines the concept of being an ‘end-to-end’ partner by uniquely
aligning consumer demand, technology enablers and business reality,” says Max Bashtawi,
head of television and media engagement practice.

“E2E TV is anchored by our award-winning technology, proven deployments
and global prime integration and services skills to deliver a television experience
that is desired, that works efficiently and is profitable,” adds Bashtawi. “With
a broad suite of open, standards-based products, we offer the highest quality solutions
for digital TV, HDTV, video on demand (VOD), IPTV, Mobile TV,
connected home, content management and advanced advertising, based on industry leading
technology and a strong heritage in television.”

du’s UAE service combines its own electronic programming guide
with time-shifting, HD and catch-up neatly slotted alongside On Demand Group’s (ODG)
VOD package. “du had VOD capability as it went fibre from day one, and then IPTV
and VOD were launched in October 2009 using ODG to supply the content,” says Georges
Dabaghi, GM of ODG, a subsidiary of SeaChange. “Now every other operator has plans
to move into the market.” With VOD accounting for up to 30 per cent of IPTV revenues
is some regions, it’s no wonder the race is on.

But how are ODG and others monetising IPTV and VOD? Dabaghi concedes
that his own product is in its infancy. “Subscription is still immature because
we only launched in July, and it was put in a free promotional bundle until the
end of September, so it’s yet to be seen what the uptake is like. However we’re
seeing that the reach coincides with other mature markets where VOD was deployed,
in Europe for example.” Dabaghi feels that to compete
with free online content, quality is key. “Today if you look at transactional models,
for example, the du service ranges from AED 7 (US$ 2) for a library title up to
AED 19 (US$ 5) for HD. Compare that with what you are getting from a pirated copy
and immediately you can see that it is much better quality and a much better experience.
Quality is driving the market.”

Ericsson’s Bashtawi agrees, adding that telcos are in prime position
to take advantage. “Telcos can deliver a high quality, truly personalised television
experience,” he says. “Secondly, they can expand their offerings of multiple services,
such as mobile TV, web TV, value-added services (VAS) and advertising, within a
unified architecture and back-office adaptability which will allow them to bring
new services to market quickly. Thirdly, they can offer premium and exclusive content
to their subscribers to attract and retain them. Lastly, they can spend money and
energy on the sales and marketing campaigns to have the buzz effect.”

Over-the-top video (OTT) is another option facing consumers,
where the operator is bypassed in favour of the broadband connection itself. Verizon
have been key OTT players in the US, allowing its users to access YouTube.
Google TV is hotly debated in industry circles: either it will be the saviour of
OTT, bringing a cornucopia of connectivity into the living room, or it will be just
another footnote in the flurry of failed IP models. Steve Klein, director of marketing
and business development at Allied Telesis, says the web giant is gunning for traditional
broadcasting. “With Google’s announcement to offer Internet TV ‘channels’ and introduce
its own Internet set-top, one can clearly infer where OTT video is being driven
– an alternative to cable and a free-to-air broadcast programming platform.”

Hadi Raad believes that true competition between IPTV and traditional
broadcasting is a distant prospect, especially in the Middle East where subscriptions
are far down on the US, Europe and Asia. “STC recently launched a hybrid model,
and that’s the trend in the region. With an abundance of free-to-air channels, you
cannot position IPTV as a competitive value proposition at this stage, it has to
be complimentary. You have to focus on what additional features and added value
IPTV can bring. There’s the premium content, but also the interactivity, time-shifting,
catch-up TV and VOD.”

Yet while IPTV enjoys
the luxury of targeted advertising, which can command up to 20 times the revenue
of its broadcast counterparts, the advertisers themselves are stuttering. “Advertisers
will need to realise more themselves how to work with targeted advertising in the
region,” adds Raad. “Advertisers are used to broadcast advertisements, so it will
require time.”

Of course, IPTV providers will have to reach the sort of scales
attractive to investors in all quarters of the industry, much of which hinges on
broadband and FTTH penetration. “Infrastructure is more ready in the GCC than the
rest of the Middle East,” says Georges Dabaghi.
“The UAE is fibre-rich and the infrastructure is great. Abu
Dhabi is moving to become fully fiberised in 2011 and Dubai has a large percentage
of its network fiberised. Then you have places like Qatar where fiberisation is ongoing.
Saudi Arabia
commenced, but given the large geographical arrangement of the country, normalised
reach will take some time. Broadband over fibre is really intensive, time-consuming
and requires government and regulatory intervention.”

“Considering predictions that over the next 20 years the industry
will witness a migration to cable and satellite IPTV hybrids, alongside the increasing
growth of IPTV in the telecom market, the Middle east
offers a lot of potential,” says Bashtawi.

“There are two types of markets in the Middle
East: mature and developing,”  he adds. “In the mature market we see high broadband
or FTTH access, such as in the UAE, Saudi Arabia,
Qatar and Bahrain, and low penetration in developing markets
such as Jordan, Syria, Iraq,
Yemen and Sudan. We have direct
relationships with governments as well as telecoms regulators and agencies across
the Middle East, and are supporting them to upgrade
their network with the latest technology in order to offer high quality to the end
user.”

With 3D coming on strong, infrastructural improvements will become
increasingly vital in the coming years, and will largely rest on governmental bodies
to incentivise expanding the ‘pipe’ to accommodate higher bandwidth viewing. When
the upgrades are made, and the market is more mature, telcos are in an ideal position
to become multimedia powerhouses. “Telcos will be moving up the chain to become
media aggregators,” says Hadi Raad, “and they are leveraging their broadband connection
rather than leaving it to third party providers.”

“Media drives communication,
communication drives media, and that drives revenues,” adds Bashtawi. “The key values
summarise Ericsson’s multi-screen TV solution. The futureis here now, for mobile
TV and for IPTV, and changes in consumer behaviour are happening as I speak.”