Triple play - A new revenue driver?

With the increased investment in broadband networks in the Middle East, vendors are dedicating more time to describing the opportunities triple play applications may offer.

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By  Tawanda Chihota Published  March 30, 2005

|~||~||~|The development of triple play, the offer of voice, data and video services over fixed line telecoms infrastructure, has the appeal of potentially increasing network traffic and providing new revenue streams. With fixed-line revenues staying flat while traffic grows exponentially - fixed line traffic was estimated to have grown by 85% in 2003 and 55% last year - the appeal of services that offer the potential to reverse this slide are of significant interest. Examples of successful tie-ups between network operators and content providers to deliver triple play services have come from markets including the UK, Italy and the U.S., and with the increased investment in broadband networks in the Middle East, vendors are dedicating more time to describing the opportunities triple play applications may offer. “In the beginning, after an operator has rolled out broadband, revenue dips due to the replacement of lucrative leased lines with ADSL,” explains Enrico Deluchi, managing director EMEA, Wireline at Cisco Systems. “However what typically happens is that a year or a year-and-a-half after launching broadband, the operator realises that it can offer more than just broadband so it makes a move to offer services on top of broadband,” he adds. Deluchi believes that triple play exists today as a result of consumer demand more than anything else and that broadband itself is not about telecommunications, but about the delivery of multimedia entertainment. In Europe, Telecom Italia and BT are setting the pace in triple play, with the delivery of completely converged services that offer the end-user a number of products payable on one bill. Telecom Italia, for example, offers a cordless phone facility with access to its broadband, thereby offering a VoIP product that has comparable mobility features to cellular services in urban areas. Consulting firm NextEdge cites the example of Italian triple play provider FastWeb, which is the largest fibre to the home video on demand service provider in Europe. NextEdge CEO, Alberto Trandoli recognises that capital expenditure to deploy advanced broadband and fibre networks is not insignificant, running at between 500 - 1,000 (US$654 - US$1,310) per subscriber. However, Trandoli believes that this level of investment can easily be justified if the right content is offered to end-users that then become loyal subscribers. “One can expect an 18-month payback period at the EDITDA level from a residential user and 12-month payback period for a business user,” says Trandoli. “Over the last two years, growth in triple play has been explosive in Europe,” and in some places ‘quadruple play’ is now what is being talked about, according to Jean-Louis Previdi, senior vice president, executive directions, Meta Group. “There are examples (in Germany and Japan) of voice, the internet, video and electricity all being placed on a single bill,” says Previdi . Pyramid Research, however, argues that offering triple play is not a proven means of increasing broadband penetration. The research company says that leading triple play carriers like FastWeb and NTL in the UK have actually seen their broadband market shares decline and attributed this to two key reasons. Firstly, companies that offer triple play are usually constrained by the size of their networks, which tend not to be nationwide. Secondly, many in the addressable market are not interested in taking three services from a triple play provider. That the price advantage embedded in a triple play bundle is not usually replicated in single and double play packages can lead end-users to opt for alternative providers, Pyramid believes Deluchi's advice to network operators in the Middle East region, however, remains that they should embrace broadband while at the same time identifying the services that they intend to offer. Then, according to Deluchi, they should form partnerships with portals, aggregators and content providers in order to develop and deliver high-value services. “If network operators in the Middle East want to make a move into broadband, then they need to all the way. They should build out to 10-15% broadband penetration then they should launch services,” Deluchi says. Service quality issues need to be monitored as bundled services are added to the basic broadband product and Cisco's Deluchi believes that the delivery of security all the way through the delivery channel needs to be maintained at all costs. “There needs to be a guarantee of end-to-end quality of service for this to work,” says Deluchi. “And voice calls obviously have to be given priority over other types of applications, say gaming.” Arab Advisors estimate that at the end of last year, the average ADSL connection fee in the Middle East stood at US$80 month with the median cost coming in at around US$79. Such prohibitively high charges are likely to impede the widespread uptake of broadband, and it would appear that until broadband penetration as a percentage of overall internet access rises substantially, triple play and other value adding services will gain limited uptake in the region. Alcatel boasts 30 triple play contracts globally, and CommsMEA spoke with Alcatel and Lucent executives regarding the case for triple play in the region. ||**||Khaled Rifai, director for business development, Lucent MEA|~|Khaled2.gif|~|Khaled Rifai, director for business development, Lucent MEA|~|CommsMEA: What's Lucent approach on triple play? Khaled Rifai: We think it will initially utilise DSL infrastructure for last mile access but as the technology matures and as the service acceptance develops and customers start demanding more and more services and multiple channels, probably technologies such as Ethernet to the home will play a more prominent role. That also has to do with the operators' willingness to make an investment in upgrading the last mile connectivity - by that I mean replacing copper with fibre or deploying a wireless technology with high capacity. But initially, as in the rest of the world, it's going to happen with DSL. We do have a product in our Stinger family of DSL products which is geared specifically to deliver video multicast applications by deploying IP multicast capabilities on the DSLAM itself so that's how we view video delivery is going to take place. Obviously we don't have the end to end solution but we're building alliances with a number of vendors who can fill the gaps we have, we're talking about video servers and we're working very closely with Microsoft on their IPTV initiative and we feel that this is the way most operators in the region will end up utilising Microsoft TV. We're working also with some set top boxes and vendors of video server platforms to get the end-to-end capability for operators who are interested in this technology. We also have a very strong alliance with Juniper to build the core network, the IP/MPLS core network that's going to deliver this capability more effectively. CMEA: Is the business case for triple play tied to existing usage of pay TV? KF: Most of the broadcasters in the region are delivering their services over satellite infrastructure. The only country that has invested in cable infrastructure is probably the UAE and we have seen that they are looking to expand their service offering utilising broadband access, DSL access to deliver voice, video and data services, so they want to augment their cable infrastructure with DSL to deliver e-vision services to subscribers who don't have access to their cable infrastructure. In the countries where cable has not been prevalent, I'm sure operators are looking at DSL as a way to deliver triple play. From the content perspective, some of the content providers are already talking to the operators about putting their content through a fixed network like DSL. The challenge is going to be on the operator side to develop sufficient services to complement the video offering. As you can imagine, it is not expensive to get video broadcasting through satellite but when you start talking about a cable based infrastructure the business case has to be developed to justify whether the delivery of such services will make sense to customers. There are some promising markets where there could be a business case, particularly where pay TV services like Showtime, ART and Orbit are common. But in other markets the business case is going to be very difficult to prove. CMEA: Do you expect the operators to develop their own video content and store it? KF: Well they don't have to. They can always go to an organisation like ART and Showtime that have the titles in their library and the rights to play them. Alliances have to take place for this business model. CMEA: DRM - is that going to be an issue considering the problems people have experienced with video downloading on the web and mobiles? I don't think that should stop network operators because the service over a fixed line should give them a better channel. Obviously there are some challenges regarding piracy aspects of delivering the technology, copyright and the technology is evolving on that side to allow the delivery of such content. CMEA: What's your view on how well the operators have been able to generate DSL uptake - is that still developing in the region? I think it is developing to a great extent now. Naturally, DSL has its challenges from a technology point of view in our region - some countries that are trying to embrace DSL have some limitations on their existing infrastructure that prevents them from doing so, because the distance between the central office and the subscriber home in some places exceeds the limitation mandated by a technology like ADSL. But if you look at how the technology is evolving with technology such as long reach DSL, the fact that the price per port is dropping significantly to a point where an operator can deploy the technology and make money in a relatively short period of time, there will be a lot more acceptance now - primarily for data and voice applications. Even from a voice perspective, it could very well be a way for an operator to sell multiple lines for a single location - DSL has been proven to be a very cost effective way to do it. So even from an operational perspective it could make sense for an operator to deploy the technology for purely voice services. But obviously its main value to the end user is the fact that the capabilities it brings in delivering voice and data, and to a lesser extent in our region, video. CMEA: Will the satellite operators do anything to combat this? KF: They will still have to play a role in the delivery - the only difference is that they don't have to go after the end customer. In many cases you see that the operator still uses the satellite component to receive the channels from abroad. I don't think there is much they can do to combat it simply because they have not been very successful in launching data services over satellite. There have been a number of attempts by providers to launch internet services and the service has not been very successful. As long as there is true triple play, I don't think they will stand a chance in competing with the telco. CMEA: One obvious barrier is VoIP regulation - are they opening up now? KF: Absolutely. As you probably heard recently Egypt has joined the bandwagon of embracing VoIP. And I think a number of North African countries will follow suit as well. CMEA: Do you think triple play would be enough to compensate for lost voice revenues? KF: It certainly will contribute but keep in mind the business case is not going to be very favourable for operators, particularly when it comes to offering video services. Typically when you go after the residential market you go after volume. The volume is not going to be there in most countries to make the service profitable from day one. It will take time, some technical innovations some new services that could be overlaid on traditional triple play and once that happens the market will accept the service and start paying for it. But initially the business case is going to be very challenging. Also today think about some of the limitations some of the DSL subscribers have if they are to have multiple TV screens in their residence and want to receive different channels. The bandwidth in many places cannot handle the delivery of multiple TV sets, which mandates having a bigger pipe. People are looking at next generation DSL technologies like VDSL, ADSL 2+ and fibre to the home technologies even to deal with this. There are also issues associated with channel latencies. Because of the nature of the fact that you are using IP multicasting and moving from one channel to another there is always an element of delay and that needs to be worked out and minimized also. I just read an article recently about a triple play service being launched in Switzerland and because of limitations they had to limit the number of broadcast screens to one. If you had 2 sets in your home you have to get 2 DSL lines or both users have to view the same TV channel. That poses a limitation, which over time I'm sure will be resolved. ||**||Jean Pierre Latigue, VP, marketing and communications, Alcatel Access Networks Division|~||~||~|CommsMEA: Subscription piracy is rife in the region's satellite TV industry - will the operators be able to reassure content providers looking to offer content over DSL? Jean Pierre Latigue: You have a point to point connection so you know exactly who is accessing what and you have the ability to cut the programme if you see that it is not the right channel, so there is much stronger security in how you broadcast over DSL and fibre. CMEA: What about copying of content? JPL: There are two answers for that. Firstly, you can't record on an internet network; the set top box does not have a hard disk so you cannot store the programmes inside. Of course, you could imagine that someone [could] but the encoding ensures that if you were to make a recording, you wouldn't be able to make a duplicate. So you encode the content to make sure it is not re-distributed. CMEA: What's the evolution path? JPL: There are different stages - you can start today with internet and data. When you move towards triple play you have to consider several elements of the network. You have the access, transport and application layers. For the access today, operators can deliver with ADSL 2+ 14 18Mbits/s. As you know ADSL is a trade-off between distance and bandwidth so in some countries like the USA they really need to bring the DSLAMs closer to the end user in which case they are looking at fibre to the node and bringing DSL which will allow them to go to 20, 30 Mbits/s and even higher, or to deploy fibre to the end user. Inside the access node itself you have to consider all the IP capabilities to support triple play and the quality of service. [MPLS vital for transport layer]. CMEA: What's happening in Europe? JPL: It's a bit early to think about specific operators but there is key interest in evolution. What we have seen in first entry countries with the way broadband has developed in the last five years, two minimum operators are looking at triple play. Triple play is now maturing quite quickly in some countries like France, Belgium and Italy. CMEA: What partnership models do you expect to see between the operators and broadcasters, when everybody gets TV for free? JPL: I'm not claiming that there is one model for all, the local competition and local situation is key. It is clear that in countries where you can get TV channels for a few Euros this is an issue. But we're not just talking about this type of service, there is also point to point video personal applications, gaming so the capability of the infrastructure anyway has to improve to offer these services. ||**||

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