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The route to market for UK ISPs

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Analysis There are more than 300 ISPs in the UK of varying sizes, from VISP resellers to tier 1 backbone carriers – most resell BT Wholesale’s core DSL product, basing their service costs on the deals they can offer on BT Central backhaul, network bandwidth and external connectivity arrangements.

They share a common destiny in that it is not longer acceptable that their networks are ‘best effort’ but they are evolving into QoS-enabled multi-service architectures, incorporating partitioned ‘virtual channels’ of voice, video and data traffic.

Bandwidth is rapidly becoming commoditized with high-speed copper technologies such as ADSL2+ and VDSL catalysing the roll-out of value-added services such as HDTV. The speed of the connection matters less and less as time goes on – what’s becoming more and more important every day is what the connection is used for. The cornerstone of all these services is the broadband connectivity that empowers each one of them.

The crowded television market is also changing at an unprecedented pace thanks to the surge in interest for IP-based delivery. The future of the market is no longer solely the big boy’s domain – the future lies in aggregated niche audiences gathered and owned by ISPs and telcos. Digital distribution is enabling ‘long tail’ economic models that make niche back-catalogue library assets more profitable than premium content. Content owners are slowly getting used to the idea of retiring the idea audience figures in the millions for fractions of highly-targeted demographic groups in the thousands and tens of thousands.

The drive towards ‘telco TV’ has been lead by large US telecoms companies wanting to compete against cable carriers stealing telephony revenues through their ‘triple play’ packages. But this scenario is considerably more relevant in most other parts of the world other than the UK, where the market share of the four main platforms (Sky Digital, NTL, Telewest & Freeview) is far more established and the technology more mature. There are precious few opportunities for ISPs to compete and differentiate what they offer as what already exists in a saturated market. Indeed it’s ironic that the vast majority of UK technology companies trading in the IPTV space have never had their products deployed in their country of operation.

Most companies researching video-centric technology have spent so much time in perpetual loops second-guessing themselves that they have not been able to look past the basic models of deployment to help understand the possibilities the technology empowers. In layman’s terms, they’re so worried about viability that they haven’t used their imagination to think of compelling applications and their constituent parts.

So as the inevitable march towards the triple-play panacea continues unabated, two viable routes to market in the British entertainment market have been identified to date – create and monopolise your own IPTV service platform or add value to an existing one. The former is a path that awaits the most fearless (HomeChoice, Bulldog, KIT), whereas the majority seem to be tilting in favour of the latter (BT, Eclipse). In practice, this means adding a powerful interactive backchannel to either Freeview, or its new cousin, FreeSat.

The ‘pass-through’ approach for DSL TV used by satellite operators in Europe (e.g. CanalSat and TPS’ service with France Telecom – ‘MaLigne.TV’) does not seem to have the same interest in the UK, despite its apparent effectiveness and natural habitat as a competitive weapon against cable rivals.

Many ISPs are rightly sceptical of IPTV technology, the network’s ability to run TV services, and indeed even the business models the existing precedents currently run on. Some simply do not have the resources to countenance even going so far as to provide the simplest of voice services.

But in such a fiercely competitive and fast-moving industry, it’s important to keep up with the Joneses or you get left behind very quickly, and in telecoms terms that tends to be weeks rather than months or years. Equally important is the need to differentiate products and services from rivals. So our business question is how do we get these companies to market with TV services now and insure them against the need to deploy more advanced services in future?

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