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The route to market for UK ISPs

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Operators wanting to build their own platforms are more than capable of finding their own way, but they are a percentage of the top ten UK carriers, predominantly owning their own infrastructure (such as LLU networks). That leaves the other huge segment of the market – over 90 per cent of the industry that is still researching viability and flirting with the idea of expanding their commercial reach if the necessary resources are conveniently available.

The business that best fits these potential vendors is the add-value platform model – i.e. providing the broadband back-channel as it can be standardised, differentiated and also be marketed in the most flexible way. The two trends that can be immediately exploited are the growth in Free-to-Air (FTA) television (Freeview, FreeSat, or collectively known as ‘Freeband’) and the demand for Sky Plus-like DVR/PVR devices.

This approach can be described as multi-value, as it is built on the premise that a marriage of the technology systems adds value to both individually and the end product collectively. For all their financial and commercial clout, BSkyB can arguably do little to rival the potential of Freeview combined with a DVD/VoD rental partner offering tens of thousands of video titles.

The best options for ISPs who wish to grab ‘triple play’ market share are to look at TV in the wider context of the digital home network, or the residential IP ecosystem. In the current conditions, it will be sometime until all services are transitioned onto exclusive IP-based delivery, and until then a hybrid model needs to be used to grow their subscriber base.

In today’s market, the triple-play monthly bundle price ceiling (i.e. the point at which the cost of the service outweighs the value the customer perceives they are getting and becomes a churn incentive) is approximately £45-50. The good news is that it is generally accepted that the demand for value-added broadband services is clearly growing, and the vast majority of customers look to their service providers to act both as a guide, and as the intermediary that can make the technology available to them.

The simplest way for ISPs in the UK to deploy mass market TV services at this moment is to offer a branded Free-to-Air television PVR receiver (based on either Freeview or FreeSat) that has built in Ethernet capability to provide a broadband back-channel return path.

Such a device can accomplish exactly what these companies are looking to achieve – so called brand ‘mindshare’ and customer retention. Such devices are already plentiful in electronic shops, use the same (ugly) internal software and can be sourced as base components extremely cheaply in Asian markets.

It is increasingly thought that the simplest solution for enabling broadband network connectivity in a set-top box without complex rewiring is via HomePlug-style technology (broadband over power cabling). The recently ratified HomePlug AV specification guarantees up to 200Mbit/s (twice the speed of traditional LANs) throughput over a house’s existing electricity cabling, which is enough for more than 10 high-definition TV channels.

Trials with currently available ‘turbo’ product versions (85Mbit/s) are encouraging in the face of Wi-Fi’s worrying lack of reliability. Only two single adaptors are needed to extend the network’s reach from the broadband router – one connected next to the home gateway and the other to a plugboard behind the television set (or any other power point in the home for that matter). It is slowly becoming seen as the technology that will enable the industry’s goal of the unified broadband networked home.

If and when HomePlug AV functionality is built natively into electronic devices as part of the cabling, it is arguable that we truly will have arrived upon the long-forecasted digital revolution. ISPs need to be working in more detail to shepherd their subscribers into enabling digital home networks by supplying HomePlug technology in tandem with connectivity CPE (routers, USB modems etc).

The commercial mechanism by which hybrid receivers could be offered is established and generally trusted to be sound, having served the market since its humble beginnings over a decade ago. CPE devices, such as routers and USB modems, are offered as lossleading incentives that drive sign-up and customer acquisition, as well as being a very effective deterrent to churn and hence a reducer of subscription losses. The maximum price point is generally set at around a maximum of £150 ($300), and is typically amortised against several years’ subscription.

A FTA/IP hybrid set-top box (also known as the broadcast TV and broadband video model) provided by an ISP will work, but needs to have a certain mandatory feature-set to be a compelling consumer proposition against what would normally be found on the high street.

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