Bell has to turn on IPTV: Analyst

Among the big decisions Bell Canada has been deferring while its ownership is in flux is whether it will move decisively into Internet protocol TV, which will require huge fibre optic spending in its home provinces of Quebec and Ontario.

But a Gartner research analyst believes the telco has to give it the green light.

“Without question” Bell is in trouble if it doesn’t, says Elroy Jopling, co-author of a Gartner five-year forecast on IPTV issued last month.

IPTV, which carries television channels over the Internet either to desktop PCs or to living room televisions, is a teleco’s way to fight cable’s ability to offer multiple products over one line. But Bell has slowly been changing its copper lines to fibre optic to neighborhood nodes. Extending fibre to homes would give the telco the ability to offer higher speeds and services, but its an expensive investment.

However, subscribers are increasingly getting warm to it. North American IPTV subscriptions should rise to 12 million households by the end of 2012 from 1.9 million last year, the research firm says, or about 8.6 per cent of households. Annual service revenue will reach almost US$8 billion by then.

In Canada, assuming Bell okays IPTV, subscribers will reach 1.2 million by the end of 2012, or about 8.4 per cent of households. Satellite would still have 23 per cent of the market here. That’s modest compared to cable TV, which dominates the television market.

Bell has been conducting an IPTV pilot for some time. A company spokesman said the company won’t comment on spending plans until its ownership is straightened out.

A group led by the Ontario Teachers’ Pension Plan wants to privatize Bell Canada Enterprises so it can sort out the company’s problems away from daily shareholder pressure. Presumably it would then take a newly-refreshed BCE back to the stock market. It is still negotiating final terms of a $30 billion loan to finance the deal, which some observers think may not be finalized until late this year.

Admittedly, for Bell IPTV is “damned if you do and damned if you don’t,” Jopling said in an interview, but all the telco has to do is look at its cable competitors. Videotron in Quebec and Rogers in Ontario are “stealing the consumer bread and butter” of Bell by bundling home and business phone connectivity with wireless and/or cable TV.

Bell’s TV product is the satellite-based ExpressVu, but Jopling dismissed its video-on-demand capability as a “kludge” compared to the cable version. And cablecos have the advantage that every product they offer is on one wire.

“If Bell isn’t able to come up with a viable solution it’s in difficulty,” he said. In the U.S., Verizon and AT&T have made significant commitments to IPTV to protect themselves. Verizon will spend some US$24 billion to extend fibre to the home for its FiOS IPTV service. AT&T, whose product is called Lightspeed/U-verse TV, has gone a more conservative route of fibre to the home in new areas, and to the node in existing neighborhoods. Both hope to have the homes of half of their phone subscribers IPTV-capable by 2012.

In Canada, Saskatchewan telco SaskTel’s Max and Manitoba’s MTS Allstream’ MTS TV are considered the IPTV leaders, with Vancouver-based Telus’ Telus TV stepping up its plans. Almost every telco around the world, except those in the Third World, is committed to IPTV, said Jopling.

“This is not a million-dollar game,” he warned, alluding to Verizon’s fibre spending. “It’s a billion-dollar game.” Even AT&T is committed to spending about $7 billion on infrastructure alone. Network equipment makers such as Nortel Networks and Cisco Systems could be among the beneficiaries of a Bell move to IPTV, as well as fibre optic manufacturers.

“This is one market where if you are going to be conservative you may have put your business in jeopardy. You have to be in this market. You have to maintain that consumer base.”

The investment will be worth it, agrees, Forrester Research analyst James McQuivey, author of a recent report entitled “How video will take over the world.”

The future of video distribution is IP-based, he argued in an e-mail interview, and the number of IP-based devices being sold is increasing. Telcos with IP-based systems “are in the surprising position of having the networks that are designed to deliver video over IP,” he said. Meanwhile, he said, cablecos are investing in Tru2Way, a way to use their cable systems that mimics IP video and can speak to IP devices with the help of a home gateway that would translate content for IP-distribution in the home network.

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