Who out there wants their IPTV – and why?

If you’re like a lot of folks, you’re probably thinking IPTV is just a tad overhyped: Service providers from AT&T to BT to India’s Reliance Infocomm have announced IPTV initiatives. Market researchers Dittberner Associates forecast an IPTV services market of US$12 billion in 2013, an increase from virtually nothing in 2005 (now that’s a long-range crystal ball). And Microsoft has been investing heavily in the technology — a sure sign that the hype-fest is at its height.

And the arguments favouring it seem singularly lame. Not that I’ve got anything against TV — on the contrary, I’m addicted to it. (C’mon, with 500 channels, what are the odds that somewhere there’s a Vin Diesel movie on?). But at first blush, it’s hard to see how delivering TV over IP makes it appreciably better.

Take the argument that IPTV provides better integration: tomorrow’s kids will be able to surf the Web, play interactive games and watch TV all on the same screen.

Oh, wait, they already do all that with peer-to-peer applications that let them download shows from the Web. Another purported IPTV plus is personalization: viewers will be able to download virtually any show at any time — just as, um, TiVo owners do today.

So what exactly is the benefit of IPTV? For one thing, it gives telcos a sustainable consumer offering whose margins aren’t eroding. And by doing so, it introduces competition into the content-distribution business.

Carriers have been hammered by the one-two punch of the Internet and VoIP. Yahoo, Google and other search engines have chewed up the profits from directory services (not so long ago, the Yellow Pages used to be a cash cow for the telcos). Meantime, VoIP has been steadily driving voice revenues down to zero.

IPTV lets carriers reverse that trend by giving them a shot at selling something for which the market demand is demonstrably insatiable: content.

Aha, you may be saying, what about the growing trend toward free content? The telcos appear to be jumping on the content bandwagon just as it’s headed for the ditch. Won’t peer-to-peer undercut the margins of content services the same way VoIP demolished voice margins?

It’s a logical worry, but here’s why I think it’s unfounded: People don’t pay for content itself. They pay for content to be packaged and delivered to them in a form factor that’s convenient. Take music: If free services destroyed the market for paid services, satellite radio wouldn’t be flourishing.

What IPTV gives carriers is the flexibility to experiment with content offerings until they hit on the packaging formula that consumers will pay money for (hint: I’m still waiting for that all-Vin-all-the-time channel, guys).

And that’s the second real advantage of IPTV: It’s not about making TV better; it’s about giving more players the opportunity to get creative about packaging and delivering it to consumers. Will that result in improved services? Probably, because competition usually has that effect. So the bottom line is, despite the hype, I’ll be watching for IPTV.

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