Boldly going where no telecom company has gone before, the large incumbents are jockeying for position in a hotly contested multiservice market where voice, data, video, TV, wireless, wireline, Internet and e-mail services are all converging.
Although not pursuing triple or quadruple play is still an option, most cable, broadcast satellite, wireless, wireline and DSL operators are recognizing the importance of becoming full-service providers of on-demand services. Even if IP video and TV do not make big margins in the end, they are necessary to grow subscriber bases more efficiently.
The largest RBOCs are making enormous broadband network investments in preparation for multiservice bundles. Verizon is rolling out fiber to the prem, SBC fiber to the node, and BellSouth leveraging DSL and evaluating fiber to the curb.
Also, not to be ignored, are the smaller, independent ILECs who have actually pioneered triple play, and in some markets even succeeded in damaging cable TV business.
All the Noise
SBC, whose DSL service passed the 5 million subscriber mark last year, launched Project Lightspeed at the Consumer Electronics Show in Las Vegas in January, where it announced it will implement IP TV solutions from Microsoft over its fiber network. The company already has arranged for use of set-top boxes through a deal with 2Wire. "We think our fiber network will reach 18 million homes by year-end 2007," says Destiny Belknap, SBC spokeswoman. That fact inspired SBC Chairman and CEO Ed Whitacre to predict IP TV will drive SBC to grow into the second-largest video provider within its fiber footprint within five years.
Through a deal with TiVo, BellSouth announced it hopes that Microsoft's IP TV software customers ultimately will transfer programming to cell phones, PDAs and other devices.
In fact, that interaction among multiple devices is expected to blur the distinction among them—whether television sets, video recorders, PCs, cell phones or virtually any other device one would find in the "digital living room" of the not-so-distant future.
Once all devices can talk to each other, and once customers have the option to dynamically interact and tailor their services in real time, the possibilities for what can be created are endless.
To start, the phone will ring, and caller ID will pop up onto a consumer's TV screen, thus allowing her to ignore or accept the call through the remote. The options would exist for pausing a movie to answer the call or for rerouting the call to a cell phone, voice mail or email. Digital photos and games could be downloaded from a cell phone to a TV to view from the comfort of a couch, rather than having the family crowd around a PC. While technically simple, such applications could have significant impact on consumers' perception of value and operators' bottom lines.
Of course, cable companies are fully aware of the impact such services could have, and are aggressively building multiservice strategies.
Comcast announced it will market Internet phone service to millions of its customers to generate as much as $4 billion in annual revenue, if it goes with its announced $40 price tag for the service. That comes on the heels of its VoIP service announcement and plans to launch a video instant messaging service this year to compete with AOL, Yahoo! and Microsoft's MSN. Comcast also hopes to transfer content into video players in consumers' cars, as it will work with mobile electronics maker Delphi Corp. That will position Comcast against Sirius and XM satellite radio and even Microsoft in the battle for digital consumers, who increasingly plug iPods into their car radios.
Also, Cox has been making big wins in terms of voice service, as JD Powers recognized the cable giant as a customer satisfaction leader in local voice service—evidence that cable companies are readily going to overcome challenges involving regulated services and provisioning and billing for telephone service.
And, not too long ago, Charter Communications CEO Paul Allen announced that the cable industry's broadband plant has a "competitive advantage" over telecom, since its networks provide high-bandwidth consumer services in quadruple play. However, he conceded that MSOs will need to seek out partnerships with wireless providers.
Time Warner Cable has done just that, partnering with Sprint Corp. to offer cell phone service on a trial basis next year. The deal would make Time Warner the first major cable company to offer cellular service, upping the ante for both Sprint and Time Warner in television, high-speed Internet access, and wired and wireless phone service.
Is Going Head-to-Head With Cable Smart?
The consensus is a resounding "no."
In the fight to own the customer, the multiservice providers that have the most creative multiservice bundles and the best reputation for service and quality will win the customers' loyalty for full-service bundles. The days of making a distinction between phone or cable providers could be numbered.
"You want to make sure the competition doesn't turn into simple price wars; rather, you want to incorporate interactivity into IP video and TV so that it beats out broadcast TV," says Dave McNierney, director of strategic marketing for Highdeal, which offers dynamic transaction management software for FastWeb and various European and Asian carriers. It also is part of a triumvirate, including NetCentrex and Envivio, which have created IPlay3, a pre-integrated triple play solution for rapid deployment of IP services. "By preintegrating softswitches with pricing and rating, and leveraging a carrier's existing billing/OSS assets, we can precipitate a service-oriented architecture by integrating softswitches, video middleware, VoD [video on demand] and game servers with back-office systems," says McNierney.
"IP TV presents an opportunity for service providers to create bundles of services that move up the stack from voice and video to gaming and even software distribution, such as providing Quicken over broadband," McNierney says. "It's an opportunity to think out of the box, and partner with advertisers to allow subscribers to watch movie trailers in exchange for credits for VoD sessions." He notes that niches, such as Spanish-speaking people, could easily be targeted with on-demand services that enable them to buy only the channels they want. "Why buy 300 channels when you only watch five?"
McNierney isn't the only one who believes success lies in doing more than just mirroring cable companies' offerings. "Offering interactive program guides, HDTV, 300-plus channels, pay per view, premium channels and DVRs will not suffice," says CSG's Steve Borelli, VP for business development. He thinks success will come only if carriers far exceed what cable companies offer.
"They will need to track leads and follow up with serviceable parts of their networks as IP TV services roll out," Borelli says. He notes that CSG has bolstered its inventory and equipment tracking capabilities to help companies like Comcast, Time Warner and EchoStar with activation and suspension of TV and video services. "With IP TV, carriers will have to be able to grant conditional access," Borelli says, "based on not only predefined parameters around qualifications to pay and existing account balance, but now in an on-demand world, dynamic parameters that must then tie into customer care and billing." Policy management and digital rights management are areas that carriers will have to become versed in when dealing with conditional access. "We already have the experience with these issues," he says, "as we already have 45 million end users on our system."
Borelli also contends that CSG's experience with multichannel relationship management is key to IP TV, as telcos getting into IP video and IP TV will have to rely on third parties to deliver content over their networks. "Because cable has the advantage of already having the established ties to content providers, it is paramount that revenue sharing and interconnect evolve so that OSS/BSS does not inhibit multiservice package rollouts," he adds.
It is expected that revenue sharing will require a new play from interconnect billing, which used to revolve around minutes of use at the point of interconnect. Now it will have to include robust partnership management to handle multiple programmers and content providers, whether HBO, ESPN, Yahoo!, CinemaNow or Rhapsody. "Carriers will have to get involved with dynamic and unfamiliar variables like royalty reporting, digital rights management, in addition to tracking downloads, subscriber numbers and transactions," says Borelli. Contracts will not be cookie-cutter agreements, since each programmer uses different rates and metrics, making check-and-balance agreement more complicated.
Another key to success will be the ability to handle unlimited convergence, regardless of operating environment or delivery method. "Whether retail or wholesale, or pre- or post-paid, you have to have a foundation to support any combination of business models," says Curt Champion, senior director of product marketing at Convergys, whose component-based architecture is designed to facilitate automated discounting and packaging, as well as consolidating services onto unified bills. "The goal is to have bills that are extremely understandable and clear, so consumers understand what amount goes to broadband, local, wireless and TV," he says.
Indeed, carriers must be wary of sticker shock for consumers who have three or four services on one bill. Because multiservice, tiered offerings could amount to hundreds of dollars, carriers must be careful in how they market their integrated offerings.
A Leg Up?
Because of differences in the underlying technology they use, RBOCs may have an opportunity to offer SLAs that trump those of cable operators.
IP TV—deployed over DSL or a combination of fiber and DSL—is not broadcast technology. Carriers can follow a bi-directional paradigm not possible with broadcast networks, and they have the advantage for creating on-demand services and creative packages that could outdo cable. "Because broadcast networks used by cable companies push content to the home according to what was purchased ahead of time, broadband access will allow for more robust, two-way capabilities—ideal for interactive, on-demand services," says Champion. "As a result, on-demand/interactive video, TV and program guides could take off over IP at a faster rate than over broadcast networks."
With cable, the set-top box restricts consumers' usage according to predefined parameters that the set-top box then controls. However, the user can create IP sessions in near real time, as sessions are created at the head-end equipment, so customers can decide what they want to see and provision it dynamically and in real time. With IP, the location where content is viewed is not important, as the head-end, which processes the content, can be used with any apparatus. That's due to the fact that in IP, any content developed with IP in mind and any device built with IP in mind will work together. That means IP TV services will actually run on not only TVs, but PCs, PDAs, cell phones or wireless IP devices of any type. Since all IP content is requested at the central office, the ability for time shifting also is more plausible.
"On-demand means decide-as-you-go," says Champion, "and carriers can go as far as they want with their imagination when thinking of on-demand games, photos and multimedia services that could complement and integrate with IP TV."
With IP TV, every time a consumer makes a request for new content in an on-demand service, he or she is essentially creating a personalized package of services. That allows carriers to push the envelope in terms of creativity of bundles and cost savings.
"It's tempting to focus on the technology and network at the demise of the customer experience; however, if carriers don't focus on creating a compelling customer experience, the underlying technology won't matter," warns Mike Michie, director of solutions marketing at Amdocs. The company's Amdocs 6 billing and CRM suite handles provisioning, customer care, billing, collections and partner management for voice, broadband and content.
"VoD offerings will not gain momentum if people can rent three videos a month at Blockbuster for less money than subscribing to on-demand TV offered by carriers," says Michie.
However, if carriers can think up content that video stores or cable companies do not have, such as enabling customers to order a favorite episode of their favorite show—the last episode of "Cheers," say, or a favorite "Friends" episode—then they offer something unique and personalized to the customer.
Getting into entertainment will make provisioning and ordering a bigger challenge than was experienced with DSL deployments. It will be technically complex, as broadcast TV, premium-content TV, VoD and network-based DVRs will require different network management, provisioning, activation and billing. Michie believes carriers looking at IP TV could draw on OSS/BSS lessons learned from DSL. "DSL also required network build-outs and new provisioning, billing capabilities, and even customer training to get services up and running," he says. However, he acknowledges that IP video and TV will demand significant technology changes to deliver the service levels consumers have grown accustomed to from cable companies.
IP TV, triple play or the grand slam of wireless and wireline integration in one package will require end-to-end management to enable a unified, integrated customer view across multiple products.
Customers will become disenchanted with triple play if they have to call three different numbers for three different services. Carriers must, therefore, possess visibility across all products and across the history of those products.
"The user experience has to be the core of triple play bundling. So to know how long it took between remote clicks to actually see the content desired means managing multiservice network issues," says Jagannath Chirravuri, assistant vice president of product management for Lucent's network operations software. "Carriers will need sophisticated monitoring of packages so they can see what was transported over Ethernet, Layer 2, ATM, frame and legacy, as well as optical pipes with SONET and other protocols."
With so many service types and network elements, managing services, applications and networks end-to-end will be difficult. "Network management will still mean knowing what traditional elements are being provisioned for certain services, but also what video servers and gateways, and what services on top of those elements, as well as the applications [the content] running on top of those services," says Chirravuri.
True convergence will really be necessary for such management to be possible. "Managing and delivering services will require robust fulfillment and monitoring capabilities," says NetCracker CEO and President Andrew Feinberg. "Having a truly convergent service running over the entire network and over many network domains will mean OSS will have to be cross-domain in view, to get a true understanding of networks and inventories."
Feinberg expects provisioning challenges will abound with IP TV, because of the bi-directional nature of on-demand services. "IP components won't make sense to legacy provisioning systems, so provisioning as carriers know it will have to transform from one-to-one to one-to-many models," says Feinberg. He also notes that where telecom networks were managed from core to edge, they must now extend into people's homes, which means management of interactive CPE will be necessary through inventory and provisioning systems.
"Carriers will need cross-domain management. Rather than stovepipe provisioning, they must have cross-domain provisioning where there is support for each service individually, and then underlying architecture to enable integration with legacy systems," says Feinberg. "That will enable carriers to view the entire infrastructure from one location at an enterprise-level, and then model service bundles on top of that so they have the ability to manage CPE and perform on-demand provisioning and activation to the home."
With IP TV, carriers will also have to accommodate higher data rates over copper pairs, as getting more power to certain customers is possible through ADSL 2, ADSL 2 Plus and Bonded DSL—all of which achieve longer reach and higher data rates.
"Carriers will have to account for new variations of equipment, such as upgraded DSL modems, set-top boxes, residential gateways at the customer premises, wireless LAN equipment, and so forth," says George Cray, vice president for provisioning and activation solutions at Telcordia Technologies. With its acquisition of Granite, the company has been evolving its capabilities to support copper loops and outside plant facilities, and process and control of orders used to provision IP TV. "Since carriers and cable operators have traditionally had their copper plant in our systems, we think the best way to compete is to leverage what they have wherever possible and augment for new services," says Cray.
As carriers do make the move from copper to high-speed pipes for IP TV, they hope to enable customer self-service. According to Susan Tarr, executive director of service provisioning and product management for Telcordia, "Carriers will have to have physical connections from the customer premises, and all services will have to ride on those connections." As customers order services in a dynamic fashion, Tarr notes, the Granite systems will track digital and video services riding on the pipe. "Seeing the physical connectivity, equipment and services and service levels will be germane to the assurance side of the house," she adds.
All of the steps taken toward provisioning IP TV are "non-trivial," according to Derek Kuhn, director of marketing and business development for strategic solutions at Alcatel, which had the first IP TV network back in 1995. Because the average American consumes as much as 7-1/2 hours of TV a day, "there will be so much that is unfamiliar to handle in terms of network loading," says Kuhn. "There will be so much data coming in a continuous stream that it differs greatly from what carriers know through DSL services." He says it will become an exercise in "dimensioning," which means bolstering the network by upgrading existing networks or opting for overlays that complement the high-speed Internet networks already in place. "In the U.S., overlay networks are becoming more prevalent," Kuhn says, "and they will enable carriers to isolate TV services on their networks."
To further bolster carriers' ability to handle content, evolving standards, such as MPEG 4, have drastically improved compression algorithms. That, along with the increasing use of ADSL and VDSL, will somewhat help in the transmission of feature-rich content.
To further ameliorate network concerns, mediation also will help carriers with capacity management, bursting bandwidth and managing over-subscription issues.
In order to enable IP TV services, "a friendly, reactive mediation platform is necessary," according to Rick Woods, vice president of product management for Intec, which in acquiring Digiquant and Singl.eView from ADC has bolstered IntermediatE version 5.0 and geared up for a consolidated set of OSS products that handle multiservice applications. "The processing of data should not be a problem with IP video and TV, as the style of network elements with which we interface is not that big a challenge. Rather, it's the volumes and amounts of services and complexity of mediation logic that will differ," says Woods. He cautions carriers to seek out mediation solutions that are proven to handle prodigious volumes of data.
In order to understand what content was transmitted, to whom and under what plan, there needs to be what Woods calls a "mediation triad," consisting of forward, reverse and active mediation. "Forward mediation solves post-event problems by collecting usage after something has occurred; reverse mediation allows us to solve dynamic service activation problems by looking at customer sessions beginning to end—as bandwidth is demanded, thus opening and closing gateways accordingly," explains Woods. Then there's "active mediation, for prepay, where balance management occurs in real time, as does session management."
Complementing its mediation is Singl.eView, a multiservice billing system that bolsters Intec's traditional interconnect billing strategy. "We've made a lot of technology changes so that we can manage content and the relationship between service and content providers, which drives revenue share and digital rights management issues," says Woods.
Time to Market Versus Common Sense
In their rush to launch, telecom carriers have to keep an eye on efficiency, otherwise they will experience errors, revenue leakage and customer fallout down the road. There has to be a balance between time to market and ensuring that billing, CRM and OSS/BSS are truly capable of going across multiple services and networks.
Quick entry into triple play is a huge concern for operators, since handling the softswitch components, the middleware, the electronic program guide and the infrastructure for IP TV services in multiservice bundles is unfamiliar territory.
Some carriers may try to get a head start by provisioning IP services in functional silos. "That may seem slick if you keep integration in mind," CSG's Borelli warns, "but developing IP TV services independent of other customer and billing offers doesn't make sense, unless you want large integration and conversion headaches down the road."
Rather than re-create the wheel, carriers need to sidestep confusion about equipment, leaving that up to vendors who've worked with set-top boxes, software for delivery of content and head-end equipment for encoding. After all, cable has been using this equipment for years. Service providers should aim to have the fewest possible number of vendors, choosing the ones with enough specialized experience to minimize integration and development efforts.
"Focus more on getting the back-office ready, because the more pieced-together the back office is, the more difficult it will be to create a worthwhile customer experience with IP TV," says Borelli. "This might be the killer app, or combination of apps, that triggers carriers to move legacy systems along, even though they have been so intertwined with everything the telcos do." He observes that RBOCs can have 40 or more systems for any specific service, making integration and maintenance too complex to allow wholesale change.
Companies will either look at IP TV and quadruple play as a reason to swap out portions of their legacy technology, or find complementary ways to have new billing files sent to legacy systems.
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