IPTV opportunity, challenges and introduction strategies for Indian market

Abstract

Decreasing voice revenues and high-speed Internet access margins are driving Telcos around the world to look for new revenue sources and differentiation. IPTV service provides Telcos the opportunity to differentiate and increase ARPU and customer loyalty. IPTV refers to the delivery of digital television and other audio and video services over broadband data networks using the same basic protocols that support the internet. IPTV enables interactive communication as opposed to the passive communication of today. Consumer gets a completely customized and highly interactive viewing experience through his television. However, IPTV impacts the entire TV landscape in terms of the types of content, the ways in which content is viewed, methods of broadcasting, business model, consumer devices, and the level of interactivity between viewer and content. Although the growth of IPTV subscribers all over the world looks impressive, a number of questions remain about IPTV business model and how the technology can help Telcos differentiate in the video market. Through secondary research, consumer surveys and interviews, our project focuses on analyzing and finding answers to some of the pressing questions related to IPTV introduction for Indian market such as - are Indian consumers ready for IPTV? What factors are driving the adoption of IPTV? Is IPTV business viable for Indian market? What issues or challenges exist and how they can be overcome? What will make customers switch to IPTV from their existing services? Can content be used to differentiate the service? IPTV is still in trial stages in India. In terms of technology adoption, IPTV in India has seen adoption by a few tech-savvy consumers assisting Telcos in their trails. There are a number of issues and challenges related to product pricing, last mile broadband connectivity, competition from Cable and DTH operators, issue of addressability, piracy, mandatory content sharing and regulators issues, which need to be resolved before the Telcos would be able to take their IPTV offerings to the early and mass market all over the country. A consumer survey was conducted based on a structured questionnaire with objectives to determine how familiar consumers are with the concept of IPTV, to gauge the features that are important to them and their willingness to pay for IPTV services. The survey respondents are spread across top six metropolitan cities, from various age groups, education and internet usage behaviours. Some key findings from the survey are as follows: Awareness level of IPTV is low. Demand for high quality picture topped the list of preferred IPTV features. Other three most preferred features are good customer support, a single unified billing and Video on Demand. Surprisingly, content which is "killer" selling feature for IPTV across the globe ranked only fifth in the most preferred list of features among Indian consumers. The primary issues faced by the consumer in the current TV viewing experience are: too many channels of low interest, too many commercials between programs, low video quality and high subscription price. The overall industry attractiveness of the IPTV industry for a new IPTV entrant is analysed. The results concluded that the attractiveness of the IPTV industry is reasonably HIGH. A business case is modelled to explore the financial viability of this business opportunity in urban and rural areas .The urban business case for the IPTV investment by Telco is positive with NPV close to Rs. 1 billion and IRR @ 52%. The business case is not very encouraging for a short term perspective; however it is attractive from the long term perspective. Telcos in the long term will need to differentiate themselves by adding new value added services and improve customer satisfaction and quality of service coupled with strategic bundling strategies. This differentiation will lead to increased customer loyalty and increased ARPU making the business case for urban areas even stronger. The IPTV business case of rural India doesn't look viable due to very high broadband network build out costs and very low subscriber density. In order for Indian Telcos to introduce IPTV offerings to Indian markets, the Telcos should take a phase-wise roll-out approach and target the broadband and internet users in metros and "category A cities first before going into other urban regions. Telcos need to create a compelling value proposition around benefits and not on the underlying IPTV technologies. They also need to promote consumer awareness; introduce aggressive product pricing strategies; implement and test technology the platform for ensuring superior quality of service; resolve technical and service assurance issues quickly; and work with regulatory bodies to help them define clear regulatory policies which would encourage investment and innovation in the sector. Once IPTV gains momentum in these markets, word-of-mouth and established credibility would give boost to the adoption of IPTV by other markets before IPTV becomes fully mainstream.