With the â€˜Operator as an Appâ€™ model starting to generate serious interest among at least a number of Pay TV providers, the viability of apps-only delivery was high on the agenda at Connected TV Summit last week. Various speakers, covering set-top box vendors, operators and analysts, outlined some of the arguments why this model is either immature or simply not viable, and why we will continue to need set-top boxes. But these arguments will not be enough to stop at least some major platform operators investigating the concept with an open mind.
As we reported elsewhere, Daniel Simmons, Principal Analyst, TV Technology at IHS, listed what he believes are the flaws in the â€˜Operator as an Appâ€™ model and why primary STBs will merge into home gateways provided by platform operators rather than into televisions provided by CE manufacturers. And while Alex Green, Director of TV at the IPTV provider BT Retail, stated a long-term desire to get rid of STBs, he made it clear that we could not live without them today or anytime soon.
He referred to Smart TVs as â€œa bunch of apps without a simple search and discovery experienceâ€ and argued that consumers do not use them as either their starting point or the focus for their content journeys today. â€œSmart TV manufacturers have a long, long way to go. They make fabulous devices but equipment manufacturers still have a massive leap to make if they want to play in the service aggregator game,â€ he commented.
Paul Bristow, VP Strategy Consumer Experience & Middleware at ADB, which provides set-top boxes, broadband gateway and home networking solutions, criticized the entire apps store concept, where the operator app sits alongside those from broadcasters and OTT providers, all competing for viewer attention. â€œThe last thing you want [as a platform operator] is a reminder to your customers that there are a whole bunch of other choices you can go to and subscribe to,â€ he told the London audience.
He acknowledged that there is now an app model that does avoid this, in the form of the TeliaSonera/Samsung IPTV app (which is more like a virtual STB experience). But this is currently the first example of this approach and does not reflect the wider market.
Talking about the dominant app store approach he continued: â€œI think the app model is wrong in terms of presentation. It puts the cognitive workload onto the end user. It makes life more difficult. They have to remember which app to use for which content. Television is supposed to be fun and relaxing and making it so is the job of TV operators, and one they do well.â€
Bristow has long argued that set-top boxes will always be necessary. â€œEssentially they are the difference between the technologies that operators want to use to drive their services and the technologies that are built into a television set. So all we need for the STB to go away is for technology to stop improving.â€
He pointed to HEVC decoding (which should eventually double video coding efficiency compared to H.264) as an example of a technology advance that will demand standalone devices that can be upgraded separately to the television set.
Bristow maintains that a set-top box is a good investment, partly because it minimizes the likelihood of customer care calls, because of its tightly managed QoE. â€œIf someone buys a cheap device from the the shops and it does not work they will write it off and throw it in the cupboard but if they are spending $40 per month for a service then they are going to call you,â€ he noted, highlighting how operators cannot hide from any additional technical support burdens.
He also contrasted the digitization of TV to the digitization of music, saying that the TV industry had managed to turn analogue cents into digital dollars, rather than analogue dollars into digital cents. His point is that the existing business structure, where platform operators work with STB providers and innovate in their own hardware ecosystem, has worked well for the industry.
Five years into the Connected TV revolution, this is the year when more questions are being asked of the CE vendors than the Pay TV operators about whether their entertainment delivery models are sustainable. Steve Christian, VP Marketing at Verimatrix, which provides content security solutions across the STB/multiscreen (including Connected TV) universe, pointed to one of the challenges that the device makers face.
He explained that a few years ago the trend was for content providers to look at how they could disintermediate the platform operators. â€œBut now we have swung back to [a desire for] participation, where content owners see the value in the Pay TV operator aggregator role.
â€œAs people have seen the shortcomings in the initial attempts to use the new apps model, perceptions have changed. But next week it will probably change again and we will see more apps like the TeliaSonera/Samsung model and that will become the more natural model of deployment. Then people will find some faults in that as well.â€
Christian suggested that if you remove STBs it reduces the cost of entry for other service providers who want to get into the video aggregation business. He is not sure you can get all the features and functions you need as an operator without an STB, anyway. â€œThere is still a lot of value in using traditional RF [broadcast] delivery in combination with OTT and [managed] IP delivered services and that is a very powerful model that will tend to be profitable,â€ he stated, referring to the hybrid platform operator approach.
Christian also highlighted the content security aspect of the debate, particularly the need to ensure a consistent content offer across different connected devices that have different DRM requirements. He said a discontinuity in the service line-up (caused because you can get rights to content on some devices but not others) is corrosive to the overall user experience.
Even Peter Fregelius, Strategy & Innovation Head at Swisscom, whose company is keen to investigate the â€˜Operator as an Appâ€™ model, highlighted important hurdles. â€œThere are issues you need to handle, including simple things like fast channel change, and before we have that we cannot think about â€˜no set-top boxesâ€™ as a model. There are other aspects to think about, like how we handle the apps lifecycle on a television and how we get visibility of the CE manufacturer roadmaps in the coming years so we can continue to develop. There are a lot of fundamental things that have to be put in place,â€ he said.
But his attitude, and that of Deutsche Telekom, is that we need to investigate the new delivery model and that is why this is a debate that will continue, despite the various challenges and objections. These companies are sympathetic to the cloud TV/apps delivery model. Fregelius spoke at a private meeting that Swisscom hosted at Connected TV Summit specifically focused on â€˜Ending operator reliance on set-top boxesâ€™. And in the wider market there is a readiness to cooperate with the CE vendors to see if this concept is a go-er.
Referring to platform operators and Consumer Electronics firms, Sally Armitage, Director of Web & TV Products at Orange declared: â€œThere are two worlds that want to work together but in a market that is not mature yet.â€ Dr Oliver Friedrich, Senior Project Manager at Deutsche Telekom Laboratories, which he described as the disruptive arm of the German telco that looks at new ideas, said the industry needed a deeper discussion about the wider cloud TV model, and that it was a good time to start talking about what the operator requirements are for the connected TV device market.
Paul Bristow at ADB is the most vocal dissenter to the view that set-top boxes will give way to the â€˜Operator as an Appâ€™ model, where Pay TV services are presented through an app via connected TV devices. He always provides a list of sound, practical arguments about why operators should keep investing in their own hardware dedicated to video services, starting with essential QoE issues like channel change times right through to the cost of supporting customers if you compromise the user experience even slightly.
Bristow bemoans the attitude that set-top boxes are a Capex burden rather than an investment. At this conference he again argued that you only need to prevent a few customer care calls before hardware devices start paying for themselves, and that is based on pure call centre costs without any reference to customer satisfaction and churn reduction.
It became clear at Connected TV Summit 2013 that others share Bristowâ€™s doubts. Daniel Simmons at IHS provided a list of practical objections to the â€˜Operator as an Appâ€™ model. There were references at this conference to the need to align operator/CE product roadmaps and for operators to have greater visibility of what CE manufacturers are working on if we go down this route as an industry.
We have already reported the list of conditions that DIRECTV provided in order for operators to get rid of STBs. These included identical channel change times for apps, resolution of DRM challenges, an identical User Interface whatever make and model of TV you are watching, apps that launch automatically and QoE monitoring. Other operators have their own lists of practical issues that need to be solved before the â€˜Operator as an Appâ€™ model is considered viable.
As is often the case, the things that were not said are important, though. During this conference, and in our private conversations over two days, it became obvious that there are no philosophical or business objections to the â€˜Operator as an Appâ€™ approach (which includes the virtual STB app model), and the eventual avoidance or total elimination of set-top boxes.
Nobody said operators need STBs to remain relevant in the home, or that they need them for marketing reasons, for example. Nobody appeared wedded to PVRs because they like to have hard drives in the home, but instead because they offer key benefits that do not exist in network PVR yet, like live pause and of course, unlimited recording rights.
Simmons at IHS raised the spectre of operators losing control of their own destiny if they rely on third-parties for their hardware. This is a good point. After all, if the STB vendor ecosystem were left to decline, how would operators ever reproduce what they achieved with the PVR, where they picked up the idea that TiVo (a CE company) brought to market and made it their own, taking it to the masses, generating new ARPU and loyalty in the process and achieving service differentiation?
Surprisingly, this was not an objection that platform operators raised publicly, and privately there seem to be few qualms about cooperating with the CE industry. (There is no question that Samsung is doing a good job in building partnerships and trust on the Smart TV side of its business).
The dominant attitude from operators at Connected TV Summit was that if we can make it work, we are interested. So this is very much a technology debate and not a â€˜religiousâ€™ one, and that makes it all the more interesting. For a number of operators who spoke at this event, the likelihood that they will migrate towards an operator app model and away from set-top boxes depends on whether it is possible to replicate the current Pay TV experience without set-tops. It seems to be as simple, and as hugely complex, as that!