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Telcos need a new kind of TV solution that acknowledges low content margins

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Telcos need a new kind of TV solution, one that acknowledges their focus on broadband and mobile as drivers of revenue and growth and which accepts television as the glue for the quad-play rather than as a raison d’etre, as it is for some Pay TV operators, especially satellite providers. According to Sylvain Thevenot, Managing Director at NetGem PVX, the London-based unit within the French company that is tasked with delivering a ‘TV Personal Viewing Experience’ for telcos, there are a number of building blocks for a successful modern IPTV service. These include efficient and pragmatic use of local DTT broadcasting, multicast IPTV and OTT unicasting without favouring any of them, and generous use of third-party OTT content to broaden the video offer, including SVOD services like Netflix and premium linear channels.

Other building blocks for what Netgem thinks of as next-generation telco TV are:  A multiscreen solution that makes content available as widely as possible around the home and beyond; A compelling user experience that makes it easy to navigate and find all content; A managed cloud platform that dramatically reduces the operational costs associated with television while providing short lead-times for launch and updates.

This is the Netgem PVX vision for the future of IPTV and it is made possible by the company’s TelcoTV solution, a managed ‘TV as a service’ proposition that lowers the barriers to entry as well as the ongoing costs for a competitive video offering. As Thevenot points out, the margins on television are often thin for telecom operators. It is not just new entrants (including telcos launching mobile-only Pay TV offers) who therefore benefit from this approach, but incumbents once they can migrate from legacy architectures.

Thevenot was in charge of EE Broadband in the UK and is credited with launching EE TV for the fixed broadband and mobile operator – a service unveiled in October 2014. This has been widely acclaimed for its excellent user experience, with features that compare favourably against far bigger Pay TV operators. Sylvain transitioned his team of functional experts into Netgem TV PVX and they are running ‘TV as a managed service’ for EE, responsible for end-to-end ongoing product developments, content partnerships, marketing services and 24×7 television operations. Netgem views EE TV as a great example of what a future-facing IPTV service looks like and Thevenot expects more telcos to follow a similar path.

OTT content is an increasingly important component for telcos looking to achieve competitive video services on a budget. As Thevenot points out: “Some Pay TV operators have made huge investments in content and their primary objective is to get a return on that, so they have to push their own [channels and programming]. Telcos are less concerned about selling their own content so for them OTT services like Netflix are a good thing. They can embrace these services to broaden their content offer.”

Like a growing number of strategists, Thevenot believes the ‘marketplace’ model is the right one for telcos. This is where you open up your platform to appropriate OTT partners and provide the unifying user experience that sits across them and which also incorporates your own linear, PVR, catch-up, Replay and VOD services. A universal search that surfaces content in all these ‘traditional’ places plus OTT apps is one powerful expression of this concept. Thevenot uses the shopping analogy to explain the new operator value proposition. The telco owns the shopping mall and provides a brilliant shopping experience and brings traffic into the shops, each of which has a commercial agreement governing their presence.

Netgem PVX is making this marketplace model easier by pre-signing OTT services to its ‘as a service’ platform and integrating them into its set-top box. The company signed 29 new content partnerships last year, taking the total to 50 for the UK and continental Europe. This covers free and ‘pay-as-you-go’ content including movies, series, international, kids and thematic. Some of the big name signings include MUBI, Netflix, YouTube, Wuaki.TV and NOW TV (from Sky UK). Netgem reckons this diversity gives telcos a distinct advantage over their competitors – whether they are Pay TV operators or rival CE platforms with their own connected apps.

One good example of how this model can keep expanding – assuming premium content owners continue to encourage the lower-ARPU paid-for video market – is the recent deal to get the TV Player Plus service (from Simplestream) onto the Netgem Telco TV platform. TV Player Plus provides a whole bunch of premium channels in the UK, including Eurosport, National Geographic and Cartoon Network. 

Some OTT services are available to all Netgem customers and others are ‘turned on’ on a case-by-case basis. The TelcoTV platform supports Amazon and Netflix but operators need a bilateral agreement with those companies. Netgem recently signed a deal with Globecast for ‘My Polish TV’ and ‘Telefrance’ to be added to the EE TV service in the UK, as an example.

Thevenot says deals like the one with TV Player make the telco TV business model easier. “Operators can focus on the customer experience rather than the challenges associated with securing compelling content, or building out the infrastructure to deliver or manage these services.”

The second key element in a modern telco TV solution, according to Netgem PVX, is hybrid delivery. This can mean any mixture of terrestrial TV (where strong local content is available), multicast IPTV (dependent on traditional IPTV network reach) and unicast OTT. EE TV uses two of the three, offering streamed on-demand and linear content plus the UK’s Freeview HD digital terrestrial service as its broadcast component. EE TV makes particularly good use of the DTT signals, allowing customers to record four programmes at once on its PVR and select favourite channels for a hard-disk recorded 24-hour catch-up feature.

Thevenot says that where the local DTT service is not strong enough (in terms of its content offer) to form the heart of a TV service, the most popular channels will be multicast over the wired IPTV network. But he argues that once you get below the top ten channels, the number of simultaneous users is low enough to make unicast streaming viable for linear TV. Some Netgem customers are using precisely this combination of multicast IPTV with unicast streaming, with the channels accessible via the EPG and their source hidden from the user.

The third piece of the Netgem PVX vision is the managed cloud service, as seen at EE TV. This leaves Netgem to worry about content provision and service delivery and lets the operator focus on their role as a retailer and functions like marketing and customer service. “If you cannot generate much incremental ARPU from video it is hard to justify having hundreds of operations staff,” Thevenot says of the IPTV market generally. “It is still early days but people are starting to rethink the economics of TV aggregation.”

In the case of EE, the television service was designed to be offered free to mobile and broadband customers. Today the company advertises its cheapest broadband deal at £4.95 (EUR 6.60) per month (for broadband and calls) plus £17.50 line rental. If you assume a customer has an iPhone 5s (16GB) on EE with 500Mb of 4G data (at £27.49 / EUR 36.45 per month) that adds up to a £50 (EUR 66) monthly revenue. This illustrates the total customer value that EE wants to retain or capture but, given the DVR was valued at £300 (EUR 397) at launch (a reasonable figure given retail equivalents), you also see the need to minimize TV costs.

Yet despite EE TV being free (and with the mobile and broadband prices well within the ‘normal’ range in the UK, it is genuinely free), this service has been hailed for its quality. EE claimed it was the most advanced TV service the UK had seen, when it was launched; as an example you can stream live and DVR-recorded content directly from the EE TV box to four devices at the same time. Smartphones and tablets can also be used as companion devices (programme guide navigation, ‘swipe-to-TV’ and remote control features, for example).

Thevenot says the managed service enables EE to keep innovating. There have been four new software releases for this service in a year, he reports. Netgem does the work behind the scenes and EE tells them when to press the button to take changes live. 

Netgem has a strong list of other telco customers including Post Luxembourg (telco-grade multiscreen TV with a large range of German and French channels), and Videofutur in France (a multicast bouquet, premium unicast channels, TVOD, SVOD, Electronic Sell Through (EST), Replay services, content apps, multiscreen experience). This is a ‘TV as a Service’ deployment that is also being offered (by Netgem and Videofutur, with its partner Alsatis) to regional ISPs who have fibre services but need television.

The Swiss triple-play operator netplus includes catch-up TV, EST and SVOD in its video portfolio, and recently added support for 4K content. Totalplay in Mexico also uses the TelcoTV platform to provide what is described as a comprehensive TV service for customers with complex behaviours yet low budgets. This service includes linear, VOD and OTT, among other things. Totalplay was one of the first Netgem customers to add Netflix (Elisa TV in Finland was another).


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