TELKOM JOINS THE FRAY IN BROADBAND TV DELIVERY BID

Telkom CEO Papi Molotsane says offering a "triple-play" bundle of voice telephony, broadband Internet access and TV is key to the company’s plans to broaden its sources of income.

It needs to do this because its traditional voice revenues will come under pressure in the next few years as prices fall. "A proliferation of competitors, coupled with the effects of market liberalisation is putting pressure on us to look at new sources of revenue," Molotsane says.

Because Telkom has operated in an environment protected from competition, it has lagged telecom operators in Europe and the US, which have already begun competing aggressively with incumbent cable and satellite broadcasters for subscription and advertising revenue. In the US, telecom operators began offering Internet Protocol TV (IPTV) after cable TV companies invaded their turf by offering broadband connections over the same connections that previously delivered only cable TV signals.

It’s leading to a sea-change in the way people watch TV. Jonathan Hatchuel, business group manager for the Windows client at Microsoft SA, says content providers today still dictate what consumers watch and when they watch it. "The shift to IPTV signals the end of that era," he says. "The consumer will choose what they want to watch, when they want to watch it and whether they want to own that content. The consumer will be far more in control of the TV experience."

In a growing number of markets, fierce competition is leading to price wars between telecom companies and cable and satellite operators. In France, for example, euro 30/month buys a triple-play bundle that provides unlimited voice-over-IP dialling, unlimited broadband Internet access and 40 TV channels.

Telkom’s IPTV trial will last six months and will involve 300 of its customers around the country. "If the numbers talk to us, we will definitely commercialise it," Molotsane says, adding that the company might apply for a broadcasting licence.

If Telkom goes ahead, SA consumers can look forward to a new era in interactive television. "Triple-play with IPTV is changing completely the way we perceive television," says Bernard Grave, regional marketing director at Alcatel, a French telecom equipment manufacturer. For one thing, it allows full interactivity between the operator and the viewer. For example, viewers will be able to vote during live TV shows simply by pressing a button on their remote control. And, as with hard disk-based personal video recorders, such as the one introduced recently by MultiChoice, IPTV allows consumers to pause, rewind and fast-forward live television.

Interestingly, Telkom won’t be the first operator in Africa to offer triple-play bundles. Operators in Senegal and Mauritius are already piloting IPTV.

Telkom has not decided yet if it will partner an existing broadcaster, such as MultiChoice, or whether it will buy its own content. Internationally, most telecom operators have spurned partnerships with broadcasters, choosing instead to compete with them as there are better profit margins in providing value-added content to consumers than in simply providing a pipe over which content is delivered.

MultiChoice CEO Nolo Letele downplays the potential threat from Telkom. He says telecom operators in the US have mounted a serious competitive challenge to broadcasters. In SA, though, the quality of the copper infrastructure in the ground is poor and consumers are often located far from Telkom’s telephone exchanges, which will limit the carrier’s ability to deliver the kind of speeds required to offer IPTV. "[Telkom] would have to invest a huge amount in infrastructure to get a triple-play business going," Letele says. "[IPTV] is not going to be a threat to us in the short term, but clearly, in time, it will become a force to be reckoned with. It’s something we are interested in and we are keeping an eye on it."

There’s also the small matter of Telkom not being a media company. It’s almost certainly not attuned to consumers’ media demands. It may, therefore, need to look at acquiring a media company.

Assuming Telkom decides to proceed with a commercial IPTV roll-out, it may also have to reconsider its much-loathed policy of limiting its customers’ monthly bandwidth consumption. The company typically limits its broadband clients to between 2 GB and 4 GB of bandwidth a month. Yet, just one channel of standard-definition IPTV can consume up to 40 GB/day of bandwidth. "IPTV has to be transmitted through our network so we will look at impediments where there are impediments," Molotsane says.

To SA consumers starved of bandwidth, recent developments elsewhere must seem extraordinary. Operators in many countries are building networks – based on technologies with arcane names such as ADSL2+ and VDSL – that are capable of delivering up to 52 Mbit/s into the home. That’s more than 50 times faster than Telkom’s fastest broadband product.

Grave says each IPTV channel consumes 4 Mbit/s of bandwidth (it’s double that for high-definition channels). "We think 20 Mbit/s is the magic number for multiple channels delivered onto multiple TVs in the home with broadband Internet, and voice and video communications in a triple-play bundle," he says.

Telkom is not without unique technical challenges as it struggles to adapt to the high-speed future. To deliver the kind of broadband access needed for reasonable-quality IPTV, consumers must be within 3 km of a telephone exchange. Unfortunately, in SA, distances between people’s homes and their nearest telephone exchange are often far greater. The fixed-line network is also less ubiquitous than fixed-line in Europe and the US and wireless broadband is not yet a practical alternative for offering triple-play services, though that may change in the next few years with new technologies such as WiMax.

Still, Telkom cannot afford to rest on its laurels for much longer. Competition in its traditional telephony business is looming and, though it hasn’t yet provided details of its plans, it’s likely the second network operator will want to provide a triple-play bundle of some description.

International operators, meanwhile, are steaming ahead with commercial IPTV projects. The UK’s BT Group (formerly British Telecom) has announced that it will spend billions of pounds replacing its old circuit-switched network with one based entirely on IP. BT has aggressive plans to take on TV broadcasters at their own game.

Media speculation has been rife this month that BT is planning a multibillion-pound bid for ITV, the UK’s largest commercial TV broadcaster. Such a move would be in line with other recent merger and acquisition activity.

Rupert Murdoch’s BSkyB, for example, recently bought broadband provider Easynet, and cable operator NTL is engaged in a hostile bid for telecom firm Virgin Mobile. Analysts say consolidation between telecom operators and broadcasters will gather pace in the next few years with the convergence of technologies.

Inet-Bridge ||   Discuss this article