Will IPTV be profitable for telcos, or will it be a case of, can't survive without it, can't make money from it?

IPTV is coming of age in 2007. Increasingly challenged on core revenues, most fixed carriers worldwide have launched consumer IPTV propositions to support growth and increase loyalty. The big question is: Will IPTV be profitable for telcos, or will it be a case of, can't survive without it, can't make money from it?

Today's competitive landscape is very different from that envisioned by the major telcos when they began looking at IPTV. Media companies are offering content directly to consumers over the Internet. Movies, TV shows and music videos are now available from sites such as MTV Overdrive, AOL In2TV and Movielink.

Consumer electronics companies and customer premises equipment vendors are expanding into IPTV. With the launch of its iTV device, Apple can deliver iTunes video content to the television. Sony customers can view online media on HDTV sets with the Bravia Internet Video Link. Cisco Systems and Netgear have products that allow multiple media formats to be viewed on the TV via wireless links from Microsoft media center PCs.

Internet TV players are emerging with ad-funded business models bringing free content to users for PC viewing. Joost — set up by Skype founders Niklas Zennström and Janus Friis — has announced content deals with Viacom and Warner Music, while Babelgum — backed by Silvio Scaglia, chairman of Fastweb — plans to focus on niche content. The ability of MySpace and YouTube to distribute content to a global audience challenges the entire model of traditional TV channels by making niche content available to the consumer directly from the producer.

Ironically, the telcos' own broadband network investments are enabling the very services that may eventually undermine their fledgling IPTV businesses. But there is a risk that proliferation of video services will overload the networks, undermining quality and degrading overall Internet performance. With control of the network, carriers are uniquely positioned to ensure that their end users avoid these problems. This presents a sustainable opportunity for carriers to differentiate their offers.

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