The RS-DVR issue comes to Europe

My friend John Goedegebuure unearthed a new service from KPN: Opnemen Pakket ('recording package'), basically an RS-DVR service, comparable to Cablevision's cloud-based service.

Specs:

• 5 EUR/mo (free for Premium subs)
• max 6 simultaneous recordings
• initiatiate using red button or EPG
• max 200 hr in SD quality (or 100 in HD)
• max 32x fast forward during playback

The new service could undermine catch-up TV, since recording is made very easy. It could also undermine the advertising models that underpins both broadcast and catch-up TV, because ad skipping is made very easy as well and because the service (presumably) doesn't have pre-rolls.

At the same time, KPN has found a new revenue source. Obviously, that may not sit very well with the content industry. John also found a verdict from the Oberlandesgericht in Dresden, in a case brought forward by RTL Germany against Save TV. It basically says: Save TV is allowed to offer the service - but needs RTL's consent.

Conclusion: in Germany, the content industry prevailed. What will happen next in the Netherlands? RTL Netherlands apparently hasn't taken action yet, but based on the German verdict, it may ask KPN to end its RS-DVR service. The way out then appears to be some sort of revenue sharing agreement.

FTTH beats DOCSIS beats VDSL

Comparisons of FTTH and DOCSIS usually aren't very thorough. So I got some industry intel to help me better understand the differences. Here's a first shot at providing a better comparison.

The conclusion could be that FTTH is superior, but upgraded HFC networks will go a long way. Telco incumbents have a choice: sweat the copper plant (some running into a huge problem because VDSL doesn't handle analogue TV very well); or leapfrog cable and swallow the capex pill.

Shared bandwidth
Fiber guys usually point to the fact that cable is a shared medium. Well, alas, all networks are shared. The real question is: how much bandwidth is shared among how many subscribers? Verizon answered that question recently for its FiOS network. And that's 'just' a PON network! In other words, fiber beats cable, but it is shared as well.

Symmetrical speeds
Fiber guys also tout the fact that FTTH enables symmetrical connections, and the cable guy usually retorts that DOCSIS can do that too. I'm not sure how it is in other countries, but in the Netherlands the fiber guy is 'more right' than the cable guy. Coaxial networks offer a full spectrum of some 862 MHz, which would deliver several Gb/s if it was all used for broadband (DOCSIS). Alas, most is reserved for cable TV (see below: cable TV v. IPTV). Moreover, only the bottom 60 MHz is reserved for upstream, and so upload speeds are constricted.
Even if cable operators decided to go symmetrical, it would require a large capex and opex bill. Moreover, symmetrical gear is hardly available.
Further, a quick calculation, assuming 30 TV channels (occupying 8 MHz each) leaves the equivalent of some 45 channels for DOCSIS, or around 1.8 Gb/s (shared!).

Cable TV v. IPTV
Cable TV is like pushing all TV channels all the time onto the subscriber's premises. Copper could never handle anything like that, so IPTV was invented, delivering only the channel that is being watched. It is a complicated technology and certainly in the Netherlands, analogue TV (the standard line-up of some 30 channels) sells particularly well because it doesn't require any STBs. The signal can easily be split by the subscriber, usually even without an amplifier, to service multiple TV sets in the home. Digital TV needs an STB, which is a major inhibitor in box-fobic countries such as the Netherlands. (It must be said however that people are getting used to them, because cable, DTT (Digitenne) and sat TV push them to consumers. Still, each TV set needs one, and usualy they are not all free.)
Further, cable has SDV technology to mimic IPTV, and free-up spectrum, but it looks like analogue TV is a must-have for cable, even if it were just for the profit: the total rights bill is some 2 EUR/mo/sub, whereas the retail price is around 15 EUR/mo/sub. Which is interesting for several reasons: 1. cable operators are saying that they want to switch it off; 2. Opta is preparing regulation for open access to cable TV; and 3. FTTH-networks have learned that they need to offer analogue TV (over a separate fiber!) to stand a chance of winning subscribers.

Latency
Apparently, both FTTH and DOCSIS score verry well, normally, even if FTTH is a little better (c. 1 ms).

Loop length
FTTH will work over 10 km without needing any equipment, whereas a cable network requires an amplifier no further than just 100 meters away from the subscriber. However, cable networks have had their VDSL-like upgrade long ago, pushing fiber quite deep into the networks. In the Netherlands: from Headend to Distribution Nodes and further down to the Fiber Nodes. From there coaxial cable takes over, first to a Group Amplifier, and (via a handful of amplifiers) on to a Final Amplifier and then to the subscriber's homes. On average, some 1500 homes are connected to a Fiber Node (over coax and 5-7 amplifiers).

Optical/electrical
The farther fiber is pushed, the farther weigh the benefits. FTTH is superior in that sense (see before: Loop length). The optical signal is only converted to an electrical signal in the subscriber's home. That's nice for FTTH operators, reducing their electric bill, but naturally it adds to the subscriber's electricity bill. Also, the overall electric bill is higher in FTTH networks for being less centralised.

Opex
Despite the electricity savings, opex differences apparently are small for FTTH and cable/DOCSIS. Take a look at this document.

FTTH: will they ever learn?

This is a remarkable statement coming from an alternative operator, TelstraClear of New Zealand. The telco says the main result of faster broadband links to the home may be more downloads of pornography and movies rather than improvements to productivity, quotes the New Zealand Herald. "At the moment we don't believe that putting fibre into every home is economic or necessary."

My comments:

• TelstraClear is owned by Telstra, which explains a lot of the above. Telstra too thinks FTTN (instead of FTTH) is sufficient for the Australian consumer market.
  
• TelstraClear proposes FTTB (business market) instead of FTTH. I'm not sure about traffic congestion in New Zealand, but there is a lot to say for teleworking. That too is a driver on the demand side.
• I've heard the argument before: why build FTTH if all they do with it is illegal file-sharing? Who are you to say what people may or may not do with their internet connection. Let the people rule!
  
• There is some reference to wireless as an alternative. I just don't believe it.

Here is a reminder to Mr. Freeth of TelstraClear that video is not just about illegal or otherwise questionable material:

• Growth rates are still high. Think YouTube and other user-generated stuff.
• Most markets need some serious TV competition, and not just for live broadcast TV, but for VoD and catch-up TV as well. Telcos are all upgrading to offer IPTV. For that, even VDSL2 isn't enough.
• Telepresence, videoconferencing, monitoring, telehealth, teleworking, cloud computing, video calling, etc.: they all require huge bandwidths.
  
• Screens are getting bigger; movies and games are going HD, 3-D and holographic.
• Place-shifting (e.g. Slingbox).
  

And to be sure, there is more:

• Fuel and carbon savings.
• If you don't, somebody alse will build and grab some extra GDP growth (like Mauritius).
• Cablecos are upgrading to DOCSIS 3.0. If you want to keep up, you might as well leap ahead of them and acknowledge that FTTH is the end-game.
  
• The build-out of a nationwide FTTH network takes at least 10 years to reach a good portion of the population. So, you better start today.
• Many applications require symmetric connections. Only FTTH will be able to offer that.
  

Telco TV: in search of a strategy

Here are some follow-ups to my previous posts. Telco TV is the one common theme.

1. The P2P/net neutrality/broadband incentive problem
A valued reader and analyst at a major research firm pointed me to a solution out of it.

To put it in my own words:
Why not sell a portion of your bandwidth and reserve the rest for your own services? This way, you may sell e.g. 10 Mb/s (best effort) for 30 EUR/mo, and keep the rest for your own www and IPTV services.
I'm not exactly sure where the rub could be. To me it is interesting to see how telcos can learn from cablecos (as I pointed out before), because this is exactly what cablecos are doing: they sell BB, but keep most of the available spectrum for their own broadcast offering.

2. Blog roll
Here are some interesting recent posts out of the Fibre Ring:

Stephen Davies: white papers.
Rudolf van der Berg: on streaming video.
Stefano Quintarelli: on separation.
Kai Seim: on PAN, LAN and WAN (cool graph).

3. Video
There seems to be coming some urgency to the telco TV market.

KPN is raising the price of DTT (in this Opinion piece on Telecompaper.nl it is revealed that probably 1 in 10 of KPN's TV subs is on IPTV, the rest on DTT; 50-60k IPTV subs is far above what I personally had in mind), while HanseNet (the Telecom Italia subsidiary in Germany) is making basic IPTV free of charge (marketing talk of course: for 30 EUR/mo you now get a triple play, which used to be 40).

4. Poll
I intend to do a poll on structural separation.

The one problem I have is this: I have some trouble getting into the heart and mind of an incumbent. Who is willing to play devil's advocate and tell me why structural separation is such a "bad thing"? You can take the above link to Stefano's blog as a starting point.

New web-based video services

After posting about the Daily Media box yesterday, I came across an apparently similar product from the US: My Broadband TV: basically an STB for personalized TV over broadband.

There are some nice extras, such as CD and DVD playing functionality and the box also serves as a DVR. (It adds WiFi connectivity, something Daily Media didn't bother to include because of interference issues.) It hasn't launched yet and details are lacking, but going by their web site makes it look like they are on the prowl for both content and distribution partners.

The company offers a $100-200 subsidy, "depending on the functionality and the length of commitment", whereas Daily Media is free for consumers and requires no subscription.

In any case, the box market is on the move. I think that price and simplicity (on the consumer side) and revenue sharing (on the partner side) are of paramount importance - things I particularly like about Daily Media.

Also worth mentioning are video solutions that add to potential congestion issues - and hence to the importance of network upgrades (FTTH).

• Telepresence, i.e. next-gen videoconferencing. Telephony ran this interesting article, highlighting the main players (HP, Cisco, Tandberg, Polycom, Teleris, LifeSize and Telanetix) and their market approach (managed services v. resellers). Still much too expensive ($250,000 for a room installation, plus bandwidth and service cost), but I suppose simpler products will come to market. Cisco: "At least 60% of our WAN traffic today is telepresence traffic." Benefits: reduction of travel cost ($70m for Cisco in 2007) and carbon emissions, increased productivity.
• Home monitoring. SureWest, an FTTH pioneer, is launching remote monitoring with partner Xanboo. They will sell to anybody in the US, but obviously only SureWest subscribers have no upload bottleneck. And the experience will only be optimal if the viewer is on a high-speed connection as well. It "can be programmed to deliver live or recorded video and still images, as well as sensor notifications for things such as motion, door and window activity, water leakage and temperature change. (...) You can control your kitchen lights, check on pets, receive e-mail alerts if a window is opened, or watch your kids come home from school from virtually anywhere in the world."

Daily Media allows new players into the IPTV market

When you ask "can it it do x?", the answer will either be "yes" or "no, but it could - easily".
That's one way to describe the new Daily Media box.

Last week, two of United Content Distributors' executives came to my home for a private demo of their newest box. And I have to say I was impressed. Hennie Meijndert is their CEO and behind much of the technology. John Goedegebuure is taking care of PR, now that the Daily Media product is ready for commercial launch.

Basically, the box provides place-shifting in that it allows for a full-blown TV experience of internet-based content. In that respect it resembles both Apple TV, Microsoft and Sony products, as well as TiVo, Akimbo (the original box) and Orb. But it offers a whole lot more, especially to distribution partners. Typically, these could be operators (CATV, DTT, telcos, munifiber) as well as 'service providers' in the widest possible sense (ranging from insurance companies to the post office) - as long as they have some form of customer relationship because UCD doesn't plan to become a service providers itself. Partners will be able to share in (targeted) ad revenues, VoD fees and other fees. And more.

Openness, partnering and revenue sharing are at the heart of the company and it's business model. In that respect, it has telco 2.0 written all over itself. It offers traditional and web 2.0 based video content, enhanced with highly targeted ads.

The specs (also, check out this .ppt that I made available as a Google Presentation):

• United Content Distributors has been working on the Daily Media box for 4 years, with 16 employees (developers and sales). CEO is Hennie Meijndert.
• Funding is private so far, coming from the shareholders: the CEO and his partner.
• Daily Media is a box for connecting a range of input sources (currently >500 channels through web feeds, beside CATV channels) to the TV. Also, all media content available in the home can be converged into the platform. As the box is portable, it can even mimic Sling-like capabilities.
• Video is streamed at 540 kb/s.
• Manufacturing cost: EUR 150 (excluding several relatively cheap add-ons, such as a PLC adaptor, cables, web-cam, microphone, possibly a DTT-tuner, etc.).
• Proprietary are the hardware specifications and the OS running on the box (albeit based on Windows CE). Further, two programs are server-based (for updates and the UI).
• Upon receipt the customer receives a EUR 240 credit at LaSer Nederland/VISA for buying content (VoD) and services. After registration it is raised to EUR 1,000.
• The company does not aim to be a service provider and instead relies on third party distributors. Their role is to subsidise the box and subsequently share in the revenues.
• The business model is centered on revenue sharing with both upstream (content providers, advertisers) and downstream (operators) partners. Sources of income are fees (VoD, t-commerce and other servies) and advertising (skyscrapers and video on the menu pages; commercialised slides during buffering; inserts; etc.).

Here are the benefits to each party in the ecosystem:

For consumers:

• A wide range of content, including web feeds of traditional TV channels, with a heavy focus on long-tail content (e.g. a Brazilian soccer channel).
• Access to the internet, so no walled garden.
• Movies (VoD, running quite well on an astonishing 540 kb/s, or 800 kb/s for somewhat better quality), with a single-click payment system (through the LaSer Nederland/VISA deal), connected to a maximum EUR 1,000 credit against which payments are debited – nice for impulse buying.
• VoIP (an SIP-based home grown solution) for box-to-box communication.
• Services including a 'red button' on screen for t-commerce and potentially domotica.
• Uploading personal content (audio, photo, video), with a free of charge 2 GB of personal storage.
• Plug-and-play installation with a single remote control, a wireless keyboard for web surfing, a webcam and a headset and PLC-based plugs that allow you to hook up anywhere in your home.

For content providers:

• Yet another platform to sell your wares.
• Daily Media picks up free web feeds, but adds pay-TV channels to make the offering more compelling.
• Also, it has a VoD agreement in place with which it has a very narrow distribution window (sometimes movies can be seen just days after they become available for rental).
• New revenue streams from interactivity (purchases through a single click on the red button on enhanced programs) and highly targeted ads (IP addresses and subscriber data can be combined, so CPMs in theory must be relatively high).

For operator partners:

• The solution to your quest for content, with the added benefit of raking in advertising euros, VoD and other fees, and solidifying your customer relationship.

For other distribution partners:

• Same as for operator partners, and add to that the option of having your brand and access to your services on the personalised home page of each individual user. This adds a line of communication to your subscribers. Providing 'hot news' may even alleviate your help desk (in case the partner is a health insurer, e.g.).

Obviously, there are a number of obstacles for UCD and its Daily Media box:

• Picture quality. At a 540 kb/s bit rate, the offering is quite astounding. However, the audience will adopt HD and get used to much more over the coming years. It remains to be seen if Daily media can keep up in this arms race.
• Dependence on web feeds implies that the server of any content provider may crash. Obviously, this is an area in flux. The service is dependent on third parties and you can only hope/assume that capacity is added, and deals with CDN operators such as Akamai and Limelight are scored.
• Funding. Four years and 16 employees implies considerable investments have been made by the current shareholders. Going to the next stage can be achieved through organic growth, but can also be expedited if the company were to attract additional funding. I have been shown some very interesting innovative financing methods.
• Yet another box. STBs and the boxes of even a company like Apple have a hard time making it to the living room. Sure, UCD adds interesting deals for partners, as well as a wide range of content and services, but still ... What helps is that the Daily Media remote can also be used to control the already existing audio/video hardware in the living room, so "one box in and 2,3 or 4 remote controls out".
• Focus. Perhaps the box can do a little too much to make it sellable?
• Exclusivity. Any distribution deal may alienate other potential partners in a specific geographical market. The same would apply if the company would sell itself to KPN, to its erstwhile Siamese twin TNT or to a large retail banking group - to name a few thinkable options.

To round off, here is what I particularly like:

• The box promises to be truly plug & play and converges several other boxes and remote controls.
• Low cost for consumers and operator partners. This is basically the result of distribution partners and advertisers coming on board, taking a big chunk of the cost.
• There are no regional boundaries. Daily Media could be sold anywhere, provided they have a distribution partner.
• New operators such as Reggefiber or bbned/Alice (both involved in FTTH in the Netherlands) could team with UCD to extend their content offering. This would raise their chance of winning against entrenched cable operators.
• KPN could forgo the development of its ill-fated IPTV offering and simply quit that game altogether. Instead, a Daily Media box with DTT tuner could allow KPN to offer basic TV and some pay-TV of Digitenne (at the highest available quality), enhanced with all the Daily Media stuff (which has a somewhat lower picture quality). In fact, an alternative could be to accept CATV channels to enter the box too (outside the network or commercial reach of Digitenne). KPN could look at that as a form of traffic off-loading – comparable to what femtocells do for mobile-only operators (in-home traffic off-loaded to the subscriber’s broadband connection). Another possibility may be to deploy Daily Media in a closed setting, to improve its performance (in terms of picture quality and stability).
• CATV operators could integrate their STB in the Daily Media box (or vice versa). A single box and a single remote control would be great for consumers.

Making IPTV more attractive by adding apps

These two releases look promising: middleware companies making efforts at developing applications for IPTV. The end user is empowered, the international developer community enriches the middleware, and the capablity is taken out of the hands of telcos.

• Orca Interactive teamed with Muvee. The resulting 'Livephotos' app enables end users to "create personalised video albums from their photos and video clips, accompanied by their preferred style of music".
• SeaChange launched its 'TV Platform Developer Program'. "The program is designed to deliver value-added applications."