Telecom Sector on the Edge: Driving the Future of IPTV

1. Telecom Sector on the Edge:Driving the Future of IPTV The Future of Voicewww.itu.int/spu/voice15-16 January 2007ITU Headquarters Geneva, Switzerland Jaroslaw K. Ponder Policy Analyst ITU Strategy and Policy Unit The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its Membership.

2. Starting points • Migration to the IP-environ-ment • Convergence of three worlds • Evolving regulatory environment • Socio-economic development • Investment • Innovation • Catch-up • Ongoingregulatory r. • Competitivness international telecommunication union

3. Telecom and Broadcasting Competition Monopoly Narrowband Broadband Traditional networks NGNs Telco Sector Telecoms Telecoms/IT Convergence Wireline Wireless Convergence Voice Data / Video Triple Play Global National Video Services Ubiquitous, personalized and interactive service Pasive Interactivity General Personalised international telecommunication union

4. Three Times VoIP Video over IP Voice over IP • IPTV (QoS) • VoD • Interactive MS • Web TV • Mobile TV • VoIP / PSTN • IP Telephony • VoB • VPN Internet Internet • Mobile and Wireless • 2G, 3G, 4G • WiFi • WiMAX (d,e) • Satelite • Fixed Infrastructure • xDSL • FTTx • Cable TV Velocity on IP international telecommunication union

5. Broadband Access, 2005 international telecommunication union Source: ITU (2006), World Information Society Report 2006, www.itu.int/wisr

6. Now Service C Service A Service B Net.A Net.B Net.C Future Services A, B, C IP Platform(QoS) Access Networks Telecom Sector in Transition Broadband/Mobility Video NGN Simulation EmulationMultimedia Generalized mobility Convergence Integrity Multi-layer orientation Open character Voice SoD VoIP QoS USO Reg. Int. Fixed: PSTN Mobile: 2G Data Next Generation Services QoS, Mobility, Interactivity, Personalization, N-play Interactivity IP-environment Interconnection / Emerging markets / Universal services / CompetitionNumbering / Quality of Services / Emergency Access / Consumer Protection international telecommunication union

7. Converging Markets Note: historically, the main service provided over the access platform international telecommunication union

8. NGN Considerations… • NGN will lead to re-monopolization in the telecommunication sector? • Less Bottlenecks / New bottlenecks • Dynamic efficiencies • Competition? • NGN as an effect of competition • NGN enhances level of competition • New interconnection regime? international telecommunication union

9. NGN Considerations… • NGN will enable structural separation? • Networks / Services / Applications • Voiceloses meaning? • Tech: IP protocol • Business: Voice plus Content • Present regulatory frameworkremains relevant? • Evolution is unavoidable • Convergence (T+B+C) international telecommunication union

10. New challenge for telecom sector • Driving the Future of IPTV • Chairman Report from Executive Round Table • Market, Regulatory Trends and Policy Options in Europe • Market, Regulatory Trends and Policy Options in Asia / Pacific • IPTV Global Technical Workshop • 12-13 October 2006 / www.iptv-ws.com international telecommunication union

11. IPTV: Implications Margin Revenues • Infrastructure requirements • 6-16 MBit/s for HDTV / Narrow Band TV • Bandwidth / Generalized mobility • ADSL2+/VDSL/FTTx/3G/4G/WiFi/WiMAX • Standardization process (Arch., STB) • Compression Methods • Business Model • Value Creation Chain / True margin redistribution • Triple-play • Distribution platforms /Interaction • Broadcasting /One way communication • Regulatory reform Users international telecommunication union

12. IPTV: Market Trends • Beijing RIC Information Consulting (2005): Global • 2006: the global revenue of IPTV service $8 billion with over 8 million subscribers. • Users: 2004: 2.19 million 2008: 20.44 million • 21st Century Communications World Forum : • 2006: 2-3 Million U. • Gartner (2006): Europe • 2006: 3.3 million users • 2010: more than 16 Million Users • Additional revenues generated willgrow from 336 Million to 3 Billion IPTV Users in Europe Source: Gartner (2006) international telecommunication union

13. 114 118 110 100% 120 105 73% 71% 90 70 61% 53% 57 60 39% 20% 30 0% 0 H2 H1 H2 H1 H2 H1 Case Study on Hong Kong: PCCW Strong Demand for Residential Installed 608 Pay Channel Customers & ARPU Pay channel customers 26 +38% y-o-y Commercial 549 Installed pay channel services 22 Steadily rising ARPU as new content introduced (’000) Pay channel customers as % of total installed Reached 654,000at end of August 441 444 Mini Packs launched 17 26 (HK$/ month) 391 361 22 10 269 271 17 418 192 369 10 147 254 182 106 29 2006 2004 2005 2003 H2 H1 H2 H2 H1 H1 2003 2006 2005 2004 international telecommunication union Source: ITU-T IPTV Global Workshop, KT Case Study, Mr Berriman

14. Case Study on Hong Kong: PCCW Growing penetration rate of among consumer NETVIGATOR Broadband Lines +16% y-o-y (’000) 998 68% Wholesale 59% 953 53% Business 48% 857 Consumer 796 28% 753 703 629 H2’03 H1’04 H1’05 H2’04 Maintained low churn rate of consumer NETVIGATOR since launch Dropped by half Before launch Jun-05 2005 2006 2003 2004 international telecommunication union Source: ITU-T IPTV Global Workshop, KT Case Study, Mr Berriman

15. Drivers Telecom competition Inter-modal comp. Pricing and sell strategies Broadband deployment Content providers New ubiquitous distribution platform Convergence Bundling strategies User Switching behavior Obstacles Regulatory environment Standardization process Margin redistribution New form of service Interactivity User Cost of the STB / Hardware providers / Operators Willingness to migrate Willingness to pay for: TV Services / Video on Demand / Next generation services Consumer protection IPTV: Drivers and Obstacles international telecommunication union

16. Policy/Regulatory Goals Socio-economic goals Investment Innovation Regulatory Focus Static and dynamic efficiences Monopolistic bottlenecks Market failures Ex-post r. v. ex-ante r. IPTV Application and service New markets Fosters competition New architecture and bottlenecks New cost models Market analysis Cross-subsidies Boundaries between infrastructure and the content Cross-ownerships IPTV: Regulatory considerations international telecommunication union

17. IPTV regulatory requirements • Infrastructure • From legacy infrastructure to investment • Inter-modal competition • Local loop unbundling • Interconnection • Universal service • Net neutrality • Symmetric regulation • Quality of services • Consumer protection • Definition of IPTV in legal systems • IP Hybrid-service / Information service / Broadcast service / Linear versus non-linear services international telecommunication union

18. Meaningful concepts • Neutrality • Technological neutrality • Net-neutrality • Universality • Universal service • New platforms… • Interoperability • Standardization • Asymmetric regulation • Ex-ante versus Ex-post approaches • Unbundling and access pricing international telecommunication union

19. Conclusions • All-IP environment accelerates convergence process of telecom and broadcasting industry • Required strict distinction of transport and content regulation • Imposing old regulatory schemes to the new technologies may weaken growth dynamics • Regulatory forbearance will impact growth dynamics of the IPTV market • Institutional issues • New dimension of regulatory reform • Competition issues • All-IP environment fosters competition international telecommunication union

20. Thank you for your attention! International Telecommunication Union Jaroslaw K. Ponder Policy Analyst <Jaroslaw.Ponder@itu.int> ITU Strategy and Policy Unit international telecommunication union

21. Useful Links • Full version of presentation: • www.itu.int/spu/presentations • ITU work on NGN and IPTV: • www.itu.int/spu/ngn • www.iptv-ws.com • Strategy and Policy Unit: • www.itu.int/spu • Shaping Tomorrow’s Networks • www.itu.int/stn international telecommunication union

22. Regulatory considerations New Initiatives Programme What rules for IP-enabled NGNs? The Regulatory Environment for Future Mobile Multimedia Services The Future of Voice ITU Study Groups Question 6-2/1: Regulatory impact of NGNs on interconnection Question 12-2/1: Tariff policies, tariff models and methods of determining the costs of services on national telecommunication networks including NGNs Question 19-1/2: Strategy for migration from existing networks to NGNs for developing countries WTDC 2007 in Doha Trends in Telecommunication Reform 2007 Global Symposium for Regulators 2007 NGN and the ITU international telecommunication union

23. NGN and the ITU: IPTV • IPTV Focus Group • Created in 2006 to deal with the standardization issues related to IPTV and link between IPTV and NGN • Meetings and first outcomes • July 2006, Geneva, Switzerland • October 2006, Busan, Korea • ITU Global IPTV Technical Workshop • Regulation / Market / Technologies • October 2006, Seoul, Korea international telecommunication union

24. ITU New Initiatives Programme • Focus • ICT innovations • New market developments • Emerging regulatory challenges • Three main outcomes : • Research programmes • International expert workshops • Publications • www.itu.int/ni international telecommunication union

25. The Future of Voice • Research Programme • Background Materials Page • Three Background Papers • Three Regional Studies • Asia • Africa • South Eastern Europe • Latin America • Workshop: January 2007 New Initiatives Programme www.itu.int/ni www.itu.int/spu/voice international telecommunication union