Most service providers realize that the largest component of network-related average revenue per user (ARPU) is video content, and so most also realize that offering video content in some form is a key to revenue and profit growth. The problem is that there seem to be many different business and technology strategies for video, and knowing what's best will require examining both the demographics of the area to be served and the nature...
of an operator's current business.
Video strategies can be classified in three dimensions:
1. The mobility dimension: Video can be targeted to mobile devices or fixed devices; and in some cases, it can be targeted to both.
3. The technology dimension: Video can be deployed primarily using an IP infrastructure, an Ethernet/tunnel infrastructure, or a combination of the two.
The mobility dimension will be addressed for most service providers based on a few simple facts about the territory. Mobile video works best with a population that is young, network-literate, and likely to be using public transportation or sitting in public places rather than driving vehicles or walking around. Where mobile phones are rapidly replacing wireline, it is worth consideration. The mobile dimension of video is less likely to be valuable where there is already strong mobile Internet use, since it may be difficult to differentiate service provider content from over-the-top content that is incrementally free.
Fixed-device video can mean either computer video or traditional television. The former has been shown again to be most effective in the youth market, and there it is dominated by over-the-top offerings like YouTube. The latter is the classical IPTV market, and where the other dimensions of the issue come into play.
Television is a mixture of broadcast and video-on-demand (VoD), and exactly what that mixture can be expected to be in a given market is the key factor in planning a television/video strategy. Where broadband data rates are high, it is relatively easy to offer downloaded or streamed video, but again, it may be difficult to differentiate these offerings from over-the-top services. Most network operators have tentatively determined that they will have to offer some broadcast capability to be competitive.
There are two basic broadcast strategies available, what is sometimes called "linear RF" or the transmission of digital TV in pure TV form (like a cable system does) and video over broadband data connections. The former approach has been adopted by Verizon with FiOS and the latter with many network operators in Europe and by AT&T in the U.S. with U-verse. The major determinant on the best strategy is the economic density of the market area. If there is sufficient concentration of households to make a passive optical network (PON) based fiber-to-the-home (FTTH) architecture economical, it is likely that a linear RF approach will offer the lowest overall cost and the highest level of customer satisfaction. If not, then a data-delivered TV strategy is the only option.
The challenges of an IP infrastructure
The largest area of technical debate in IPTV is just what IP infrastructure's role would be. There are two basic approaches. The first is an IP metro infrastructure and the second is a tunnel-based metro infrastructure. In the former, which is currently championed by Alcatel-Lucent, the customers premises are actually on an IP network, assigned an address by a Dynamic Host Configuration Protocol (DHCP) process. This IP network supports multicasting, and broadcast channels are multicast using the standard IGPM join/prune architecture. In the second, which most other vendors seem to support, a broadband remote access server (BRAS) -- usually placed well forward, even into the central office -- performs the channel assignment process. In both cases, the customers have some predetermined number of "slots" into which broadcast or VoD programming can be inserted.
The challenge posed by any data-delivered broadcast architecture is the traffic management, which means metro aggregation must be carefully planned. Any form of streaming video is highly sensitive to jitter and even more sensitive to packet loss, since loss of frames in MPEG coding can create noticeable pixelization. In rough terms, a hundred broadcast channels will require about 1 Gbps of transport. A key question is the size of a central office (CO) in terms of the number of households served. A typical CO of 20 thousand households will likely consume about 30-50 active channels at a time, and the variability of the load will be relatively small. Larger COs are even more likely to have relatively predictable traffic patterns, but small COs may show heavy swings in load as viewing patterns change. Major live events will also influence viewing patterns and thus traffic.
Video compression is normally used for delivering video payloads over any data protocol, and there are trade-offs associated with compression technology. As noted below, data loss in compressed video has a significant impact on quality and thus networks using compressed video must guard against packet loss, if possible through a combination of traffic engineering and hold-back buffering. It is also important to look closely at the insertion delay associated with the code/decode process and to insure that video compression doesn't cause problems with details like audio track synchronization. A careful analysis of compression standards and options is in order, but the industry is zeroing in on MPEG-4 compression for HD programming, and networks should be designed to assume that. There wills still be variability in the way that various MPEG-4 coders and decoders perform, so testing the combinations will be important before any major decisions are based on compression assumptions.
It's also important to plan for transition to a greater percentage of VoD traffic over time. Some research shows that customers are becoming more "on-demand" oriented as a result of their experience with the Internet in general and with Internet video in particular. This shift in viewing patterns can create a major problem in traffic management, since VoD streams are not likely to be suitable for multi-household distribution. A CO of 20,000 homes might require only about 450 Mbps of broadcast bandwidth but would consume a staggering 200 Gbps if only one VoD per household were watched at a time.
Satellite and broadcast TV
Satellite TV and over-the-air broadcast are the last factors. Where both are strong (which is likely true in mid-latitude locations where population density is high), it will be harder to be profitable without a strong VoD offering to differentiate service provider video from available competitive strategies. Where there are problems with both, or where it is perceived that competitive strategies are higher in cost, there may be an opportunity to field a broadcast-based video offering and be competitive for some time before major shifts toward VoD consumption will change the traffic mix.
Service management issues
Service management is the final issue with video in any form, and it is perhaps the most problematic. Customers will simply redial a dropped call, in most cases, and will have relatively little concern unless the problem happens frequently. The loss of video during a prime-time show is another matter that is likely to prompt frenzied calls to customer support. There, collision in complaints from a network-generated congestion event will create hold times that will further increase customer frustration. It is important to have some form of proactive system for handling problems with the network that result in video loss, which can range from a "network status" channel or display on a portal channel to a web portal or a canned message in a call center. Whichever system you choose, it should advise customers only of their local status, not of system-wide problems. Research is now showing that system-wide notices can erode customer confidence in the service overall.
Virtually every survey of communications ARPU shows video as the largest component of consumer spending, and in many markets the only component whose relative and absolute cost has been rising rather than falling. Because it is the most demanding network application, an incumbent competitor in the video space can likely enter voice and broadband services markets with a low barrier, and an incumbent service provider in the voice-data space that has no video plans is likely inviting a competitor to gradually take market share in non-video spaces, eventually marginalizing traditional services. Video, in the long run, is a necessity and not an option.
About the Author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is a member of the IEEE, ACM, Telemanagement Forum, and the IPsphere Forum, and the publisher of Netwatcher, a journal in advanced telecommunications strategy issues. Tom is actively involved in LAN, MAN and WAN issues for both enterprises and service providers and also provides technical consultation to equipment vendors on standards, markets and emerging technologies. Check out his SearchTelecom networking blog Uncommon Wisdom.