Telco TV Expected to Surge

Worldwide adoption of IP-based TV is expected to grow significantly in coming years, though the U.S. will only be a bit player in the market, according to researchers from In-Stat Tuesday.

The Scottsdale, Ariz.-based market research firm predicts 32 million subscribers will be watching TV provided by telecommunications providers in 2009, up from 1.6 million at the end of 2004.

IPTV is expected to provide the foundation for a new industry of premium services by telephone providers and for consumers. With television as the basic service, telcos can sell extensions, such as video on demand (VoD), digital video recording (DVR) and interactive TV.

According to the In-Stat report, “Telco TV in Mass Deployment Phase,” worldwide revenues in the premium services space will surpass $600 million in 2009.

IP-based providers can also bundle the TV service into the highly sought-after triple play of the broadband world: VoIP , high-speed Internet access and TV.

The U.S., which requires new entrants to sign local franchise contracts before they can provide television, is expected to lag behind the rest of the world, according to Michelle Abraham, In-Stat analyst.

“The current franchise regulations — needing a franchise license to serve a community — really does require a lot of negotiation with each community,” she said.

According to Abraham, the North American region is expected to make the least significant contribution to the predicted 32 million subscribers by 2009. The lion’s share of the subscribers will come from Europe and Asia, where the telco providers in those countries have already been providing the service.

She said many other countries can deploy TV services after gaining federal government approvals, not through negotiations with local communities.

The leaders in the IPTV space, Abraham said, are companies like France’s Free Telecom and France Telecom, Italy’s FastWeb, Taiwan’s Chunghwa Telecom and Japan’s Yahoo BB.

Abraham said the North American telcos are definitely picking up the pace of their IPTV activities. Baby Bells like SBC and Verizon are rolling out miles of the fiber-optic cabling needed to provide the service, and are looking at the premium services that will help fund the initiative.

SBC plans to pass 18 million homes in the next three years, while Verizon has been working on securing franchising agreements with local communities.

There are indications state authorities are looking for the means to get IPTV into the communities quicker than the existing method. Recently the Texas state lawmakers passed a bill to grant a statewide video franchise, which the governor is expected to sign.

Commissioners from the Federal Communications Commission are looking for the means to update the current policy.