worldwide IPTV Subscribers Will Reach 48.8 Million by 2010

Gartner: The number of households around the world subscribing to Internet Protocol television (IPTV) services offered by telecom carriers will reach 48.8 million in 2010, IPTV subscribers will more than double in 2007 from an expected 6.4 million in 2006 to 13.3 million (see Table 1).

Despite the eight-fold increase in users between 2006 and 2010 that carriers will struggle to turn IPTV into a mainstream Pay TV distribution platform on par with established cable or satellite services.

The difficulty in carving out a distinctive proposition that will clearly differentiate early IPTV services from other established TV options will lead many service providers around the world to drive adoption by competing on price in the next few years.

As a result, the global picture for IPTV revenue is much less impressive than for subscriber numbers. global IPTV revenue during the period will grow from $872 million in 2006 to a still relatively modest $13.2 billion by 2010. IPTV will not be a panacea to replace diminishing voice revenue for carriers, but in the medium term it can be a powerful tool for carriers in helping retain customers on their existing voice and broadband services.

Gartner defines IPTV as the delivery of video programming (either broadcast or on-demand) over a carrier’s managed broadband network to a customer’s TV set. It does not include streaming media over the Internet to a PC.

Table 1 global IPTV Subscribers 2004-2010 (Millions)

	2005	2006	2007	2008	2009	2010	CAGR 2005-2010
Total IPTV Subscribers	3.2	6.4	13.3	24.7	36.3	48.8	72.8%
Growth (%)	139.4	102.5	108.1	85.5	46.7	34.5

Source: Gartner Dataquest (August 2006)

Carriers need to look beyond the immediate revenue opportunity to understand the longer- term importance of IPTV. This is because IPTV is not a single service; it is in reality a new carrier distribution platform over which many consumer communication and entertainment services can be offered eventually.

Despite some early successes by a handful of carriers showing that consumers are willing to adopt IPTV — notably in France, Italy and Hong Kong — the market remains in its infancy. Many of the world’s largest carriers are taking a cautious approach to rolling out services, mindful that cable and satellite operators are also continually evolving their Pay TV offers, and that they, as carriers, need to be able to match the competition in functionality and content choice if they are to make an impact.

This is a key issue in the North American market where the carriers have a big challenge ahead to catch-up with the cable operators in their ability to offer voice, broadband and TV services. In addition, media regulations, which prevent carriers from becoming broadcasters, are holding back the mass market launch of IPTV services in several big markets in Asia.

Subscriber growth in the next nine to 12 months will largely come from IPTV services that are already launched. However, beginning in 2007, many more new services will go commercial and subscriber growth will begin to take off.

Evidence from the early IPTV service launches clearly shows that price is a key factor in uptake. The most-successful IPTV services so far have been offered either as part of an overall household bundle of services, including voice and broadband or they have allowed customers to cut bills by paying only for what they watch. In both cases, the revenue per household generated by the IPTV service itself has been at a substantial discount to that achieved by existing Pay TV options. While IPTV does offer growth prospects for carriers, the low yields it is likely to currently generate, do not make it an especially exciting prospect as a new standalone business.

North America is forecast to have one of the highest IPTV growth rates in the next five years, with subscribers doubling nearly every year to 2010. Although currently behind Europe and Asia/Pacific, the next 12 months should produce the main inflection point in the growth of IPTV in North America as the major players launch new TV services.

Western Europe currently has the largest number of IPTV subscribers of any region with 1.6 million subscribers. France leads in adoption for the region and will end 2006 with approximately half of Western Europe’s IPTV subscribers. Gartner attributes IPTV’s success in France to an aggressive (low entry price) push from competitive players including Free and Neuf as well as France Telecom’s early embrace of IPTV.

After a burst of activity in 2005, subscriber growth for IPTV in Asia/Pacific region has slowed down in 2006, with regulatory problems proving to be a big hurdle in several large markets. Some of these problems — in South Korea and Japan — are likely to diminish in the next 12 months, allowing carriers to move ahead with their plans which have been on hold. The biggest prospective IPTV market in the region is China, which is also mired in regulatory problems. Beijing is hosting the Olympic Games in 2008 and there are hopes that this will provide motivation for the authorities to make an early attempt at clearing up the issues that are preventing carriers from launching new IPTV projects. global IPTV Subscribers 2004-2010

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