This year was the one in which we saw a genuine penetration by “telco bypass” technologies, that enable telephone conversations over the Internet. Although VoIP services are not yet a force to be reckoned with in the competition for telephony revenues, telecommunications companies are already taking the matter seriously. After all, the cellular industry did not just burst forth one day, and look where it is now. Telephony companies know that they have to find a new way to grow their revenues, before it’s too late.
The key asset owned by telephony companies is the network of copper wiring that leads to everyone’s home. These lines already transmit data services as well as voice, but the real target is to also use them to transmit video clips. At Infogate Online and Irdeto, they believe that the coming years will see the development of television broadcasts over Internet protocol, via the telephony companies’ infrastructure. This vision motivated the companies to reach a strategic cooperation agreement that will enable the provision of an integrated solution for telephony customers.
Under the agreement, Infogate will supply the middleware, i.e. the service that will interface between content suppliers and customers to ensure the latter have access to their specific choices of content channels, while Irdeto, which develops security software for protection of video content against piracy and theft, will provide the requisite security and licensing services.
The two companies plan to offer their joint solution to an integrator. In some instances, Infogate itself will act as integrator, but in most cases the two companies will work with integrators such as Nortel Networks (TSX:NT) or Unisys (NYSE: UIS).
Irdeto is a subsidiary of technology company Naspers (Nasdaq: NPSN) which is traded on Nasdaq and has turnover of around $2.5 billion a year. Infogate is controlled by Rad Bynet, which has a 90% stake, with Bezeq (TASE: BZEQ) owning the remaining 10%. The company is considered to be one of the leaders in its field. “All our customers told us that they wanted a solution that could be integrated with the one developed by Infogate,” said Parvaiz Ahsan, Vice President for sales at Irdeto, “which is why we approached them.” This market, however, for big players, and independent Infogate will have a tough battle to maintain a leading position.
A customized TV guide
Internet Protocol Television (IPTV) is no longer a voice from the future. In countries with advanced technology in this field, such as Italy and Korea, you can already access a television guide with listings for the past two weeks and select any program for a fee. Cable companies in Israel are also offering a Video on Demand service, i.e. content by choice, although the range is more limited. Regulatory constraints form the main obstacles to the development of IPTV in Israel. There is one main telephony company, Bezeq, which also controls a content company, YES, and this makes the ideal integration for the breakthrough into IPTV. But as things stand at present, the regulator will not allow cooperation at this level between Bezeq and YES, and such a ban will remain in force until the process of opening up the telephony market to competition is complete. Sources inform “Globes” that Bezeq previously carried out a test of IPTV technology in conjunction with Infogate to assess the new technology’s potential, although no attempt has yet been made at implementation.
Why is such cooperation between a telecommunications operator and a content company necessary? After all, the world is full of television channels that would be glad of the opportunity to offer broadcasting to our homes on a pay-per-view basis.
Infogate Product Manager Asaf Inbar, explains. “Initially, IPTV must be transmitted through a local content provider, such as the cable or satellite television companies, which know which junctions to channel the information through and the bandwidth they will need to allocate for this purpose. A telecommunications provider knows when customer x has asked for a certain program and that he or she has paid for it, so it will allocate the requisite bandwidth to ensure the data is channeled through local and available junctions only. It will take ten years at least until video broadcasts are economical enough in bandwidth usage to enable high quality transmission of content over the Internet, making possible more freedom in the choice of supplier.”
”So what advantage does IPTV have over current cable and satellite television services?”
Parvaiz Ahsan: “First, I would like to point out that we are working with all the digital content providers, and they all have advantages. Having said this, I would note that cable television has an expensive infrastructure. In the past, when there were no other solutions, entire countries were connected by a grid of cables for transmitting cable television. Today we have choices, and in locations that do not have cable infrastructure but do have copper lines or can have such lines installed without difficulty, IPTV can develop alongside cable television. $250 million was invested in IP infrastructure in 2004.”
”The telephony service providers are the ones pushing forward the new method,” adds David Zonsheine, Infogate Vice President for Research and Development, “This forms part of the competition for Triple Play, or transmission of voice, data, and video by one single provider. The IP method has an advantage, especially where interactivity is concerned. The cable television companies have been built as a broadcasting medium, meaning the broadcast of the same content to a wide audience. If they have to provide different content to each customer, their bandwidth will be used up very quickly. IPTV gives the greatest flexibility and speed in handling requests from viewers at home and offering maximal customized content in accordance with the preference of each user.
"IPTV is set, in the near future, to turn our contact with the world of television into a bi-directional network, enabling any one of us to also offer his or her own content, or television channel. Instead of a television set and receiver, we will have a local network of televisions that both broadcast and receive content, and anyone who so wishes can make a contribution of their own. At present, you can download from the Internet a home video made by someone else, but we still don’t have quality live home broadcasting. This will be possible in the near future, through the television set.”
”We already have access to an extensive file sharing network online. How can you be sure that the television industry will not suffer the same fate as the music industry?”
Ahsan: “The video industry has learned from the music industry, and today, all digital content, whether offered on disk or over the various broadcasting channels, is encoded. Pirates cannot crack this code and duplicate the product. The only thing they can do is copy analogically the image created by the code. This can be compared to the difference between using a computer program to copy a picture that was sent to you by e-mail, and printing it, scanning the hard copy, and duplicating the scanned image afterwards.
”The quality will always be inferior, while viewers are becoming increasingly accustomed to better quality and will not want to go back to the previous methods. Pirates who sell non-quality versions will find their success is short lived. People also distribute movies they copied in cinemas where you can see the heads of the audience in the foreground. How many people would want to see movies like that, and for how long?
”The options offered by VOD services include advancing or moving back the film, skipping the commercials. Will there be any advertising in the IPTV world?”
Inbar: “We have the ability, from a technical standpoint, to require a person to see commercials, either before or during viewing of a film. We will probably have two models, as is the case with the Internet. There will be premium content with no commercials for a fee, while content including commercials will be offered free.”
”What about cellular television? Would it not make sense to transmit it over IP too?”
Ahsan: “Television broadcasts on mobile phones already exist. In Korea, Japan, and China, people spend hours watching sports broadcasts or soap operas on their mobile handsets while they’re on their way to work. This has become so popular that several countries had to pass a law stipulating that people caught watching television while driving will be prosecuted and given prison sentences.”
Inbar:” As with television broadcasts, IP is one of the leading methods for transmission of cellular content. There are rival methods, and each has its own advantages and disadvantages, from both the technological and business perspective. The market is hot and developing rapidly. These are interesting times, and we will see the outcome within a few years.”
Published by Globes [online], Israel business news - www.globes.co.il - on February 23, 2006