Operators combine TV and internet to cope with www development

Newsroom 24/09/2007 | 16:07

There are just a few IPTV providers in Romania, but big companies like the national fixed telephony carrier, Romtelecom, have already announced their intention to launch IPTV in a few months. On the international scene the situation is similar, with a small number of IPTV providers. International studies show that the number of customers of such a service is about to explode from just two million in 2005 to more than 60 million in five years. The development of IPTV is strictly related to the increase of the broadband internet connections, as the service needs a large bandwidth to broadcast. As a result, any boom in the number of IPTV users will be generated by the increase of broadband internet access, which is a constant preoccupation for both the public and private sectors. But the development of TV does not stop here, as the next generation in the evolution of the standard TV station is online television. The most representative local online TV channel is Evo TV, although there are other players on the market, like MTV on demand, a collaboration between Romtelecom and MTV.
In Romania the number of broadband internet connections is still extremely low compared with the international market. In this way, the position of the cable TV operators in front of the IPTV providers will be maintained until the latter has a wide spread and well developed infrastructure. The difference between IPTV and DTH satellite TV is a bigger number of channels, a better quality of signal which is not influenced by weather conditions and other specific functionalities like Time Shifting, or internet access from the TV screen.
iNES Group and i-TV are among the first to start operations in the area of IP television with small investments. Depending so much on the broadband internet adoption rate, the reimbursement of the investment in such a service will not be rapid, while the turnover, profits and client base are extremely low when compared with cable operators.
The initial investment at the time when Synco's IPTV service, i-TV, was launched at CERF 2007 was about EUR 100,000, representing equipment and retransmission contracts for the TV stations. Another EUR 20,000 was invested as new stations were added to the initial package and the functionality of the service was expanded, Corina Cozminca, sales and marketing manager of Synco, said.
The residential i-TV client uses the internet a lot at home as well as at his or her work place, with no restrictions regarding income or level of IT knowledge. The monthly subscription of the base package of TV stations provided by the company is less than EUR 10.
Since the beginning of 2006, iNES Group has invested EUR 700,000 in the infrastructure of its IPTV service. A significant part of this was used for the introduction of a package of HD broadcasted TV stations, due to happen at the end of the year or the first few months of 2008.
“The iNES IPTV service was created for and targeted especially at the residential segment, so the majority of our clients are residential,” Radu Rusu, operation manager for IPTV at iNES Group, said. The company targets clients oriented towards premium products for whom the investment in quality and the latest technology is a current habit. “Our clients want to have total control over their received information and communication means and personalize their things. IPTV clients are frequent internet users and considering that this is a high-end residential service, their disposable income is also an important factor in deciding to adopt the service,” Rusu said. His company has a Triple Play offer including internet access, IPTV and fixed line telephony for prices starting from EUR 100 for residential customers and EUR 250 for corporate clients, for whom a sign-up fee of EUR 150 is charged as well.
i-TV has about 400 users, most of them being from the residential segment. The service is available only in Bucharest for the moment.
But Synco, the company which provides the IPTV service, has the corporate segment targeted as well. The company has received much demand from internet providers in Bucharest and other cities in the country to redistribute its services. “We are currently working to find a legal solution for this, which should be available soon,” added Cozminca.
Another of the company's projects involves the introduction of a new type of set top box, that would allow its clients to have games, internet access, e-mail and chat on the TV screen.
“With these two projects completed, we estimate to have by the end of 2008 about 2,000 subscribers, but this could vary depending on the appearance of other IPTV providers on the market in the next period, as well as on the functions that we introduce,” said the Cozminca.
While the evolution of IPTV in Romania is not significant in comparison with cable or DTH satellite TV, the situation is not much different on the international market either. An analysis published by Reuters revealed only two million IPTV users worldwide at the end of 2005.
But, considering the increased potential development of the internet and the evolution of the number of broadband internet users, the analysis estimates the number of IPTV users will reach 60 million worldwide in 2010. “Considering the evolution of the international market, we estimate the Romanian IPTV market will generate growth rates of up to 300 percent in the following period,” says Cozminca.
Rusu thinks the public's interest in services which naturally combine the characteristics of broadband internet and audio-visual services will grow significantly in the years to come.
iNES Group's strategy for the next couple of years focuses on expanding its network in Bucharest, where the company considers the market has a potential of tens of thousands of IPTV clients. Currently, the IPTV service is available in Bucharest and Voluntari.
Far from the turnover of the cable TV operators who now have millions of euro, Synco's turnover for 2006 was only EUR 200,000, while the estimate for 2007 exceeds EUR 500,000.
iNES Group, which also provides internet access, had a turnover of EUR 6 million in 2006 and estimates a similar figure for 2007, given that the prices for data services registered a significant decrease.
After entering the data services market to cut some of the losses registered by fixed line telephony, Romtelecom attacked the TV market as well with the launch of DTH satellite TV services under the Dolce brand. The new service accrued a couple of hundred thousand customers in half a year. Encouraged by these results, company representatives have already announced their intention to enter the IPTV segment as well with their own developed service. The service is due to be launched in 2008. “Romtelecom's strategy of becoming a significant content provider started at the end of last year with the launch of the digital satellite TV service Dolce. We are ready for the age of the broadband internet brought content, which is why we plan to launch an IPTV service next year,” Romtelecom representatives said.
The launch of MTV on demand is also part of the operator's strategy of becoming an important internet content provider. The project offers Romtelecom customers the possibility to watch videos and MTV shows for free.
Meanwhile, Evo TV specializes in generating and providing online television content, with specially created shows and productions in reality TV and info-tainment. The investment for the establishment of Evo TV was EUR 150,000, which went on servers, platform, software, administration as well as some productions.
“Online television is the newest way to deliver mass-media messages, with exact statistics on the number of viewers and reached target. In the US this model is already very well developed with exclusively generated content and a clear audience,” Sergiu Mihalcea, manager and shareholder of Evo TV, said.
The income of the TV station is generated by the advertising sold on each show, which can reach its exact target through this type of broadcasting. Mihalcea said the station targets the 20-40 age group, with access to the internet. They think the station will become a trendsetter in public opinion matters. According to Google reports, the TV station has about 350,000 viewers monthly and currently addresses a restricted market of possible clients as the number of broadband internet connections in Romania is around two million. Mihalcea is confident in the development of the station, expecting to reach up to two million viewers per month in about five years.

But it depends on the development of the broadband internet infrastructure in the country. “The only milestone that I can relate to, when estimating the future number of viewers is the example of online newspapers, which were given low survival chances when they appeared, four or five years ago, but now represent an important information source, with thousands of daily readers,” said Mihalcea.
Evo TV's turnover estimated for 2008 is EUR 500,000 and the launch of two or three more niche online television stations is planned.
As for the broadcasting format of the TV channels, discussions on the introduction of the high definition (HD) format started a couple of years ago, but no TV channel provider is able to go over the standard definition (SD) format. The TV sets able to receive such signals are registering significant sales growth, but the service remains unavailable for the moment.
“We have to say that the majority of our users who ask for HD transmissions don't have internet access with a bandwidth that would allow the standard to be visible,” Cozminca said.
i-TV does not currently broadcast HD channels, but it is planning to introduce a couple of TV stations that broadcast to this standard in the next few months as its clients have asked for such a service.
Another impediment for switching to HD is the fact that among the Romanian TV stations, only one, ProTV broadcasts, in HD standard, but only a small percentage of its shows, as a trial. At this moment, no Romanian TV station totally broadcasts in HD, on satellite, as would be natural, Cozminca added.
For the broadcast of HD television the most important role is played by the distribution network which should support the increased traffic. The receivers, head-end equipment and the set top boxes should also be superior to the SD format, from the performance point of view, which is also reflected in the investment value of the providers, Radu Rusu, IPTV manager of iNES Group, said.
Aside from the equipment costs, which are significant, the costs a TV station faces to broadcast HD are increased by the required bandwidth to reach the satellite. While an SD broadcast needs between 2.5 and 5 Mb/s satellite bandwidth, the HD standard needs 40 Mb/s, which means an increase of the broadcasting price of about 10-12 fold.
Among the international TV stations which broadcast in HD, none has Romanian language subtitling. Worldwide there are about 75 TV stations broadcasting in the HD standard, more than half of them being available on satellites that do not cover Europe.
“If we were to launch a package of HD TV stations now, it would have at most 10 or 12 stations, the majority of them being of no importance to our users,” Cozminca said.
The European channels with HD format broadcasts are Discovery HD, National Geographic HD, HD1, HD5, Luxe TV HD, Anixe HD and Voom TV HD.

Roxana Mihul

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