IPTV and the Triple Play Challenges and Opportunities

IPTV and the Triple Play: Challenges and Opportunities Bill Dodd President & COO HEAnet, Kilkenny, Ireland November 10, 2006

What is Internet Protocol TV (IPTV)? • Video delivered to a device using IP data packets as the transport stream • It is not TV delivered over the Internet in a manner similar to cable or satellite because it is a switched network • Point to point connection to the multicast source, whether it is using the public Internet or private fiber transport • Can be viewed on most any device capable of displaying a video signal • Can be a highly secure, operator controlled network – end to end

Why is IPTV Relevant? You. Tube sells to Google for $1. 6 Billion IPTV market emerging at very rapid pace – 72 million IPTV subscribers worldwide in 2010 - nearly 25 times the 2005 figure – Representing over $200 B in market value at today’s cable multiples – Most all major worldwide telcos to deploy IPTV over next 12 -36 months – Telcos must deliver on their promises to the investment community, which translates to a very big need for innovation

Many Approaches to Delivering IPTV • Public Internet or private fiber networks • TVs, Computers, PDAs, Cell Phones • Linear or VOD or both • Fiber or Satellite • MPEG-2 or MPEG-4 • STB choices • Many middleware choices • DRM/Encryption options

Service Provider Model

The Network

Student Housing Platform

The Promise of IPTV • More programming – Hundreds of channels from major content providers • More applications unrelated to entertainment – Healthcare – Education – Productivity enhancements • Switched network – Theoretically infinite channel capacity – both for linear and VOD offerings – A la carte in the near future – Get ready to Google your TV • Better picture quality – Digital from the head-end to the STB • • Significantly lower costs for bundled IP services Content encryption – DRM to the satisfaction of the studios

The Reality • Today - equal programming – Same as cable or satellite • Switched network – Promise not yet realized – Not enough content available. . . yet • Better picture quality – True for standard def – BUT, no HD available • Significantly lower costs for bundled IP services – BUT, RBOCs can (and will) subsidize pricing of traditional offerings • Content encryption – Still not much content available for IP-based transmission

Legal Overview • Types of Service Contracts – Bulk Agreements • Residents can opt to subscribe independently to other services and premium programming • Student Housing and Hotels typically Bulk Triple Play – Installation and equipment covered by owner • Hotels: exclusive voice/video/data for rooms and common areas – Right of Entry (“ROE”) Agreements • Typically includes exclusive marketing for life of contract • IPTV Programming Agreements – Need for Large Cooperative to be Competitive (i. e. NCTC) – VOD content agreement aggregation required as well

Business Overview - I • What you need to operate an IP based TV service – – – – Network (long haul, last mile, in building) Head-end STBs Middleware DRM Content Buildings/Service Agreements Customer Care And make it all work!!!!!

Business Overview - II • What you need to be relevant and cost effective – – – – Scale Concentration of subscribers Bundled offerings Appropriately priced service agreements Efficient hardware/software purchases Effective and efficient network architecture The right price for content The right price for labor

Lessons Learned • • • It’s all about the bundle Bandwidth, bandwidth Computer illiteracy rates Low demand for phone service HD and multi-stream PVR quickly becoming must haves

Beyond the Triple Play: The Edge of the Future IP-based Controls Product

The Future Innovation: Key to Extending the “Reach” of IPTV • A glimpse offered from the past • IPTV will ultimately use the public Internet for VOD and private IP networks for live and real time streaming of high quality video in an open architecture • PVRs more disruptive than you might imagine • IPTV’s future is far beyond that of just entertainment…healthcare, distance learning, logistics, security… • The applications that will drive IPTV usage is anyone’s guess and everyone’s opportunity

Thoughts/Questions • Meaningful deployment of real bandwidth is still a ways off – Will broadband-over-powerline (BPL) ever be relevant • Wireless multicasting very, very costly • IP applications will drive value – can’t just be a 3 rd wire • Content is king – Hollywood quickly embracing IP delivery, but still far to go • When will TV quality video be available via the Internet in a usable fashion? • Keep your eye on Wi. Fi/Cellular dual mode phones—The 3 rd Screen • VOD business models will transform the economics of entertainment • Microsoft is coming – but when? And with what?

A Closing Thought “Technology is only one of many forces driving human history, and seldom the most important. . Technology only gives us tools. Human desires and institutions decide how we use them. ” - Freeman Dyson, The Sun, The Genome and The Internet The real opportunity before Ireland is to discover, not determine, how humans and institutions desire for IPTV to be used.