Feature

IPTV decoded: What became of IPTV?

From the Next Big Thing to last year's model, IPTV may have missed its time. But with BT Vision putting it back under the spotlight, Alasdair Reid assesses the platform's chance of success.

They've been at it again. Jane and Adam, mummy and (sort of) daddy of BT's thoroughly modern family, have been given yet more communications infrastructure to knock out to us in ads. For another few weeks still, there will be no escape.

When BT means business, the media budgets tend to fall on the excessive side of generous. And BT is more than a little serious about BT Vision, an on-demand pay-TV proposition that the current ad campaign aims to position as the UK's most flexible digital television service.

BT Vision was given a soft(ish) launch in December 2006, but even so, its uptake has been disappointing. Before the new campaign's launch in May, it had attracted only 5,000 subscribers. The target now is to break through 100,000 by the end of the year, and to exceed two million within five years.

Those are hugely ambitious targets - the latter one especially. Virgin Media, for instance, has just over three million digital TV subscribers, despite the fact that its inherited cable TV companies have been scrapping for customers for decades.

What's more, some commentators have been pointing out there are one or two things wrong with this BT commercial - and they're not just referring to the coy affectations of the Jane and Adam characters.

No, they were more concerned that the service involved seemed to be a classic manifestation of internet protocol TV. How quaint. Hadn't the world moved on? IPTV, heralded in the late 90s as the future, had surely morphed from the Next Big Thing into last year's model without experiencing any of the glory in between.

And it was perhaps a supreme irony that this campaign hit its stride in the same month that Joost, an internet-based open-access TV platform, moved into the beta stage of its launch programme. These days, internet- delivered TV is surely about accessing freely available streamed content via your PC. In other words, web TV, IPTV's anarchic little brother.

You can go for the snacking option on YouTube, go direct to the websites of broadcasters themselves, or hook up to a whole platform as offered by Joost, which boasts 150 channels supplied by the world's top media owners. The common strand here is the fact that when you opt for web TV, you're choosing to watch on your PC, and probably not in your living room.

The distinctive aspect of IPTV is the fact that it uses internet technology to deliver programming to your living room TV via a piece of kit that looks like a satellite or cable set-top box. A decade ago, this was an enormously exciting notion, especially for the telecoms operators that owned (or had favoured access to) telephony infrastructure. Overnight, with the advent of new DSL switching techniques, they became not just telephony companies, but broadband internet purveyors and cable TV network owners, too. That's why IPTV is often called Telco TV.

If the future was about convergence - and everyone was positive that it was - then suddenly, as if by magic, telcos had leapt into pole position, leaving the cable companies (who'd spent decades digging up roads) looking very silly indeed. Even Rupert Murdoch, who'd always sneered at the very mention of cable, began taking an interest, and was soon seeking to forge links with telcos, such as BT in the UK.

What a difference a decade makes. And, actually, the pioneer of IPTV in Britain wasn't a telco at all, it was a spiky little technology company called Video Networks that was part-owned by Sir David Frost and Lord Owen.

In 1999, after three years of technical trials, the company launched HomeChoice, a service it claimed was the first consumer TV-based on-demand programming service in Europe. In its first years of operation, a small group of early adopters (not least the new-media people in ad agencies) raved about the service, but, as word spread, HomeChoice suddenly hit a wall.

The technology in this early phase couldn't cope with even modest numbers, largely because the service was routed through BT exchanges, and, although telecoms deregulation was forcing BT to let other companies use its infrastructure, the reality was that BT was still proving uncooperative. The net effect was expensive but limited bandwidth availability - and each time a new HomeChoice subscriber joined in your area, the performance of your system declined a little.

Even the wildest of enthusiasts soon became disgruntled. So, although subscriber numbers had climbed to 15,000 by 2001, by 2002, they were down to just 3,000. In 2003, HomeChoice lost £162 million, dropped any pretence of offering premium content and had basically become a "me-too" multichannel TV platform. It would have gone out of business altogether but for the arrival of a new investor, the former Microsoft director Chris Larson.

So, in 2003, it seemed very much a case of RIP IPTV, especially given the hugely impressive rise of the uncomplicated terrestrial digital TV option offered by Freeview. Multichannel TV platforms abounded, and we'd started to realise that new TV technologies were just so many different ways of packaging up the same old rubbish.

HomeChoice, though, has survived. It was acquired in August 2006 by the UK division of the Italian telecoms company Tiscali, and in March 2007, it was rebranded as Tiscali TV. But David Cuff, a broadcast consultant who has a media agency background and also formerly worked for what is now Virgin Media, argues that the troubled history of HomeChoice will continue to cast a long shadow over IPTV in this country. "Every time BT Vision makes upbeat forecasts, people still tend to think about the problems faced by HomeChoice," he says.

Tiscali's response is that the world has moved on. And, as a company specialising in broadband internet, it should encounter less in the way of technical distribution problems. Tiscali may only have 50,000 TV subscribers at present, but it has 1.5 million broadband customers - and these customers are going to be targeted in future marketing campaigns for Tiscali TV. Thus, Tiscali sources say, the potential for growth is clearly there, although it's instructive that these same sources characterise BT Vision's targets as "interesting" and "ambitious" - euphemisms, you suspect, for "delusional".

Some independent observers certainly think that IPTV has missed the bus. Peter White, the principle analyst at the media technology consultancy Faultline, says: "Telcos will remain obsessed with high-quality, well-supported services which focus purely on a single screen and, as a result, they will miss the revolution entirely."

The revolution he's referring to is a web TV revolution. And the irony, some say, is that although quality will be a major part of the IPTV selling proposition, it will never offer a high enough quality to compete with the likes of Sky or Virgin in HDTV.

Meanwhile, Sky has adopted a two-pronged strategy that it hopes will isolate IPTV providers in a seemingly unattractive middle ground. On the one hand, it is pushing HDTV; on the other, it has a vigorous internet strategy, offering its Anytime TV on-demand service across TV, PC and mobile. Since its launch in January 2006, Anytime on PC customers, numbering more than 100,000, have chalked up two million downloads. Together, web TV and HDTV could squeeze the life out of IPTV.

But, in any case, from an ad industry point of view, the raw numbers are perhaps only half the battle. Some sources are scathing about the old model still being pursued by some players in the digital TV arena. They argue that, as advertising becomes increasingly dominated by planning philosophies road-tested in online advertising, there will be a marked decrease in interest in the linear TV advertising models found on "walled garden" TV platforms such as cable, satellite and IPTV.

The real growth - and buzz - from an advertising point of view will be in the web TV sector and the likes of Joost, Babelgum, Jalipo, BitTorrent and tapeitofftheinternet.com. Or even, if it survives current litigation, the dominant player in bite-size TV archive clips, YouTube.

Well, perhaps, Giles Rhys Jones, the director, interactive at Oglivy, says. But, he insists, we shouldn't write off IPTV quite yet. There's plenty of room for all sorts in this market, he explains - and, actually, IPTV offers a pretty interesting environment for advertisers.

"For a certain part of the audience, Joost will be a big thing; for others it may well be IPTV," he says. "For many, TV is still a social thing, and PC viewing isn't that sort of sociable experience. The interesting thing about IPTV is that where linear TV is about sitting back and web TV is about sitting forward, 2 can offer a bit of both. It offers entertainment plus the potential for greater involvement, so it potentially does add something. We need to experiment more with how brands exist in this space."

TV TECHNOLOGY TIMELINE

1984: Swindon becomes the first area to gain a modern cable franchise under the UK's more liberalised media and telecoms regulatory regime. By 1997, there are 24 different cable operators across the country, but by 1999, when ntl acquires the UK cable TV assets of Cable & Wireless for £8.2 billion, the industry has consolidated down to just two players - ntl and Telewest.

1990: In October, British Satellite Broadcasting, which had launched only six months earlier, backed by Granada, merges with Sky Television to create BSkyB.

1994: In the US, Time Warner begins testing on-demand TV technologies on its Orlando cable network. It proves difficult to make the system work reliably.

1998: Microsoft's Windows 98 includes a Web TV upgrade option that allows users to patch their cable connections into their PCs so they can watch TV in a window while working on other applications. BSkyB launches Sky Digital. It successfully migrates its (at this stage) four million subscribers on to the new platform and is able to phase out its analogue platform by 2001.

1999: Video Networks launches HomeChoice in the London area.

2001: BitTorrent launches a file-sharing protocol that allows users to exchange video files over the internet.

2002: October sees the launch of Freeview out of the ashes of ITV Digital, which had collapsed in March following a war of attrition with BSkyB. The ITV Digital brand had been created in 2001, but the digital terrestrial platform had launched originally as ONdigital in 1998.

2003: BSkyB, a long-term sceptic about the merits of fixed-line communications in general and cable in particular, enters into a joint marketing agreement with BT in order to combat the triple play (TV, internet, telephony) of cable. BT customers are offered incentives to join Sky, while Sky subscribers are offered discounts when they take BT telephony and broadband.

2005: YouTube launches In February. July brings the first concrete result of Rupert Murdoch's spectacular U-turn on the likely impact of the internet on his businesses when News Corp buys MySpace for $580 million. Then, in October, News Corp's sister company, BSkyB, pays £211 million to acquire Easynet, an internet service provider specialising in local loop unbundling. Sky then uses the Easynet network as a platform from which to launch Sky Broadband and Anytime TV - its internet download service. In 2005, Microsoft also rolls out its Media Center software suite, with Bill Gates heralding this as one of the most important product launches in the history of the company. This, he believes, is a truly convergent product that will blur the distinctions between web TV and IPTV and encourage users to move their PCs into the living room. In this mode, the computer acts as a cable and terrestrial TV decoder box, a personal video recorder (allowing you to download on to disk, creating your own DVDs) as well as a means of surfing the net for video streams and content downloads.

2006: Tiscali acquires HomeChoice; BSkyB launches Sky Broadband and Anytime; Google acquires YouTube for $1.65 billion.

2007: In February, the company formed by the merger of Telewest, ntl and Virgin Mobile relaunches under the Virgin Media brand. It offers a quadruple play - TV, telephony, broadband internet and mobile. This brings it head to head with BSkyB and its "see, speak, surf" triple play; and natural antipathy between the two soon sees them embroiled in a High Court dispute over carriage charges. In March, Viacom takes Google to court, claiming damages of $1 billion for alleged copyright infringement. In May, ITV.com rejigs to offer access to recent programming via the internet in an on-demand, streamed video basis. Joost, a portal offering internet delivery of TV channels, delivered to PCs via the internet using peer-to-peer software, also launches. And BT Vision ups the ante (it had launched initially in December 2006) with a major TV ad campaign.