IPTV’s Growing Pains: ‘Video Is Hard’

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Grapevine, Texas -- Executives from two small U.S. telephone companies described their experiences at the Telco TV conference here in rolling out Internet-protocol-TV service.

In a word: IPTV is hard.

“It hasn’t been easy, but it’s been a great experience for us,” said Keith Galitz, president of Canby Telcom, a 100-year-old telephone cooperative that provides 11,000 phone lines in and around Canby, Ore., just south of Portland.

Canby Telcom began deploying an IPTV service two years ago, and it will have spent about $3 million on the project by the end of 2006. The company currently has 900 IPTV subscribers, and it hopes to hit 1,000 by the end of the year.

One of the biggest lessons learned, according to Galitz, is that customers are even less tolerant of disruptions to TV than to phone service. “If you miss Tiger Woods’ last putt on the 18th green, you’re going to get a lot of angry people calling you,” he said. “So you had better be prepared to deliver.”

Hancock Telecom, an 8,200-line phone company northeast of Indianapolis, launched IPTV in April 2005 and spent the next six months hashing out a number of technical glitches.

“The first six months were terrible,” said Mike Knoll, Hancock Telecom’s chief technology officer. “Video is hard. It’s very hard.”

One of the most frustrating glitches -- and the No. 1 reason why customers call for technical support -- is set-top boxes freezing up or otherwise malfunctioning.

Hancock Telecom -- which now has 600 IPTV subscribers -- uses set-tops from Amino Communications and IPTV middleware from Minerva Networks. Canby Telcom also uses Amino IPTV set-tops with middleware from Siemens’ Myrio subsidiary. “Customers just want it to work,” Galitz said. “The set-top-box reset is happening far too often to be acceptable to us or our customers.”

Some of the problems result from subtle incompatibilities between the middleware and set-tops, and vendors have assured the telcos that the kinks will be worked out. Said Knoll: “You’ll hear that phrase a lot: ‘It will be taken care of in the next release.’”

Roy Kirsopp, vice president and general manager for Cambridge, U.K.-based Amino, said the company is continually working with vendors of middleware, headend video servers, conditional-access software and other IPTV infrastructure to improve the reliability of its set-tops. Problems can occur anywhere in the delivery chain, but “it’s always blamed on the box, because that’s what’s sitting on the TV,” he added.

In launching its IPTV service, Hancock Telecom merged telephone support technicians and information-technology staffers into a new “netops” group. That required retraining data techs on telephony equipment and vice-versa, Knoll said.

“That was ugly for a while,” he added. “IT people and telephony people are fundamentally different. They want to approach a problem differently.” For example, Knoll said, “the data guys didn’t understand why they couldn’t just reboot a server when it needed to be rebooted.”

Canby Telcom, meanwhile, spent about nine months’ time training employees -- everyone from the install-and-repair crews to customer-service representatives who are now selling triple-play bundles instead of just phone service. “You have to involve employees in the process,” Galitz said. “I just can’t emphasize training enough. It’s a cultural change.”

Both Hancock Telecom and Canby Telcom provide more than 100 channels and video-on-demand services, but neither is carrying HD channels yet. Ironically, both telcos receive programming feeds provided by the National Cable Television Cooperative, which serves 1,100 independent cable operators.

Galitz said he was surprised at how much greater Canby Telcom’s actual programming costs were when compared with the original business plan. The IPTV project has cost 25% more than projected, and 90% of that overrun, he added, is programming.

“Programmers have a completely different concept of negotiation,” Galitz said. “To them, it means, ‘Do you want to sign in blue or black ink?’ Whether you take four or eight of their channels -- that’s not negotiable.”

Canby Telcom expects “several years of negative cash flow” from the IPTV service, Galitz said. On the other hand, the IPTV offering is helping to drive sales of digital-subscriber-line service, which have grown from 2,458 lines in 2005 to a projected 3,891 this year, he added. That offset revenue losses from traditional phone service, which is expected to decline 2% this year, from 11,152 lines last year to 10,927 in 2006.

But both telcos said they needed to do some aggressive promotion in order to start signing up TV customers.

“You can’t just upgrade a switch and add new features,” Knoll said. “You’re not the incumbent: You’re probably the last guy people are going to think of for video.”

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