ACG Research

ACG Research
We focus on the Why before the What

Thursday, December 8, 2011

Dave’s Top 10!

Content delivery was a consistent and persistent driver underlying telecom services in 2011. Operators struggled (and continue to do so) to meet the quality demands of consumers streaming videos, music and games on all of those new mobile devices (iPad) in the market in 2011. This trend promises to intensify in 2012. What else will the New Year bring to the video market?

1. Pay TV operators (cable companies and telco TV companies) will finally recognize that OTT is creating a real cord cutting and cord shaving threat. Various studies have shown that only a small percentage (less than 1%) of people are dropping service and using OTT only. This realization that OTT is not going away and is a threat will drive pay TV operators on several fronts:

2. Pay TV operators will embrace providing their own OTT services. This has already started, with Verizon announcing in early December 2011 that it is starting its own service. However, despite this:

3. Pay TV operators will stumble with these OTT offerings as they figure out which availability of programming, format (live vs. on demand), which screens it will support, locations (in home or out) and what pricing and bundling will be attractive to consumers.

4. A corollary, pay TV operators will continue to roll out their multiscreen TV viewing programs. Again, we expect several attempts before they get it right.

5. Consumers’ demands will drive MSOs to continue their DOCSIS 3.0 rollout plans. Many are reluctant to spend for the upgrade in areas where the old plant is not fully depreciated.

6. The fight over distribution rights between the content owners and distributors will continue during the early part of 2012, but the stakes are so high that we expect that both sides will eventually agree and move forward.

7. Netflix, YouTube and other OTT vendors will continue to grow their library of content with deals for exclusive content.

8. Service providers will continue to experiment with offering a CDN service to compete with global CDNs such as Akamai. Expect to see several announcements but no significant traction.

9. Service providers have no real experience with selling CDN services; the large content owners do not want to have CDN arrangements with many of the providers. They lack a global foot print and will need CDN federations to make it fully competitive. CDN federations will not be a major factor this year. Agreeing on and implementing standards, network management/analytics, revenue sharing, troubleshooting and customer service will be harder than the service providers realize.

10. Advanced advertising platforms and analytics will become the key technology for service providers in their strategy for dealing with next-gen video.

Finally, the most important development in 2012 (as in 2011) will be the focus on business models. Operators will become more aggressive as they look for technology to service innovation and focus on delivering stronger customer value to increase their profitability and longevity of service.

David Dines

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