IPTV: Reducing total cost of ownership
Sep 1, 2007 12:00 PM
Now that IPTV is a reality, the industry must address total cost of ownership.
by Hemang Mehta
IPTV technology has experienced tremendous growth in the past four years. The technology has evolved from an initial concept to the brink of commercial deployments. There are several reasons for this progress. First, tele-communications service providers understand that they must provide a competitive offering to counteract declines in landline subscriptions. Second, consumers are demanding more interactive and personalized television services. Third, the technology required to make IPTV a reality has come of age.
Now that IPTV has become a reality, the industry chatter has shifted from “this will never work” to “how soon can I get it?” But little has been said yet about the different approaches to constructing IPTV platform architectures and the resources to operate and maintain them. It’s time for the industry to address the total cost of ownership (TCO) of operating and maintaining an IPTV service, as well as fully understand the different IPTV options available and the TCO associated with each.
IPTV service models
In today’s market, there are basically two IPTV service approaches. First is the heterogeneous approach, in which multiple vendors provide different components of the solution, often with one or more systems integrators providing the services that bind these heterogeneous solutions into a single service delivery solution. In this approach, operations management is typically layered on top of the service delivery system after the fact. Second is the homogenous approach, in which a single solutions vendor designs, builds, tests, validates and supports the IPTV service delivery and operations management solution.
There is a perception that both approaches can deliver IPTV subscribers a similar service experience. However, the TCO associated with each service delivery approach differs greatly. There are a few factors that affect the TCO of an IPTV delivery platform, including:
- content acquisition costs to deliver the best of TV programming to consumers ;
- operating expenses (OPEX) for the development, ongoing delivery and maintenance of the service delivery infrastructure; and
- capital expenses (CAPEX) for the service delivery hardware, software and network infrastructure.
Content acquisition
Content acquisition costs vary based on revenue opportunities that a service provider can offer a content provider. Typically, the content costs are based on the number of subscribers. However, the expanded service delivery opportunities afforded by IPTV may change this. If the IPTV service offers subscribers a chance to select alternate camera feeds from a sporting event, for example, the content provider that owns these feeds may charge a higher fee for content.
There may be some variations in pricing for content delivered over IPTV. However, service providers will likely pass along these additional content fees in the form of higher subscription fees, so the net effect of any content cost variations will be negligible on TCO. Consequently, content costs are not a critical component in the calculation of TCO for the purpose of this article.
Hidden just under the surface, and often overshadowed by the licensing costs, are the costs for setting up and operating the delivery of content. A digitized stream or a file is inconsequential unless it is associated with sufficient metadata that describes it.
For example, let’s say a service provider pays a specific fee to license the use of a channel. The program information — such as the start time, end time and the program description — are the more obvious elements of the metadata that must be managed. Associating the digital stream generated by the encoder to a multicast address, assigning network identifiers to transmit this stream across the network, and connecting license keys that allow subscribers to access this channel are all metadata elements that must also be managed. Collectively, the digital file and all the metadata required to deliver this channel is referred to as a service. There are costs associated with maintaining and operating services.
Operating expenses
Certain OPEX will be startup costs, such as the costs associated with initial deployment and with the integration of the IPTV infrastructure with existing business support systems (BSS) and operations support systems (OSS). Other OPEX are ongoing, including the expense of day-to-day monitoring and managing the infrastructure.
In addition, OPEX will arise as a result of decisions to change or evolve the service delivery network. These expenses are project-related expenses, but upfront decisions about how the service provider will deliver the IPTV service can lead to higher operations costs and more complex projects when it is time to upgrade or evolve the service delivery network. These downstream costs must be factored into the TCO equation.
Capital expenses
To offer IPTV as a subscriber-oriented service requires investment in a platform to deliver and manage the service. The service provider must acquire systems for encoding and delivering live content as well as systems for encoding, storing and delivering video-on-demand (VOD) content. The service provider must deploy systems to manage this content and its delivery. It must also deploy systems to monitor and maintain the network, the content delivery and the management systems themselves. This is just a high-level description of a central headend installation. There are multiple metro headend configurations that involve local content delivery servers, local VOD servers, local management servers and more.
TCO for such a network infrastructure depends in part on the service delivery approach selected by the provider.
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