The proposed IPTV services were considered as heaven for ISP players, given their ambitious plan to tap the lucrative business. Standalone ISPs have already geared up to launch IPTV services, as they never wanted to be left alone in the race with the mighty mobile operators. The reason for their preparedness is vast.

The size of the global IPTV market is likely to touch $26.3 bn by 2011, from $779.2 mn in 2006, according to market research company iSuppli.

Considering the fact that the anticipated IPTV market boom could also boost the coffers of players, involving value-added offerings, digital music, on-demand gaming, data services, and home security, IPTV has the potential to support the ongoing business of ISPs in India. According to the iSuppli survey, these value-added offerings will boost global IPTV video revenue by over $1 bn by 2010.

The middle class population, who are embracing whatever comes their way, may make India one of the fastest and leading IPTV markets in the global arena. According to a forecast by Alcatel-Lucent, IPTV subscribers may reach 70-100 mn by 2010.

At the end of 2006, IPTV subscriptions totaled 2.2 mn globally, double the number in 2005, says market research company InfoCom. IPTV subscriptions swelled in countries such as France, Spain, and Italy, and many operators are looking at mass deployment.

However, India is yet to catch up with the emerging boom by offering triple and quadruple play services. This comes at a time when the Asia Pacific region is also showing signs of improvement.

According to Frost & Sullivan, the Asia Pacific IPTV market draws a rosy picture as the IPTV subscriber base in the region is projected to reach 2.74 crore by 2013. World's leading economies such as China and India are pitted as the two high-growth markets in the Asia Pacific for IPTV by 2009. China, combined with the already mature IPTV market in Hong Kong, is expected to contribute around 60% of the total Asia Pacific IPTV revenues in 2013.

In Australia, the IPTV business is expected to enter growth in three years, as service providers are early in their adoption of IPTV services and are aggressive in their pricing strategies. Countries such as China, Hong Kong, Malaysia, Singapore, South Korea, Taiwan, and Thailand were some of the countries that have shown much interest for early deployments. The service was introduced in India and in the Philippines in 2007. But at present, there are not too many players in India who are ready to put in funds into the IPTV business.

"Telecom service providers who want to get into IPTV, will be required to pay a percentage of AGR as license fee"	"We are extremely disturbed by the net worth benchmark"
Nripendra Misra, chairman, TRAI	Rajesh Chharia, president, ISPAI

Adding to the Woes
Domestic ISPs are already feeling the heat because of dwindling ARPU. The average revenue per user per month for dialup Internet usage was Rs 200 at the end of September 2007 as compared to Rs 203 at the end of June 2007, a negative growth of 1.48%. A massive uptake in broadband and Internet usage can only improve the present financial situation.

Analyzing the top position of ISPs, Sify is the only standalone ISP that finds a place in the top 5 according to the recent TRAI rankings, with the remaining positions occupied by players such BSNL, MTNL, Bharti Airtel, and Reliance Communications. On top of this, ISPs are in a state of shock currently. The cause is the recent recommendation by telecom regulator TRAI.

According to TRAI's draft recommendation, telecom service providers (UASL, CMTS) having license to provide triple play services and ISPs with net worth more than Rs 100 crore and having permission from the licensor to provide IPTV, can provide IPTV service under their licenses without requiring any further registration.

DoT can permit any other telecom licensee to provide IPTV services as licensor. Similarly, cable TV operators registered under the Cable Television Network (Regulation) Act, 1995 can provide IPTV services without requiring any further license.

This means ISPs are required to meet the Rs 100 crore net worth criterion and not cable operators. "We are extremely disturbed by the net worth benchmark. Only 1-2 ISPs may be able to meet this. Our next step will be to meet concerned authorities in the government since the present recommendations will harm the industry. IPTV could have been a boon for India's ISPs. But the final recommendations are against our interests," Rajesh Chharia, president, ISPAI, says.

According to TRAI, there are seventy-two broadband service providers having a subscriber base of 2.67 mn subscribers. Out of the seventy-two broadband service providers, only thirteen have a base of 10,000 plus subscribers and they share 98.3% of the total subscriber base.

Considering the poor subscriber-base and financial conditions, a large section of these broadband companies are also not in a position to jack up their net worth to Rs 100 crore in order to grab IPTV license.

There were 9.63 mn wireline Internet subscribers at the end of September 2007 as compared to 9.22 mn at the end of June 2007, registering a growth of nearly 4.37%. It's poor growth in a year that is considered as the broadband year by the government, and this is not an encouraging sign. If ISPs are unable to offer value-added services such as IPTV, their subscriber base will further tumble in the coming months.

According to Chharia, the association is happy with the rest of the TRAI recommendations.

Policy Analysis
Through this draft recommendation, the telecom regulator, under the aegis of Nripendra Misra, chairman, TRAI, has tried to ensure that the government exchequer is with funds coming in. According to the recommendation, telecom service providers, who want to make the IPTV foray, will be required to pay a percentage of AGR as license fee. Currently, the AGR is 6%, 8%, and 10% for access service licensees in category C, B, and A circles, and 6% for ISPs.

The Indian communication industry is set to see the convergence of the broadcasting and telecom industry as cable operators and broadcasters are trying to ensure that the footsteps are strong enough to compete with the mighty mobile operators. Though TRAI has allowed telecom operators to offer IPTV services, it tried to ensure that they are meeting the broadcasting guidelines as well.

The draft says: "Telecom licensees, while providing TV channels through IPTV, shall transmit only such channels in exactly the same form (unaltered) for which broadcasters have received up-linking/down-linking permission from the Government of India (Ministry of Information and Broadcasting). In such cases, the responsibility to ensure that content is in accordance with the extant laws, rules, regulations, etc shall be that of the broadcaster, and the telecom licensee will not be held responsible."

A reliable content code is also in place with the present draft recommendation. The draft says: "In case of content other than TV channels from broadcasters, the telecom licensee will be responsible for observing program code and advertisement code as per the Cable Television Network (Regulation) Act, 1995 and rules there under."

In fact, the telecom regulator is already on the fast track. It has taken enough steps to ensure that the I&B Ministry and the IT Ministry are acting upon non-compliance of content regulations related to their jurisdiction. TRAI also wants the concerned ministries to regulate the content used by IPTV service providers.

TRAI also wants DoT to seek the guidance of the concerned ministries to ascertain the penalties for breaches in order to maintain uniformity, and shall initiate suitable action for imposing penalties for violations in a time-bound manner.

There are some restrictions on customers who want to enjoy some of the leading news channels that are yet to reach their homes. According to the draft, telecom service providers providing IPTV will show only those news channels that have been approved by the I&B Ministry. This means that Indian customers will not have much choice to select their preferred channels.

Unanswered Questions
Will Indian subscribers pick up IPTV services as Indian telecom operators are still wary of offering such services? India is always looking at China's growth story. Can the Indian IPTV market be the leading one in the Asia Pacific region, as China is likely to lead the IPTV world in terms of IPTV customer-base, thanks to its growing population and the Chinese government's focus on innovative technologies for this year's Olympics?

While China may be leading the subscribers, North America will lead the market in terms of revenue, accounting for over $10 bn in IPTV subscription revenue by 2011, according to iSuppli.

Advertising revenue may not skyrocket in India soon, but it has the potential to grow substantially over a period of time. According to iSuppli, advertising is expected to be another significant generator of revenue for IPTV players, with IPTV-based advertising revenue expected to exceed $1 bn annually by 2010.

There is one question that is still unanswered by the industry. Can the net worth issue lead to a series of mergers and acquisitions among the regional ISPs? Combining the businesses may assist regional ISPs to improve their financial positions to a certain extent, though it is not the final answer to the current
situation.

The government's recommendations have a far-reaching impact. If telecom operators, including ISPs, are ready to offer quality services at affordable prices, IPTV can be made available across the country.

Baburajan K
baburajank@cybermedia.co.in

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