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Challenges in IPTV Telefonica IPTV Competence Centre Date: 30/10/2008

IPTV Challenges

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Page 1: IPTV Challenges

Challenges in IPTV

TelefonicaIPTV Competence CentreDate: 30/10/2008

Page 2: IPTV Challenges

2TelefonicaIPTV Competence Centre

... that has consistently shown strong growth, which has accelerated in the last years ...

... which is reflected in its track record of solid financial results …

... consolidating its outstanding position in the global enterprise rankings

Telefónica has a rich heritage spanning more than 80 years...

Telefónica is today one of the world’s leading companies

Page 3: IPTV Challenges

3TelefonicaIPTV Competence Centre

About 63,000 professionals

About 250,000 professionals

Staff

Services

FinanceRevenues: €3.2 bnAssets: €12.9 bnMarket Cap: €2.5 bn

Integrated ICT solutions for all customer segments

Clients About 10 million

subscribers

About 230 million

customersBasic telephone and data services

1987 2007

Spain Operations in 25 countries

Geographies

Revenues: €56.4 bnAssets: €105.9 bnMarket Cap: €106.1 bn

Our evolution has been particularly evident over the past 20 years …

Page 4: IPTV Challenges

4TelefonicaIPTV Competence Centre

TELEFÓNICA

ESPAÑA(fixed)

TELEFÓNICA

LATAM(fixed)

TELEFÓNICA

MÓVILES(Spain+Lat

am)

CESKY TELECOM(fixed and

mobile)

O2(mobile)

TELEFÓNICA at the end of 2005 (operations in 19 countries)

TELEFÓNICA

ESPAÑA(fixed and

mobile)

TELEFÓNICA

LATAM(fixed and

mobile)

TELEFÓNICA

EUROPE(fixed and

mobile)

TELEFÓNICA today (operations in 25 countries)

INTERNATIONAL

ALLIANCES

Telefónica has evolved from a global business lines structure into a lean, focused and highly efficient organisation across its

integrated geographical operations

… and has accelerated over the last three years, mainly due to the progress towards and integrated management model

Page 5: IPTV Challenges

5TelefonicaIPTV Competence Centre

Argentina: 20.0 millionBrazil: 56.1 millionCentral America: 5.9 millionColombia: 12.1 millionChile: 9.7 millionEcuador: 2.9 million México: 14.7 millionPeru: 13.5 millionUruguay: 1.3 millionVenezuela: 11.1 million

Wireline market rank Mobile market rank

2112

21112211

12

2

Notes: - Central America includes Guatemala, Panama, El Salvador and Nicaragua- Total accesses figure includes narrowband ISP of Terra Brasil and Terra Colombia, and broadband ISP of Terra Brasil, Telefónica de Argentina, Terra Guatemala and Terra México.

Data as of June ‘08

Total Accesses (as of June ‘08)

147.9 million

Telefónica is a leader in the Latin American Telco market …

Page 6: IPTV Challenges

6TelefonicaIPTV Competence Centre

Spain: 47.0 millionUK: 18.9 millionGermany: 14.6 millionIreland: 1.7 millionCzech Republic: 8.1 millionSlovakia: 0.4 million

Total Accesses (as of June ’08)90.8 million

1

11

11

4

2

Wireline market rankMobile market rank

3

Data as of June ‘08

... enjoys a significant footprint in Europe …

Page 7: IPTV Challenges

7TelefonicaIPTV Competence Centre

The global digital world is transforming our business, offering significant new opportunities …

More powerful devices full of features available as never before

We shall have the possibility to store everything

Digital contents continue to increase

The network will assume a role far more relevant

Users are adopting new habits in a quick and easy manner

Many new services will show up

Page 8: IPTV Challenges

8TelefonicaIPTV Competence Centre

Com

petit

ive

allia

nces

Competitive alliancesInternet players

Telcooperators

Competitive alliances

Services

Access/connectivity

Terminals Cont

ents/

aplic

ation

s

Consumer electronic devices

suppliers

… at the same time that the competitive landscape is turning complex

Page 9: IPTV Challenges

9TelefonicaIPTV Competence Centre

Best-in-class customer experience

Innovation to grow

Turning customers into fans

Becoming a more innovative company, with third parties collaboration

A common operating model for an excellent and efficient delivery

People engagementEvolving our culture

to make Telefonica the best ICT place to work

Transforming our Operating model

we have defined four main strategic initiatives to implement it

Page 10: IPTV Challenges

10TelefonicaIPTV Competence Centre

Previously, on Television… Limited bandwidth towards consumer

— Broadcast model:linear consumption and experience— Limited number of channels— Broadcasters decided what people “should like”— TV personalities were stars (even dogs) — Prime time access to media between 19h00 and

22h30 Eyeballs drove advertisement

— Advertisement drove content producers & broadcasters

— Compelling content drove again more eyeballs Standalone solution

— Not connected to other devices inside home — Not connected to other services in backbone— Television was only on the television, and on the

television was only television— Offered by providers that only provided television

“Televisionwas a passive experience”

Page 11: IPTV Challenges

11TelefonicaIPTV Competence Centre

But we are finding a new and unknown playground with…

…a new broadband network infrastructure

… new players, the content providers

… new terminals, called “set top boxes”

… clients with a complete different behavior, even telephoning call

centers at 12 pm!!!

… a new type of network signal over the networks, video signal, that can

not support 10-9 error rates

… and new technical terms such as “pixelization”, “freezing”….

To change this, telecom operators begin to play a new match, the “IPTV match”….

“it´s critical for telcos to deeplyexplore, understand

and get experience in this first half”

Page 12: IPTV Challenges

12TelefonicaIPTV Competence Centre

There are few telcos who have already played the first half time, and Telefónica is one of them

Brasil Chile Argentina

Spain

Czech Rep.

600.000 customers

>100.000 customers

Next commercial launch in December 2008Trials on going

Communications

Entertainment

Home digital management

Home Networking

With a broad portfolio of services (broadcast TV, PPV, True

CoD, interactive services over the TV, ...)

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13TelefonicaIPTV Competence Centre

where we have understood that, in the second-half…

Now that the referee has called for half time, it´s time to think over and prepared ourselves for second half…

… we need to evolve and innovate quickly. Therefore we

decided to industrialize our IPTV platform with a market

leader… we must deal with these subjects in a global form

within Telefónica

…And that we need to be even more aggressive to

win the match

...This is why we have selected Alcatel-Lucent as partner

...This is why we have created the Telefónica IPTV

Competence Center

...and this is why we made a strategic analysis that will turn into defined actions

Page 14: IPTV Challenges

14TelefonicaIPTV Competence Centre

ALBA project: rationale and implicationsFor maximizing synergies Telefonica Group should deploy

the same technologies in all local IPTV services operations it’s necessary to industrialize the Imagenio IPTV platform

For this purpose Alba proyect is arranged with Alcatel-Lucent in order to assure availability of a best-in-class platform for all markets where Telefonica commercialize IPTV services

IPTV CCIPTV CC

Page 15: IPTV Challenges

15TelefonicaIPTV Competence Centre

Staying ahead of the competition requires the strongest team, all the time…

CommercialBundles

EnhancedServices

Personalizedand Blended

Services

BlendedServices

StovepipeServices

Incr

easi

ng D

iffer

enti

atio

n

Increasing Innovation for end-user convenience and QoE

1st Half 2nd Half

Developing an innovative services roadmap to increase differentiation

Page 16: IPTV Challenges

16TelefonicaIPTV Competence Centre

Some challenges you should face

From a connectivity/communication company, implies a renewal of infrastructure equipment and data centers: TV Head end, Video Servers,…

Adjusting your organization structure to face new challenges

Design of the access network to provide QoS and convergence services

Beware of the puzzle of actual solutions, integration of different elementsin the echo system use to be a nightmare

Avoid Cable habits to use dozens of Set Top Boxes

In xDSL access interference/impulse noise issues should be considered

Monitoring and Probes deployment is a secure investment to enable visibilityof the service and its maintenance

Page 17: IPTV Challenges

17TelefonicaIPTV Competence Centre

Three pillars for the service

Excellencyin IPTV

operations

Quality Usability

Extensibility

MaintainingPrevious

Experience In terms of Availability

And quality of Image

TransformingCustomers

Aptitude fromLean-back toLean-Forward

Being able to enrich theService with third partyApplications enhancing

The openness of the solution

Page 18: IPTV Challenges

18TelefonicaIPTV Competence Centre

Meeting Customer Expectations is Key

VoIP

QoE Expectation: Moderate/High

Fault Tolerance:Moderate

Consumer experience is

established. While high quality and low latency are

expected, there is generally some

tolerance for dropped calls.

IPTV/Video

QoE Expectation: Very High

Fault Tolerance:Very Low

Expectations are very well

established, with very low fault

tolerance.

HSI

QoE Expectation: Low/Moderate

Fault Tolerance:High

Individual Consumer

experience/history with broadband is relatively short. General quality

expectations are low/moderate

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19TelefonicaIPTV Competence Centre

Enhancing Quality through...

Interleaving Network Protection in xDSL access

Forward Error Correction mechanisms

Retransmission Technologies

Fully Redundant Network interconnections

Isolating different types of traffics with QoS

High Availability Solutions Backup Centers In distributed environments:

redundancy between Areas Extensive use of Probes

integrated in monitoring tools

KPIs reports for QoE evaluation

In the Network In the Platform

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20TelefonicaIPTV Competence Centre

Expanding IPTV echo system

Closed SystemGetting Video Running

Off-DeckClosed Garden(VoD, HD, Caller ID)

PC AppsWalled Garden

PersonalizationWeb 2.0,consumerizationof smart Phones

Third Party applications

Bring-your-ownDevice (BYOD)Approved devices

Bring-your-owndevice –to-any-network

(BYODAN)Network-neutral BYOD play2007

2008

20092010

2011-2012

20??

Customization

10

30

40

70

140

160

180

Source: Yankee Group, The Degrees of Open Access, “Case Closed: IPTV Not Likely to Be an Open Environment for Foreseeable Future”, June 2008

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21TelefonicaIPTV Competence Centre

Usability

Once customer has subscribed to service, its usability is one of the factors which determines his continuity— Learning stage is critic!

TV is a massive market— Intuitive use is key— Quick navigation and zapping

– Analog syndrome— Quality in the video

– Protecting the stream– Subjective Picture Quality

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22TelefonicaIPTV Competence Centre

There’s some expectation in user experience from PC to TV, mobile, PDA…— Adjusting service to terminal facilities

– Performance, formats, human-machine interface…. Customization

— Real Value of service = Perceived Value of service— Less technological profiles implies

– Simplicity– Reduction in equipment cost

— Advanced and technological profiles– More options and shortcuts are expected– Value perceived in advanced functionalities like home networking: DLNA, UPnP

User Experience

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23TelefonicaIPTV Competence Centre

New Remote Control — Mobile Phone could helps in customization

– And providing one additional screen— Gesture interfaces— Vocal interfaces— Gyroscopic controls

Seizing each specific terminal characteristics— One example could be UGC

– PC for management and configuration– Mobile/PC for production and storage– TV as a receiver

User Experience

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24TelefonicaIPTV Competence Centre

Future: Convergence

Mobile and fixed networks integration Lack of standards in a world-wide approach for an e2e

solution Standardization initiatives— DVB. Europe and Asia

– Technologies, applications and protocols

— ETSI TISPAN. Europe– E2e vision but limited

— ATIS IIF. North America– E2e approach

— ITU FG, SG13. Global– Not very active

— Open IPTV Forum. Global– E2e approach. Very active

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25TelefonicaIPTV Competence Centre

Open IPTV Forum— Multiple player: Service Providers, CE manufacturers, SW

Suppliers, DRM manufacturers…— Convergence to maximum

– Managed and un-managed networks– Service Provider and Platform provider independent environments

Future: Convergence

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26TelefonicaIPTV Competence Centre

Interactivity: Rich Media applications— Your personal TV viewing experience

3D User interface and contents

Future: User Experience

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27TelefonicaIPTV Competence Centre

Business models evolving— Massive TV market actually being financed through advertisement

(75%)— Digital Advertisement will grow with higher rates than traditional

Towards an interactive and customized advertising— Knowing the customer: multidevice, consumption profile, time dependant habits..— Synchronized with services— Normalized and secure“Feedback” of impacts to advertiser

Real time capabilities can introduce advertising auctions

$0

$200

$400

$600

2004 2006 2008 2010 2012

US$ B

ILLIO

N

Traditional Digital

Global Advertising Expenditure

Future: Interactive advertising

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28TelefonicaIPTV Competence Centre

Customized in each terminal of the costumer Contextualized with content, time … A more efficient approach than actual

advertisement , specially considering time shifted content consumption — “Shift TV”— PVR

Future: Interactive advertising

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29TelefonicaIPTV Competence Centre

Converging networks and services— Socializing entertainment and leisure in the TV out of the home

Presence capabilities enhanced with activity taking place Possibilities of knowing what my family and friends

— Communicating through instant messaging, videoconference …

— Content Recommendations— Sharing my own experience

Future: Social Networks

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30TelefonicaIPTV Competence Centre

User Generated Content— Quality content became more accessible— Sharing means dealing with:

– Security and rights (DRM)— A multidevice approach enabled through:

– Scalable video: MPEG 4 SVC– Transcoding

— “Streaming” experience

Future: Social Networks

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31TelefonicaIPTV Competence Centre

Hundreds of channels and thousand of on demand titles: How do you find what’s interesting for you?

Enriching content description through intelligent metadata:— Automatic classification of content:

– Extracting visual descriptors– Statistical recognition of patrons – Semantic reports generation– Digital fingerprints

Search and recommendation engines— Explicit preferences— Consumption profile— Semantic characterization

Up to customized virtual canal for each one

Future: Search & Recommendations

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32TelefonicaIPTV Competence Centre

Where customer wants Porting terminal status

— To one or several terminals at home— Different access networks: from TV to mobile— Different media of the same service to different terminals

– Video in the TV and sound in the mobile Accessing to mobile services through wire line connectivity

— WiFi— Bluetooth— Femto cells

Management in one terminal and enjoyment in other— Purchase in the mobile and watching in TV— Scheduling local PVR through mobile

Independent Service Provider of Access Provider “Roaming” of Access Networks

— Access through other terminal in other network

Future: Nomadic & Ubiquity

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33TelefonicaIPTV Competence Centre

Convergence increase complexity issues in security Authentication of user and terminal

— Access Network— Services— Mechanism defined in IMS from 3GSM

Rights protection are now dependant of terminal and business model: DRM— Conditional Access in Digital TV Platforms

– Only in distribution services and “always on”— WDRM, Fairplay in PC— OMA, PlayReady, Marlin in mobile

Marlin: A promising technology in a convergence world

Future: Security & Content protection

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34TelefonicaIPTV Competence Centre

What & When through CoD— Streaming vs Download

Important Business Models Towards a business created from thousands of niche business Hierarchic architectures of content servers

— Optimizing Bandwidth in access— Concurrency— Intelligent dynamic distribution— Control Layer

Future: Long Tail

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35TelefonicaIPTV Competence Centre

Evolution from HSI to customized TV

Network

ServiceValue

ADSLInternet AccessNewIncomings

ADSL2+QoS, McastIPTV, CoDTriple PlayNewIncomingsChurn ↓

MassiveDeployment

Openingto 3rd partiesContents ↑

CustomersGrowth

VDSL2FTTH

HighDefinition“Multiroom”PVR

CustomersGrowthARPU ↑

IMSPreseneceComm.

IntegratedMultimediaComms

NewoportunitiesARPU ↑

4 PlayConvergence

Customized TVWhat, WhenWhere, How

NewopportunitiesARPU ↑Churn ↓OPEX ↓

Initial Step

IPTV roll out

Growing

HDMultiroo

m

CommsIntegrate

d

Convergenced

Customized TV

Future: Trends and steps

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36TelefonicaIPTV Competence Centre

Main Conclusions

1IPTV services will provide a completely new TV experienceIntroducing the new habits and expectations of customers

2But even each technology employed is well tested, there’s no standardized solution … yet

3Deploying TV services means a shift in technologies and organizations

4Convergence approach: from IPTV to IPEntertainment?

5Provide enough operational tools to support the servicewith the lowest levels of claims

6Don’t forget usability, it’s our customer entrance

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