Better late than never, I should summarise the main discussion points from last week’s IPTV World Forum in London. In general “IPTV” in the context of this event means “managed TV services over broadband”, and indeed, “managed by broadband service providers”, as opposed to “managed by over-the-top providers”. It’s easy to spot this because the interest of the major sponsors – Ericsson, Alcatel-Lucent, Cisco etc – has historically been to support BSPs rather than their competition. But in spite of this natural bias, much of the debate in the conference and on the show floor revolved around how BSPs could counter the impact of emerging OTT competitors such as Hulu and the BBC’s iPlayer. While anecdotes are always a dangerous foundation for analysis, it is not unprecedented to hear of people in the US claiming to have cancelled their cable subscription (ie TV) because they can now “get all their shows” on Hulu and other internet-based services. However much they pretend to dismiss these claims as isolated or atypical, such stories strike fear into the hearts of operators, and their technology vendor partners, around the world. The general impression from IPTV World Forum debates is that the BSP response will be to “embrace” OTT content, encouraging providers to join their managed services and packages so that customers are guaranteed quality of experience for their Youtube videos. Before accepting these overtures, OTT providers themselves should consider whether this embrace will resemble a loving couple gazing at the sunset, or a grizzly bear hugging its newly captured prey. Broadband providers have little choice but to offer content in some form or other, and that’s really what IPTV is about. As we are seeing in France, bundling content (TV) with broadband access can be a highly successful, if controversial, strategy. And the regulators have barely begun with this issue, let alone completed their assessment. As Christophe Forax, a Member of EU Media Commissioner Viviane Reding’s Office, informed the conference on day one, all broadband service providers would be expected to embrace “platform neutrality”. Quite what this means to the bundling of access and content, however, is a topic for further very heated and lengthy debate. The key question, as Juniper’s EMEA Director Paul Gainham put it, is “what is the role of service providers in a few years’ time?” For now, a number of them are placing their bets on content, either as partners and distributors or as fully fledged owners and developers. The other main strategic option in a mature market is often described disparagingly as becoming “bit pipe providers”, and incumbent telcos in particular are reluctant to admit to this possibility: it would inevitably mean considerable downsizing, and that’s something that’s tough to sell to any investor. Twitter: twitter.com/DavidMercer_SA Client Reading: Global Media & Entertainment Market Forecast, 2004-2012

Like most telecoms technology vendors, Alcatel-Lucent has been suffering from a stagnant market and intense competition from emerging players such as Huawei. In fact ALU’s 2008 revenues are expected to decline “in the low to mid single-digit range”, according to the company’s Q3 financial report. Alcatel-Lucent was formed in 2006 from the merger of two of the industry’s historic giants, each with a pedigree going back to the dawn of electronic communications in the late 19th century. Those roots are evident in the Bell Labs operation, still based in Murray Hill, New Jersey. Bell Labs was for most of its life part of the AT&T organisation, and has been known as Lucent Technologies over the past decade or so. Over the years Bell Labs has been involved in developing many new technologies, not just in voice communications but in media and entertainment. Somewhat off track, a particular story caught my eye. Back in the early 1930s, when the world’s economy really was in meltdown, Bell Labs was involved in various sound recording developments and worked with the famous conductor, Leopold Stokowski, to improve the recordings of his Philadelphia Orchestra. This led to the use of gold film to improve recording masters, as well as the development of stereo recordings. In 1933 a concert in Philadelphia was transmitted in stereo over telephone lines to Washington, D. C. As I’m often reminding clients, the concept of using our phone lines to “stream” content is really nothing new… While major firms around the world rightly review their finances in the light of the current global economic crisis, they also need to avoid the temptation to take their eyes off the innovation ball, because when markets and economies do begin to recover, companies with strong positions in the next wave of technology industries will prosper, as the story above illustrates. Against this background, ALU last week presented its Bell Labs Innovations day, which, in recognition of the Franco-American business alliance, took place not in Bell Labs’ NJ base but at Alcatel’s historic headquarters in rue de la Boétie, Paris. We saw a series of demos under the theme of “Transformation”, as well as specific projects focusing on improving existing applications like home management and IPTV. Within the Home demo, we saw online gaming (Mario Kart as it happens) on Nintendo’s Wii console using a wireless LTE connection, alongside a console using a regular fixed broadband line, demonstrating that 4G at least in theory can meet this particular home application. Next to this was a demonstration of 3DTV, without which no discussion of emerging consumer technologies is now complete. Like most other demos I’ve seen, this used the Philips 3D display. ALU is not about to get into the consumer electronics business, but it is exploring the potential impact of 3D on its IPTV business line, and in particular showed a couple of interesting examples of how 3D EPGs and user interfaces might be presented. Video conferencing is another application with potential relevance to 3D. There was also a display of a femtocell solution, in which various CE devices were sharing the femtocell wireless connection built into the home gateway. Telecoms vendors have been pushing femtocells, which are basically a very low power cellular transmitter, as one of the next innovation waves. The initial motivation of femtocells was to improve in-building cellular coverage. This demo suggested that they also provide an alternative home networking solution. My question was why this offered any improvement over existing, widely deployed WiFi technologies, and the answer offered was that femtocells will be easier to use, since devices will be easier to connect and will have better power management. We will have to wait for actual deployments to see how true that is. WiFi is certainly not perfect, and connecting a new device to a home network can still be a challenge, but once it is installed I have few problems, and it’s not clear to me exactly why femtocells would be an improvement. We also saw a prototype of a video microprojector, which beamed a video from a mobile phone onto the wall. It offers VGA resolution today. We are told that true HD is on the roadmap, although this will demand a larger footprint. As optical modules such projectors will be integrated into handsets, something which we can expect from around 2010 onwards. The quality is likely to be adequate for laptop-equivalent displays (~20” diagonal). Battery life will clearly be an issue – constant projector use would give a phone about 2 hours’ usage. A number of other demonstrations focused on media and content applications such as photo file management and intelligent video stores. The latter is a profiling technology that suggests video titles based on a user’s search activity. ALU was keen to point out that this would be entirely an opt-in process. Putting all of the significant near-term business challenges aside, ALU would appear to be well positioned to take advantage of new revenue streams, if and when they emerge. The challenge as always will be to predict the winners. It’s a reasonable bet that at least one of the innovations on show will make it onto the long list of past success stories, but it may be a few years before we discover its identity. (Footnote: I just arrived in San Jose for Cisco's C-Scape event, which will make an interesting contrast with the Bell Labs show - updates to follow.) Client Reading: CES 2008 and Beyond: Can the Wow Factor Make a Comeback?

This week at London's Olympia we are attending the IPTV World Forum, which has become one of the world's largest events focused on the subject. Last year's event featured a number of emerging technology firms, such as Ruckus Wireless and Vividas, that made good progress in the following 12 months, so we are hopeful that the 2008 show will be as good at predicting future trends. Strategy Analytics is involved in a number of the conference streams this year, including Connected Home and TV-over-Net. I will be chairing my first panel at the main IPTV conference on IPTV ARPUs on Wednesday. I look forward to a lively debate with participants from Sonaecom, Industria, Red Bee, ANT and NDS. My main question is whether it is realistic to expect ARPUs to increase at all, at least in terms of direct subscriber payments, and should IPTV providers be looking instead to indirect subsidies from third parties such as advertisers. My second panel takes up this theme the following day when I will be debating advertising in the IPTV space with Alcatel-Lucent, Tandberg, Pilat Media, Red Bee (again), Talk Talk and Ruwido. I'm hoping these panelists will be able to shed some light on the potential for IPTV to revolutionise television advertising and when we are likely to see this happen. Clients wishing to arrange an analyst meeting during the event should use this form. Client Reading: US IPTV Forecast and Outlook: $13.7 Billion by 2012

Analyst conferences are a good way to get an quick fire update on a company's strategy, so I'm spending a valuable couple of days in Boston with Alcatel-Lucent. But often the best presentations at such events are given by partners or customers, and today was no exception. It was Paul Corbel, the CTO of French mobile operator SFR, who had the most interesting things to say about the state of the wireless industry and the outlook for new technologies and services. Paul described the highly competitive environment in the French mobile market, where MVNOs are now taking 50% of new customers, the third largest player has introduced flat rate bundles of unlimited calls, and SFR recorded 0% revenue growth last year. In spite of these challenges, SFR, 44% owned by Vodafone, continues to see the mobile phone as key to its success, since it believes this is the device most preferred as a communications tool. Paul cited data suggesting 40% of home-based phone calls in France are now made from a mobile phone. SFR's strategy is to continue to push the mobile phone as the preferred consumer device, as well as extending its capabilities in data, taking share from the fixed voice and data market. Expect SFR to be very aggressive in HSDPA pricing later this year. At the same time, the CTO was refreshingly cautious (compared to the rosy scenarios often presented by certain technology vendors) on the potential for new services such as advertising, games and video to make up for declining voice ARPUs. The company's own models suggest that €100m advertising revenue could be a realistic target, and this makes it very small in the context of the company's overall scale. There does seem to be an inherent conflict in SFR's plans, which can also be detected in its parent company, namely that there is a love-hate affair with the fixed access business. SFR's 40% subsidiary, Neuf Cegetel, has just acquired Ozone, a Wifi provider, presumably partly to offer more cost-effective roaming web access and even Voice over Wifi like its competitors. SFR has in any case been offering DSL and will continue to do so in order to remain competitive. You get the strong sense that SFR sees all this wireline stuff as a necessary evil rather than a positive strategic play. But the company has aggressive plans for a number of new technologies, including residential femto cells, so it's a company that should stay on the radar. Anyway, congratulations to ALU for inviting a customer to tell analysts it will continue to reduce capex by 10% a year and encourage more competition between its suppliers. That is a better reflection of the real story behind the wave of new communications technologies coming down the pipeline.