IPTV Is Dead and OTT Killed It. Will it Do the Same to Broadcast?

In a recent announcement, CenturyLink indicated that it was scrapping its IPTV offering in favor of OTT. The logic? It is simply cheaper to deliver over the internet than over fixed line. But CenturyLink isn’t alone in this movement. Comcast, with the Xfinity platform, has been advocating OTT over IPTV for a while, and several other cable providers (Verizon, Charter, etc.) have all been putting increasingly more eggs into the OTT basket. In fact, one could argue that there is a grassroots movement in the industry toward streaming, driven by consumer demand for watching what they want, when they want, and from whatever device they want.

There is a nice synergy between what the providers want—lower cost of delivery—and what the consumer wants—anytime, anywhere access. This leaves us with a critical question: “What does all this over­the­top delivery mean for the future of traditional broadcast?” Before I answer, let’s look more closely at the cost of delivering over fixed line or satellite. When it comes to delivering content to the television, providers have a physical value chain—the head-end, the set­top box, the line in the ground (or the eye in the sky). All of that demands considerable dollars and resources to operate, maintain, and upgrade. It’s also why providers offer multiple services (internet service, VoIP, etc.) to maximize revenue on equipment owned and installed. But when it comes to delivering content over the internet? Not so much the case. That physical value chain dwindles significantly (especially as a lot of broadcast­level equipment, like encoding, moves to the cloud). Sure, there are new costs associated with OTT (like using content delivery networks), but they are much smaller than owning the end­to­end pipe. What that means is that providers can achieve greater margin on content delivery—lower capital expenses, growing viewership, and increasing ad impression rates all equate to a much better upside than delivering over fixed lines like with IPTV or broadcast.

So, let’s return to that question about traditional broadcast. I think there’s an obvious answer to it. Broadcast television, as we know it today, will go away. No, this isn’t going to happen tomorrow or even next year. This is a long-term evolution of the television viewing experience. Yes, the ball has started to roll downhill (as providers are opting for OTT over IPTV), but it’s going to take a lot more for a true transition to happen. For example, we’ll need more consistent quality for OTT. That will require something other than the delivery systems we have today. 5G is going to help. HTTP2 is going to help. The networks we have today aren’t built for streaming video, but the networks of tomorrow will surely be created with this kind of content in mind. Still, we have the issue of advertising. Until content distributors and access providers can achieve revenue parity between OTT and broadcast ads, television as we know it will still rule. The distribution model follows the money, and right now the money is on the big screen.

Yet, this brings up another interesting question: “What does streaming mean for the regulations governing the distribution of video content?” Up until now, it’s been a “signal” distribution from a source to a fixed endpoint. When it’s “broadcast” over the internet there’s no longer a signal, and the endpoint isn’t fixed. Will a provider still need a headend to deliver video broadcast to a specific geography, or will the FCC modify regulations to account for user mobility (and the mobility of the signal)?

There’s no doubt that CenturyLink’s announcement sends a clear signal to the industry—OTT is the future of video delivery. But it’s an uncertain future. Even as the industry and consumers embrace streaming video, there’s no shortage of issues that need to be addressed before the incumbent systems of today give way to the promise of tomorrow.

This article appears in the April/May 2017 issue of Streaming Media magazine as “IPTV Is Dead. Is Broadcast Next?” 

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