While the industry has been, the technology will soon get its prime-time debut in the U.S. when AT&T, the country's largest phone company, moves from and U-verse TV service to commercial deployment of the service later this summer.
"IPTV is moving out of trials, and the basic viability of the technology has been proven," said Rick Thompson, senior analyst at Heavy Reading. "Now it's time to look at how well the service is performing and enabling new features to enhance the quality of the services."
AT&T has beenfor several months, and it expects to deploy the service to more cities in Texas later this summer, with further deployments planned for 2006 and 2007. The company has said that it plans to spend $4.6 billion through 2008 to bring television and high-speed Internet services to almost 19 million homes.
Whether AT&T succeeds in the TV market hinges on several factors, including how well it evolves its technology so it can offer customers new interactive experiences. More than 500 software and equipment makers will be on hand this week in Chicago at the Telecommunications Association's GlobalComm trade show to demonstrate the latest technology that will help AT&T and other carriers around the world make IPTV a truly competitive service.
Initially, most of the companies supplying gear and services have focused on simply getting the technology to work. As a result, early deployments, including AT&T's, will look very much like what's already available from cable and satellite operators today. Early on, the battle for new customers will be won based on pricing. But in the long run, IPTV providers need to convince customers that they offer features that are different from what's already available from the traditional television providers.
"Once the networks are rolled out and people see they work, the question becomes how will the phone companies compete," said Adi Kishore, director of the media team for the Yankee Group. "They are coming into many markets as the third or fourth or sometimes even the fifth video provider. It's a stiff challenge, and they'll need to show some kind of differentiation."
Microsoft, which is, as well as for several , will be demonstrating some of its advanced features, like displaying multiple pictures within a picture and instant channel change. The software is also designed to integrate with other IP-based services, like voice over Internet Protocol and Internet data surfing.
Some of the advanced features may not be available right away when IPTV services debut, but that's not a big deal, according to Kishore, who says it will take a while for people to appreciate the new offerings.
"In the beginning, 80 percent of the business will be decided on pricing, packaging and marketing, rather than on the new whiz-bang technology that IPTV delivers," he said. "But integrating Internet content and providing new ways of viewing content could appeal to some people frustrated with what's currently on TV."
The HD factor
That said, technology will be a big factor in enabling IPTV networks to keep up with new broadcast trends. One of the biggest challenges for AT&T and other carriers will be having enough bandwidth available to deliver high-definition channels. HDTV eats up big chunks of bandwidth. Using today's most common compression codec, MPEG-2, a single high-definition channel eats up about 20Mbps of bandwidth.
"Using MPEG-2 for HDTV pretty much blows all of AT&T's bandwidth budget," said Heavy Reading's Thompson. "And that's just for one channel. Most households in the U.S. have multiple TVs."
Today, only about 15 percent to 20 percent of households in the United States have HD-ready television sets. But considering that on average people buy new TVs every four years, it's likely that this figure will increase dramatically in the near future. What is also expected to increase is the number of homes that will have multiple HDTVs, said Kishore.