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1
TIAD
Final Paper
Cable TV,
Terrestrial
TV & IPTVBharath MH
Naidu
5th April 2015
Table of contents
Technology: Cable TV and differences with terrestrial TV 3
Stakeholders in cable TV 6
Advantages of cable TV to users 7
Switching costs from terrestrial to cable TV 8
Disadvantages of cable TV 9
Rise of cable TV industry 11
Adoption rates of terrestrial TV 13
Adoption rates of cable TV 14
Changes in viewing habits and cultural norms 16
Decline of terrestrial TV and rise of digital terrestrial TV 17
Sustaining nature of cable TV technology 18
Network effects of cable TV 20
Competitors for cable TV 21
Rise of internet streaming services and IPTV over multiple devices 22
How internet streaming works 23
Adoption of IPTV 24
Appendix
Bibliography
26
27
2
Technology: Cable TV and differences with terrestrial TV
Prior to cable systems, a lot of households used terrestrial transmission to receive TV
broadcasts. In this system, the programs and content were routed through a transmission
room to a broadcasting tower which then transmitted the signals over a certain distance.
Antennas at homes of subscribers received these signals and displayed them on TV sets. This
technology was severely limited by distance constraints as signal strengths decreased with
increasing distance from the broadcasting towers. Remote and isolated places were at a
disadvantage due to the lack of proximity to these broadcasting towers. Poor signal quality,
dependence of signal strength and quality on weather conditions and limited channel
transmission capabilities limited the effectiveness of terrestrial television. Cable TVs sought
to address these shortcomings.
The earliest cable systems were strategically placed antenna systems connected to the
subscribers’ television through long cables in order to receive better quality of transmissions.
This was a popular practice adopted by subscribers with access to terrestrial transmission, but
limited reception strength. The cables served as a means to strengthen the signal. Amplifiers
were also inserted at regular lengths along the cable to increase the signal strength as they
tended to weaken with the length on the signal.
In the early 1950’s microwave transmitting and receiving towers were used to capture signals
from distant stations. The addition of Community antenna television and spread of cable
systems led manufacturers to add a switch that could enable people to tune into channels
based on the FCC frequency plan or the plan used by most cable systems. However, most
modern cable systems use the technology outlined below.
3
Cable TV distribution starts at the ‘Headend’ or the point at which the cable signal originates.
The Headend is where the cable system receives programming from various sources
(predominantly satellites today) and assigns them to channels. The head end sends signals out
via satellite while also picking signals from other headends to process the available
information, form bouquets of free and premium channels and send it out to subscribers.
Information in this context, refers to transmission signals which are received by the end
subscribers in the form of content. Signals are then sent over fiber-optic wiring systems into
the area of service. These fiber optic cables are spread all across the neighborhoods,
eventually branching into smaller ‘drop-lines’ that reach the homes of the end user. These
drop lines are often embedded into the ground or are strung onto cable poles. Amplifiers are
attached to the wires along the way to prevent the loss of signal strength during transmission.
In 1989, General Instruments demonstrated the possibility of converting cable signals from
analog to digital and transmitting it in a standard 6 MHz TV channel. Using modern
techniques such as MPEG compressions, CATV systems today, transmit up to ten channels
of video in the 6 MHz analog bandwidth channel. Combined with 550 MHz overall
bandwidth, it is possible to receive 1000 channels of video on a system. Digital technology
allows for error correction as well, ensuring quality of the received signals.
Fiber optics are an important component of the cable transmission technology. Fiber optic
cables does not suffer the same signal losses as traditional co-axial cables and reduced the
requirements for the number of amplifiers required along the transmission path. This is due
to prevention of signal leakage in fiber optic cables. Fiber optic cables also have the capacity
4
to serve 500 households, making it possible to target individual neighborhoods for messages
and services. This grouping was extended to create LAN (Local area network) to provide
internet services.
With advances in technology, advanced high capacity fiber wires are replacing older cables
with the capacity to transmit stronger signals further. Newer methods of transmission such s
satellite HD, where by subscribing to a satellite HD service and purchasing the appropriate
equipment, subscribers can access HDTV content with enhanced sound quality.
5
Cable TV transmission Optic fiber cable
Terrestrial TV transmission
Value proposition: Stakeholders in cable TV
To understand the value in adopting cable TV, it is important to understand the various
stakeholders in the cable TV industry. The stakeholders in the cable TV business go beyond
just the broadcasting stations and the end consumers. Indeed, the effect of the cable TV
industry is far-reaching and impacts multiple industries. Stakeholders in the cable TV
industry include content producers or production studios, broadcasters, advertisers,
government entities such as the Federal communications commission (FCC), trade
associations such as National cable and telecommunications association (NCTA), equipment
suppliers, cable TV operators and end users.
Content producers produce content such as TV shows, sports shows, soap operas and other
forms of content. These programs are usually produced by major studios and require a huge
budget. The broadcasters which are popularly known as ‘channels’ purchase or license this
content from the content producers and air them on their channels. This content can either be
free or premium pay-per-view content. Advertisers choose to air their ads on these channels.
The decision to air ads are based on the popularity of the content with audiences, the time
slot in which the content is being aired, the type of content being aired and other factors. The
advertisers are charged a preset fee per second for the broadcasting their ads.
Once the content is broadcast over satellites to cable operators, who then form bouquets of
these channels as per consumer choices or ‘packages’ they sell to consumers, usually for a
monthly fee, and transmit the same to consumer households. Governmental entities such as
the FCC oversee the allocation of broadcast spectrum that is available to broadcasters,
6
enforcing the bandwidth allocation as well as ensuring competition among cable companies
and overseeing issues such as mandatory carriage of television broadcast signals, program
access, over the air reception devices etc. The NCTA is the voice of the cable TV and
communications industry and manages its regulatory and legislative priorities.
Advantages of cable TV to users
From our understanding of the various key stakeholders and their roles in the industry, it is
clear that the obvious advantage to the end consumer is choice and the freedom to choose
programming and customize it according to their needs, a feature that was tellingly lacking in
earlier terrestrial TV. However, there are other advantages of cable TV over terrestrial TV.
These can be broadly described as follows.
Stability
The dependency of TV signal reception on proximity, weather and other conditions not
directly related to broadcast and transmission is reduced as signals are transmitted through
cable. The chances of a broken cable or router are far lesser when compared to unfavorable
weather conditions. Thus, most importantly, consumers were able to experience increased
stability when compared to terrestrial TV.
Choice
The advent of cable TV saw an explosion of channels. Rather than the limited number of
channels that were available to consumers before, they now had access to a large number of
channels, possessing the option to customize the channels they receive and pay for as per
their needs. With such wide genre of programming such as news, sports, cartoon,
documentaries, comedy among others, it became possible to disseminate knowledge among
7
the public and raise public awareness. By catering to diverse needs, consumers were also
exposed to the many facets of the world, all through the comfort of their living room. Since
cable TV can be customized to include strong language or other ‘indecent’ content by the end
customer itself with a choice not to watch the same, indecency laws are not as strict for cable
TV networks as they are for OTA channels.
Multiple channels
Cable TV allowed numerous channels to share broadcasting space on the same delivery
system. Rather than maintaining separate transmitters for every over the air channel, a single
transmission system could carry hundreds of channels through different frequencies.
Price
Cable TV can be fairly inexpensive and the ability to customize channels further puts the
choice in the hands of the consumers in deciding how much they pay every month. The FCC
requires that all cable operators provide a basic cable package consisting of few broadcast
channels and local channels.
Bundling
With advancements in cable related services such as broadband and telephone, it is possible
to bundle multiple services into one package, thereby reducing the complexity of installing a
multitude of services from various providers as well as making it easier to deal with bill
payments.
Value proposition: Switching costs from terrestrial to cable TV
The switching costs from terrestrial to cable TV involved multiple layers of changes to the
existing system of broadcasting and transmission. Co-axial cables and later, fiber optic cables
8
had to be laid out by cable operators across much of the country. End users, who received
OTA transmissions as analog signals had to purchase converters that were capable of
processing signals from cable transmission and relaying the same onto their sets. In some
cases, newer TV hardware had to be purchased, raising switching costs. With the advent of
digital signals, most users who were using TV sets compatible with analog signals had to
purchase analog to digital signal converters. This was especially relevant after 2007 when the
government enacted a law to make all transmissions digital.
These switching costs were however, offset by the advancements in hardware technology and
the need for better programming content by the people. Rapid advancements in TV hardware
from bland and white vacuum TV sets to CRT based sets to LCD and LED technology,
prompted people to upgrade TVs frequency to experience the pleasure of watching HD TV as
well as better picture and sound clarity. The newer TV sets came with the option of
connecting to cable directly. The late adopters were the last to use converters and switching
to cable TV became extremely easy once the initial cable network was established and the
entire population moved to newer types of TV hardware.
Value proposition: Disadvantages of cable TV
Cable TVs, while largely representative of the significant advancement from OTA, were not
without their disadvantages.
Monopolies
Despite the FCCs intention to promote competition, certain areas were largely served by a
particular cable operator which had a significant cable network in that region. The rise of
these local monopolies reduced the choice of the customers in opting for the cable operators
9
of their choice, though most major operators relayed most, if not all major channels. This
culminated in poor customer service, less frequent checks on cables.
Confusing price packages
The problem of choice is extremely evident in the cable TV industry. Despite all efforts to
classify various channels in an appealing and easy manner, many users are left confused
about the pricing for these packages. While it is extremely difficult to cater to individual user
tastes, the pricing mechanism remains a major concern. This is further compounded by
hidden fees, taxes, rental charges and ambiguity about the long term costs of cable TV
subscription. Additionally, most packages are designed to contain a variety of channels while
most people watch few channels only in the long run.
Privacy
With bundling of cable and internet broadband services, it becomes difficult to mask location
if required due to IP addresses being stable in this type of offering and allowing unscrupulous
elements to track location and browsing history. In contrast, DSL modems, change IP
addresses every time the modem is reset.
10
Adoption: Rise of cable TV industry
1940 1950 1960 1970 1980 1990 2000 2010 20200%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TV adoption rates
Overall TV Color TV
Sources from Mahajan
To understand the adoption of cable TV, it is essential to know a brief history of cable TV
itself. In the 1950’s, cable operators took advantage of the fact that they could pick up signals
from long range and broadcast them to households. In 1962, 800 cable systems serving
850,000 subscribers [CCTA 2015] were in business with well-known firms such as
Westinghouse jumping into the fray. The existing TV networks viewed them as threats to
their services and the FCC expanded it jurisdiction and imposed restrictions on the ability to
import television signals, creating a freeze effect.
This freeze on cable TV lasted until 1972 after which the clamps were released and
regulations surrounding transmission of these signals by cable operators eased. The clamp
down had adverse financial effects for cable companies. Changes in technology in the 70’s
such as satellite communication increased the number of cable subscribers as well as cable
services offered. In 1972, USA’s first pay per view channel, HBO was announced, leading to
11
the creation of a national satellite distribution system, paving the way for an explosion of
program and network services. The end of the decade saw nearly 16 million subscribers.
Further deregulation in the 1980’s created a strong market for cable TV industry and led to a
combined industry spending of more than $15 billion [CCTA 2015] in the wiring of America
and even more on program development from 1984 to 1992. The end of the decade saw
nearly 53 million [CCTA 2015] household subscribers and more than 79 program networks
in 1989, compared to 28 networks in 1980.
Legislations to regulate prices were enforced in the 1990’s in response to consumer concern
over increased pricing and cable subscriber growth continued to increase with over 65
million households subscribing to cable. A major upgrade to optic fiber cable service
delivery was undertaken with $65 billion in spending to create a broadband network capable
of multi-channel video, HD video, internet and phone service delivery via a single cable. The
2000’s have witnessed a sea change in the cable services offered with broadband internet
services being the main focus of cable operators. With this in mind, it is interesting to note
that most households, around 98% have a TV at this point of time. The evolution and
increased adoption of the color TV and advanced hardware also played a major factor in the
increased adoption of cable TV services – a factor that will be examined in detail in
subsequent sections.
As is common for most technology, cable usage has been on the decline with increasing
number of ‘cord cutters’ have been cutting off cable and opting for internet streaming and
on-demand services besides satellite TV services. This has led many to believe that cable is a
12
dying industry while many predict that it is the first of many steps in the continued evolution
of cable TV.
Adoption: Adoption rates of terrestrial TV
1945 1950 1955 1960 1965 1970 1975 19800%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Terrestrial TV adoption rate
Source from Mahajan
Terrestrial TV, being the pre-cursor of cable TV saw a high adoption rate. This coincides
with the rise of TV itself. Prior to cable TV, terrestrial transmission was the sole means of
broadcasting content to TV sets. Due to lack of reliable data on the adoption of terrestrial TV,
it has been assumed that the adoption of TV implied the adoption of terrestrial TV. Since
commercial TV was introduced and made affordable to the public in 1950’s, TV was adopted
fairly quickly, reaching levels of up to 98% adoption a little after 1970. Data for terrestrial
TV has been factored in until 1975, since cable TV was introduced in 1970 and the adoption
rate had already reached the zenith by then.
13
Adoption: Adoption rates of cable TV
1940 1950 1960 1970 1980 1990 2000 2010 20200%
10%
20%
30%
40%
50%
60%
70%
80%
Cable TV adoption rate
Sources from Mahajan, Fishkin, Rangaswamy and various
Using the adoption rates of cable TV, we notice that cable TV adoption follows the S shaped
curve pattern. Since its introduction around 1965, cable TV witnessed a steady growth. As is
consistent with its history, cable TV subscribers were nominal due to regulatory pressures
and the lack of networks to fully capitalize on the power of cable delivery system until 1980.
However, there was still some growth from the early adopters who preferred some choice
and possibly pay-per-view programming to regular television.
We notice that the number of cable TV subscribers increased sharply after 1982 due to the
aforementioned de-regulation and the explosion of programming content that was available.
This period also witnessed the establishment of large scale cable networks, reaching more
people than ever before and is consistent with history.
The number of subscribers for cable TV has continued to climb in the 1990’s as well with
late adopters joining in the fray, reaching an optimal of nearly 69% adoption rate before
levelling out. As of today, the number of cable subscribers are on the decline, with more
14
people opting for internet streaming, satellite relay and other means of content delivery,
moving away from the cable delivery model.
It is also interesting to note that the increased adoption of cable TV coincides with the
increased adoption of color TV in the 1970’s. This demonstrates the inter-dependency of
cable TV services on hardware quality and customer need for better signal and picture
quality. The climb also continues well into the 90’s with TV sets becoming increasingly
cheaper, leading to the introduction of LCD and LED TVs as well. In recent years however,
the introduction of newer ways of viewing content which are not dependent on cable
services, but rather the internet such as laptops, mobile phones and tablets may also be
contributing factors for the decline of cable and the increased adoption of internet streaming
services.
Viewed through demographic lens, it is also interesting to note that cable TV was adopted
initially not only by the wealthy or the innovators, but by people who desired programming
with no proximity to standard terrestrial TV services who can broadly be termed as imitators.
The demographic of cable TV viewers has since cut across income divides, reaching the
general public through its differential pricing, recognizing differing abilities to pay of
different income groups.
1940 1950 1960 1970 1980 1990 2000 2010 20200
102030405060708090
Cable TV usage (hrs/ month)
15Source from Fishkin
Another lens through which adoption of cable TV can be seen is through the number of
hours/ month of cable TV viewing. From 2-3 hours/ month when cable TV was a novelty in
the 1970’s to nearly 86 hours/ month in 2010, the number of hours viewed has been steadily
increasing. This is attributable to the availability of content that caters to specific tastes of
subscribers, motivating them to tune into cable TV more often. It is interesting to note that
cable TV is a mix of both regular as well as pay per view. While cable services did initially
start off as an ad free service in the 70’s, the introduction of ads into cable TV did not
dampen user response to the programming content. With such a remarkable increase in
subscriber engagement through the years, it remains to be seen if internet streaming and
video will enjoy similar success. It is indeed ironic that while cable subscriptions have been
declining, cable viewership has been more or less on the rise, demonstrating the network
effects of content programming on cable TV technology.
Adoption: Changes in viewing habits and cultural norms
Cable TV also had the benefit of bringing about cultural diversity and bringing cultural issues
to the fore. In the days of terrestrial TV programming, when diversity was an issue and was
predominantly dominated by the white population, cable TV enabled people of other races to
voice their opinions and cater to diverse needs, hastening its adoption and demonstrating the
power of choice in content programming. It played a major role in bringing various sections
of the population onto a single platform. With the popularity of this type of content, content
creators became more inclusive.
16
Cable TV also had a significant effect on the psyche of the American family, leading to
increased adoption. Where OTA was limited to a few channels that were broadcast and TV
viewing was seen significantly as a family activity with members gathered around television
sets, much like they did around the radio, cable TV with its cost effectiveness, ease of
installation and ability to cater to multiple TV sets in a single household with highly
customized programming made it easier for different members of the family to watch
programs more suited to their taste. TV viewing was beginning to be seen as less of a family
activity and more of a personal choice. However, the fact remained that having a large
number of TV sets was extremely cost prohibitive in nature due to the expensive nature of
TV hardware.
Market dynamics: Decline of terrestrial TV and rise of digital terrestrial TV
Analog terrestrial TV declined in popularity with the advent of cable TV as is the case with
older technology. While terrestrial TV had the distinct advantage of airing free to air
channels initially, they were showcased later via cable itself as part of FCC ruling that free to
air as well as few local channels be broadcasted compulsorily. The marked variety of choice
and signal clarity of cable TV reduced the number of viewers opting for terrestrial TV. The
increase in the number of alternate technologies contemporary to cable TV such as satellite
TV and IPTV gave consumers the choice of watching content in the platform of a choice and
many people shied away from terrestrial TV due to its obvious disadvantages.
In 2007, all analog signals were mandated to be converted to digital, freeing up precious
spectrum to be used for other purposes. This marked the end of analog terrestrial TV era as
17
these signals were no longer broadcast. People possessing analog terrestrial signal compatible
sets were encouraged to use converters which converted these signals to digital signals. Due
to growing popularity of cable TV and lessening interest in terrestrial TV, TV hardware
makers also stopped including antenna reception in TVs and antenna installation to receive
signals. As a network effect of the decline of terrestrial TV, antenna sales fell sharply and
disappeared almost altogether.
Of late, terrestrial TV has been staging a comeback in a new avatar in the form of digital
terrestrial HD TV has been witnessing increased adoption. Digital terrestrial TV works the
same way as traditional broadcast TV while being capable of receiving multiple channels,
including HD channels, on a single frequency. Coupled with advancements in video
encoding, DTTV capabilities are expanding vastly. DTTV signals are received through
digital set top boxes, gateways or integrated tuner cards in TVs. DTTV also supports more
free to air television channels and multi-sound channels. While Digital Terrestrial TV also
faces the distance limitations of its predecessors and is feasible in well populated urban areas,
alternatives such as digital satellite TV are making connectivity easier and reducing
dependency on distance as well as cable network.
Market dynamics: The sustaining nature of cable TV technology
We can view the rise and diffusion of cable TV through Christensen’s definition of
characteristics of disruptive and sustaining technologies. It becomes increasingly evident that
cable TV was a mostly sustaining innovation with some features of disruptive innovation in
relation to terrestrial TV due to the following reasons.
18
Catered to same market with improved technology – Cable TV was an extension of terrestrial
TV since its beginnings. It started out as a way to enable better reception of TV signals and
catered to the same segment of the market i.e. households with television sets. It can be
argued that cable TV, while successful in creating a relatively new market for a segment of
the audience with pay-per-view, hastened the process of adoption. TV sales peaked at around
the same time as the inception of modern cable technology and the alternate medium with its
capability to reach more households than terrestrial TV, represented the next step in content
delivery systems without radically disrupting the fundamental means of broadcasting
programs and content.
Building incrementally on existing technology – While the fundamental means of signal
dissemination was different with cable network replacing broadcast towers, it did not
represent significant disruption in the means of service delivery. Households and families
still viewed cable TV in the same way they viewed terrestrial TV, albeit paying for improved
service. Cable TV was a means of building upon the initial hiccups of content transmission
rather than a brand new way of changing how people use technology. While people did move
to cable TV, they also had the option of viewing terrestrial TV as the content was free. This
provides further basis to the argument that cable is a sustaining technology.
Non-displacement of existing players – Existing major networks such as CBS were not run
out of business with the introduction of cable TV. Rather they evolved out of necessity and in
later stages, governmental regulations to broadcast signals over cable as well. While there
was an explosion of channels and content with the introduction of cable, this was mostly due
19
to the better capability of content delivery as compared to traditional broadcast. Besides, with
means of broadcasting heavily regulated by the government, it can be argued that even
disruptive technologies eventually fall under the ambit of sustaining technologies due to the
high regulatory intervention and nature of the business
Arguments for disruption
Different pricing and packaging and new business models – While Terrestrial TV was free,
cable TV gave subscribers the freedom to choose customizable content packages of their
choice. This came with the caveat that various pricing models evolved for these methods of
delivery. The pay-per-view model could be argued as being potentially disruptive. The
advent of cable TV revolutionized the TV content and broadcast value chain, representing
significant opportunities to realize revenue for players in the business.
Market dynamics: Network effects of cable TV
The advent of cable TV had a major effect of a number of dependent service providers as
well as equipment manufacturers. The major network effects on key stakeholders were as
described below.
Content producers – Content producers were incentivized to produce more content that
catered to a wide variety of subscribers. This was mostly done in the expectation that people
would consume more content increasingly due to having access to programs of choice at the
convenience of home. Initial reactions to cable and airing of movies was that it would
hamper ticket sales at traditional theaters, but this perception changed over time. It can be
argued that cable TV would not be as popular without content to enhance its adoption.
20
Content broadcasters – Cable’s ability to broadcast multiple channels to subscribers gave
rise to a number of local channels that showcased increasing amount of content on TV. The
higher number of channels of various genres also served to attract more subscribers to cable
TV’s fold. Content broadcaster’s requirement to broadcast further programming increased
the amount and type of content produced for TV.
Equipment manufacturers – Increased adoption of cable TV required that a vast network of
cables be laid. This in turn gave a huge thrust to the cable laying and maintenance industry.
TV hardware manufacturers also had to adopt to the increasing popularity of cable by making
provisions for reception of cable lines.
Advertisers – While cable was initially viewed as an ad free service, it started showing ads in
later years as well. The ability to reach a large audience by showcasing ads on popular
programs piqued the interest of corporations wanting to advertise their products on TV. This
also spawned a huge media and TV advertising industry in itself, giving rise to the digital
media and advertising industry that we are familiar with today.
Market dynamics: Competitors for cable TV
Cable TV has not been without its share of competitors over the years. Some of them are
listed below.
Terrestrial TV – While terrestrial TV itself was being slowly replaced by cable TV, the free
service offered through terrestrial TV was a big draw for consumers who had access to
21
traditional broadcast content. Many people were satisfied with the service quality and
competition has become more relevant due to the rise of digital terrestrial TV in recent years.
Satellite TV – Satellite TV or direct to home (DTH) services are steadily becoming the
medium of choice for content delivery to television. By receiving signals beamed through
communication satellites, DTH removes the dependency on cable networks and delivers HD
content. DTH services are especially becoming popular in growing economies such as India.
Internet streaming – By being able to stream content of your choice on demand from any
device through services such as Netflix, internet streaming’s versatility and portability of
video watching experience is leading to a generation who have grown without the
dependency on cable to receive information. It will not be an understatement if internet
streaming services are viewed as the most potent long term threat facing the cable TV
industry.
Next generation: Rise of Internet streaming services and IPTV over multiple devices
Internet streaming has undeniably changed the way we consume video content and
information in our day to day lives. Coupled with social media, it has changed the
entertainment landscape with such companies as YouTube, Netflix and Hulu operating with a
different business model and catering to a variety of devices and not just limiting themselves
to TV. All these sites, along with the rise of Internet Protocol TV (IPTV) and players such as
Apple TV are changing the traditional TV viewing landscape with on-demand program
delivery.
22
One of the biggest drawbacks of cable TV was that programs were broadcast at a certain time
during the day and you had to be present in front of a cable enabled set to watch the same.
Streaming services and IPTV remove this obstacle by providing content that can be searched
and accessed on multiple devices if you subscribe to the service. With the advent of mobile
devices such as laptops, cell phones and tablets, the concept of portable, multi-device access
video entertainment is all the more relevant.
Next generation: How internet streaming works
Ironically, this radical new way of consuming entertainment was fuelled by the growth of
internet broadband, spearheaded by cable companies who wanted to satisfy the increasing
demand for internet services by the consumers. As mentioned earlier, cable allowed multiple
services to be bundled together and cable companies seized this opportunity to offer
broadband services in addition to cable services.
IPTV and internet streaming works by directly broadcasting content from the source i.e. the
cable companies as well as streaming services servers. These signals are transmitted through
the internet connection onto your computer or IPTV set top boxes that decode encrypted
signals and play them on the hardware. IPTV comes in 3 major flavors which include Video
on demand (VOD), time shifted IPTV and live IPTV. Streaming video companies such as
Netflix and YouTube are examples of VOD, where you subscribe to service to access the
video content. Time shifted IPTV services however allow you to watch content broadcast on
TV at a time of your convenience. Examples of time shift IPTV is BBC using its dedicated
23
video player BBC iPlayer to broadcast content. Live IPTV broadcasts live events over
internet channels to the subscriber.
Next generation: Adoption of IPTV
2008 2010 2012 2014 2016 2018 2020 20220
50
100
150
200
250
Worldwide IPTV adoption forecast
Mill
ions
of s
ubsc
riber
s
Source from Statista
Data shows that the number of IPTV subscribers worldwide has risen to roughly about 90
million subscribers [Statista 2015] with about 13 million subscribers [Statista 2015] in the
US in 2013. This can be attributed to existing broadband subscribers using internet services
as well. A new generation of ‘cord-cutter’ or people who are unsubscribing from cable to opt
for streaming services and IPTV services are leading the way in adoption of this technology.
IPTV can be truly classified as a disruptive technology because of the fundamental difference
in the way content is broadcasted and is being consumed. With increased broadband
penetration and higher number of people having access to streaming services, IPTV is
increasingly gaining relevance and becoming the preferred medium of choice for watching
24
TV. While terrestrial and cable TV were viewed as bring family units together, IPTV, with
its ability to stream to multiple devices has created a far more personal form of video
watching, breaking it down to individual choice.
Cable operators are adapting quickly to these services by providing internet services as well
as VOD and movie streaming services to capitalize on this growing market segment. It can
be argued that IPTV required larger bandwidth capabilities to work effectively. But with
upgrades of bandwidth capacity taking place similar to laying of cable networks for cable,
the day is not far off when IPTV reached the masses.
25
Appendix
Predicted adoption of IPTV using Bass model
2014 2016 2018 2020 2022 2024 2026 -
20,000,000.00
40,000,000.00
60,000,000.00
80,000,000.00
100,000,000.00
120,000,000.00
IPTV US AdoptionCu
mul
ative
Sub
scrib
ers/
yea
r
m Total number of adopters 150,000,000N(t) Number of adopters in 2014 13,000,000 Cable TV 0.1 0.06 0.3N(t-1) Number of adopters prior to 2013 11,500,000 Home PC 0.121 0.281 0.1S(t) Number of added adopters 1,500,000 Color TV 0.059 0.146 0.2m-N(t-1) Size of potential market remaining 138,500,000 Cell Phones 0.008 0.421 0.1N(t-1)/ m Percentage of adoption 8% LAN networks 0.0006 0.686 0.3
Likelihood of purchase by new adopter 8% Overall P and Q 0.05488 0.3232S(t) Potential new purchasers 11,032,725.33
Adopters Remaining Market Cumulative adoption2015 11,032,725.33 127,467,274.67 24,032,725.33 2016 10,153,873.14 117,313,401.52 34,186,598.48 2017 9,345,029.15 107,968,372.38 43,531,627.62 2018 8,600,616.59 99,367,755.79 52,132,244.21 2019 7,915,502.94 91,452,252.85 60,047,747.15 2020 7,284,964.53 84,167,288.33 67,332,711.67 2021 6,704,653.97 77,462,634.36 74,037,365.64 2022 6,170,570.17 71,292,064.19 80,207,935.81 2023 5,679,030.78 65,613,033.42 85,886,966.58 2024 5,226,646.76 60,386,386.66 91,113,613.34 2025 4,810,299.05 55,576,087.61 95,923,912.39
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Presentation by Dr.Arvind Rangaswamy, Anchel professor of marketing, Penn state university
Cable: it's not just for TV, Dutta-Roy, A. Spectrum, IEEE Volume: 36 , DOI: 10.1109/6.763204 Publication Year: 1999 , Page(s): 53 - 59
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Dawan, Geethika. "Iptv." Slideshare. Web. 5 Apr. 2015. <http://www.slideshare.net/nishumittal1410/iptv-14747608>.
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