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IPTV is not just a technology or an infrastructure, it is also a service and a business. Service providers need to focus on making IPTV work not only for themselves, but for their subscribers and content providers as well. This article will address three issues of particular importance for service providers: content navigation, billing for content, and royalties. When handled properly, these three issues can help make an ITPV service successful, but when handled poorly can potentially have serious repercussions for service providers.

Today broadcast television schedules are published in national and local guides in magazines, newspapers, on Websites, and elsewhere. It is easy to find out that “Lost” is broadcast on Channel 7 at 8 p.m. and that “The West Wing” is broadcast on Channel 4 at 9 p.m. but what happens when thousands of TV shows, movies, and music videos are available to the viewer at any time?

One over-reaching goal of providers is to have a full library of video, film and stored live-broadcast content available. Only recently, however, have the economics of IPTV infrastructure made it possible to actually have a complete content library. Now that the cost of mass storage has plummeted, networks will soon have enough bandwidth available to handle DVD-quality video. A new modular IPTV architecture will allow operators to respond quickly to viewer’s requests for content by storing the first few minutes of thousands of the most frequently requested videos at the network edge, while storing tens of thousands of complete videos deeper in the network.

Successful IPTV providers will help viewers navigate the vast amount of content so they can decide what they want to watch and find it quickly and easily. Presenting program schedules TV-Guide-style on the screen, as cable and satellite operators do, will likely prove to be inadequate if viewers cannot find what they want quickly. One possible solution is to develop a Google-type interface that presents tens of thousands of options in a rational fashion that enables users to find what they want quickly and easily. Unlike Google, however, in the mass market the dominant IPTV interface will be the television screen and remote control, not the PC and keyboard.

Providers will also have to deal with the issue of micropublishing--when subscribers with a home video camera link to family and friends. This type of use raises significant security issues and the potential for liability. The challenge for providers will be to create a walled garden with teeth to ensure subscriber privacy.

The second issue IPTV providers face is how to bill for content. Is it feasible for providers to charge a flat fee for a service that offers subscribers thousands of choices? Or since content owners may charge different prices for different types of content, will providers need to charge their subscribers according to what they watch? The most advanced switched digital video architectures will support a number of billing structures, including delivering, charging for, and billing content on a per-minute basis. With this model, a sports fan can watch the last three minutes of an important basketball game over and over again and the provider could charge for just those minutes watched. But will per-use charges prove too expensive for many subscribers?

More likely, providers will create standard, plus, and premium packages for VoD, each available for a flat fee. These packages will offer various virtual channels based on demographics, interests, and themes that help viewers zero in on titles of interest they can access at any time. These VoD channels may be analogous to satellite radio channels that focus on specific genres or decades. Providers will most likely start out by offering a number of virtual channels and then refine their offerings depending on users’ viewing patterns. For subscribers who are not interested in channels or do not use the service much, providers may bill for IPTV services on a per-use basis. Providers will need to determine the pay structure based on per-channel or per-use basis and how to charge accordingly.

A third issue is how to deal with royalties. Today, broadcasters purchase the rights to show a movie, for example, to all of their viewers at once. In the world of IPTV, a movie is watched one subscriber at a time. Some might watch a movie as soon as it becomes available and some might watch it months later. Regardless, a royalty must be paid every time. If royalties are not paid, access to content may be denied.

Many of the issues involving royalty payments will have to be solved by the content industry. Standard contracts for producers, directors, writers, actors, and even content owners, may need to be rewritten, as they were when the videotape and video rental entered the mainstream. One option is for content owners to create a direct-to-consumer model that uses the carrier as a distributor where the owner would use a “settlement engine” to track viewings and pay the appropriate royalties. Most content will probably be available via providers who will need to bring their content and programming expertise into play to ensure they capture the information needed to pay royalties.

Creating a new IPTV offering requires rethinking conventional ways of handling content navigation, content billing, and royalty payments. The nascent industry, including providers and content owners, is considering many different approaches to these three issues and an IPTV architecture that can support them is available now. By the time IPTV services are available, subscribers should have no trouble finding exactly what they want to see and the industry should be in an excellent position to bill for content appropriately and pay royalties to those who are owed them.

Jeffrey Paine is Vice President of Strategic Marketing for UTStarcom Inc.

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