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Georgina Lee

Struggling telecommunications  firm PCCW is planning a re-launch of its video-on-demand service, hoping to build a new earnings stream at its NOW Broadband pay-television business to compensate for the erosion of its core fixed-line revenues.

It would be the operator's second attempt to run a video on demand service.

In 2002, it closed iTV, inherited from Cable & Wireless in August 2000, after failing to lure subscribers to a congested network offering a limited collection of programming.

The firm is in talks with content providers about buying films  to offer through NOW's installed base of 367,000 set-top boxes.

Many of the boxes have been distributed free of charge to consumers who signed up for PCCW's Netvigator broadband service. PCCW has refused to disclose NOW's average revenue per user,  saying it is premature to do so.

While PCCW still holds about 70 per cent of the residential fixed-line market, the segment  is in steep decline.

Fixed-line competition, plunging IDD rates and the spectre of ultra-cheap voice over internet protocol  have left the company scrambling for a business model capable of reversing the slide.

Wu Liang-tai, executive vice-president of emerging technology, said video on demand could be a solution, and was a natural progression for NOW's service line-up.

The earlier video-on-demand effort was hampered by immature technology: transmissions were 'unicast', meaning a network could  become congested if too many customers ordered  the same film.  Moreover, the NEC set-top boxes  were too expensive.

Offering video on demand over an internet protocol television (IPTV) network made better business sense, Mr Wu said. 'The telecoms industry in the past might have made a mistake by launching video on demand before IPTV.'

'[Video on demand] is the last step  if [PCCW]  wants to become a successful triple-play operator,' Mr Wu said, referring to the business of  packaging voice, internet access and pay-television services.

Mr Wu said PCCW was also exploring other  opportunities for NOW, such as online gaming.

A second PCCW source confirmed the company was studying video on demand using more efficient 'multicast' technology.

DBS Vickers Securities analyst Wallace Cheung said video on demand would help PCCW fill out its product range, but doubted whether  it could be a key revenue driver.

Video on demand would  compete  with regular television channels, the corner DVD store and even cheaper pirated DVDs.

However, PCCW  is not alone in offering IPTV video on demand.

Taiwan's Chunghwa Telecom has launched on-demand films and interactive learning content. South Korea's KT plans to launch IPTV  video on demand in 2006.

Hong Kong Broadband Network chairman  Ricky Wong Wai-kay said his company had no plans to offer the service  as it would need to compete with  Hong Kong's numerous  sources of pirated video.



PCCW plans to revive ill-starred video-on-demand service