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Stuart Biggs

PCCW has used its strength in Hong Kong to gain a head start, but it remains to be seen whether others can do the same

At last week's convention of the Cable and Satellite Broadcasting Association of Asia, PCCW's executive director and chief financial officer Alex Arena  was asked what kind of content would drive the firm's pay-television business in the future.

Mr Arena's response - 'Hey, I'm a telecoms man' - drew laughter from the audience as it played to an industry joke that telecommunications companies know nothing about television and content, and especially licensing.

But with about 500,000 subscribers to its NOW Broadband television service, PCCW arguably has proved that content is not the insurmountable barrier to entry it once appeared.

Mr Arena said the key focus for PCCW's content deals was sports, movies and local news. Deals with ESPN, HBO and Star Movies took care of the first two categories; PCCW will launch its own 24-hour financial news channel to take care of the third.

Analysts have used the decision to move into content generation to highlight the risks associated with rolling out IPTV and to illustrate that for many fixed-line operators getting into pay TV was a defensive measure aimed at offsetting falling voice revenues.

But proponents of IPTV said the functionality of internet protocol networks was ideally suited for next-generation interactive television services, and that it could turn out to be cable operators, for all their experience, that emerged the losers.

PCCW head of strategic market development Paul Berriman  said: 'The important thing is to look at IPTV from the perspective of a telecoms [firm] rather than a traditional cable operator.

'Our core competence is building bandwidth and billing customers, so our philosophy for the IPTV platform comes from our old premium rate telephone services, where the user dials in to access the content, PCCW bills the customer and shares the revenue with the content provider.'

With the trend towards interactive programming, advertising and video-on-demand gathering strength, a telecoms company's inherent billing capabilities may emerge as the clincher for content providers looking to diversify from the traditional broadcast model.

Mr Berriman said PCCW could monitor by the minute what the firm's customers were watching and the interactive choices they were making on their handsets, which might not please conspiracy theorists but would add value to content providers and advertisers.

Richard Anderson,  IBM's general manager for global digital media, said: 'Technically, now you can know down to the individual what they are doing and a great deal about their profile, so the question is what is going to be acceptable to the consumer and society in letting that happen. And I think the consumer is going to start making trade-offs on that. It can be very convenient for the user because broadcasters can give content that is more relevant.'

But while PCCW has used its strength in Hong Kong to gain a global head start in IPTV, critical questions remain about how telecoms firms can make it work. Cynics argue that PCCW's success is in large part due to Hong Kong's unique advantage, such as its high broadband penetration and population density.

Telecoms are unlikely to have things their own way, however. The BBC's head of new media Ashley Highfield  said the key to digital programming was 'a triumvirate of content, quality and functionality'.

PCCW's latest plans address the issue of functionality with video-on-demand, high definition television and network-based PVRs expected in the coming months.

Mr Berriman said: 'Every year we've given the customer more for his money.'

Telecoms consultant Jeanette Whyte  said developments such as Google Video were a critical element in the consumer shift to event-based rather than broadcast-based viewing. For telecoms firms providing IPTV and video on demand there is a risk that customers may utilise their broadband connectivity to bypass the operators' content in favour of alternative portals such as Google.

The success of IPTV may come back to consumer choice of content. In a research report, Gartner analyst Andrew Chetham  predicted the emergence of content aggregators to service especially the smaller operators, leaving larger players to deal directly with content creators/ providers.



IPTV puts telecoms firms in box seat