Why IPTV is Nowheresville in the U.S.

The IPTV hype is happening in a big way, just not in the U.S.

According to S2 Data Corp, of the 8.3 million IPTV subscribers in 2006 (expected to explode to 34 million by 2010),  the U.S. has only 500,000 of them.

So who's got them all?  The hundreds of rural U.S. telcos (the so-called independent operating companies or IOCs) who are actually rolling out IPTV services to consumers in places like Ramondville, Texas, Lenora, Kansas, Fallon, Nevada (they have their own theme song), Palmer, Alaska and Viola, Illinois. Make no mistake, these are the guys trailblazing IPTV in the U.S.

Meanwhile outside the U.S., IPTV has become a relatively mature service and is growing like gangbusters.  From Belgium to Brazil, Sweden to Slovenia, France to Finland, Ireland to Italy, IPTV is the thing with millions of IPTV subscribers paying real money for real services. 

In France, IPTV is even sold in consumer electronic stores like Darty (one of the largest consumer electronic stores in the country). That's why vast majority of our own puny Ruckus revenue (despite being based in Silicon-Valley) comes from outside the U.S.  Maybe we should have based Ruckus in the south of France!

A recent survey conducted by the EUI (Economist Intelligence Unit) and Accenture suggests that IPTV won’t generate “significant” revenue for North American telephone carriers within the next year, but that it will grow into a major cash cow by 2009.

So why is the U.S. so far behind? Here's the problem(s):

1) the "we've got coax everywhere" problem
Unlike almost any other country in the world, the U.S. has a legacy of cable companies delivering TV over a coaxial infrastructure. They've invested a lot of money in delivering digital TV using a special encoding technique (called QAM) and haven't been compelled to change. And this cable infrastructure isn't necessarily IPTV-friendly either. It's a shared medium where all channels are broadcast to all users all the time. Telephone companies don't have this problem and understand IP. But they have their own issues (below).

2) the crappy copper problem
The copper facilities used to connect phone companies to consumer homes (the so-called last mile or local loop) are antiquated and incapable of effectively supporting IPTV. (a single DVD-quality MPEG2 compressed video streams runs 5 to 7 Mbps). So telephone companies must either upgrade them to fiber (fiber to the home like what Verizon is doing with FiOS) or add repeaters that enhance the signal, allowing it to go farther and stronger. The enormous costs of upgrading these lines has prohibited new services such as IPTV.

3) the too many rules problem
The U.S. government (through the Communications Act of 2006 - the Stevens/Inouye bill) is trying to streamline the national franchise process to make it easier to offer IPTV without having to negotiate with each and every municipality.  They are also trying to eliminate multichannel video program distributors to deny access to content.  Keep in mind we said "trying" twice.  Outside the U.S., they aren't trying, they are doing.

4) the virgin problem
In the world of telecommunications, virgin is a bad word. Telephone companies have never delivered TV content and must now deal with content licensing, distribution and broadcasting rights and a bunch of other issues that take a lot of time to sort - while cable companies aren't really giving a rat's arse about IPTV - yet.

5) the home problem
Even after you solve all the problem above, how do you move this stuff around your home?  We've talked about this problem ad nauseum. The U.S. carriers have been so preoccupied figuring out how to solve the above problems that in-home IP distribution is simply an afterthought that's become a major deployment obstacle. Can you say "smart Wi-Fi?"

6) the bar problem
In the U.S., the IPTV bar has been set MUCH higher. U.S.cable and satellite companies offer premium services now. So in order to compete, the U.S. carriers must push the limits further than the folks in Europe and Asia.  This means they want to enter the market with multiple HD streams (each HD stream is 12 to 20 Mbps/piece) and "DVR networking" throughout the home out of the shoot. The big boys barely deliver 5 Mbps to consumers now (the IOCs do though).

So for now, the IOCs have become the IPTV innovators in America. Then again, America has always rooted for the underdog. We love dogs!