IPTV Equipment Spend and Subscribers Growing Rapidly

In the midst of this recession, which Federal Reserve Chairman Ben Bernanke believes we’ll come through by the end of the year, and despite the tens of thousands of layoffs in the tech sector, the outlook has perhaps been brightest in the communications space. 

 

The ability of the communications industry to continue to flourish, of course, is thanks in large part to the ongoing innovation that has delivered such cost-saving technologies as VoIP to the world. With companies under intense pressure to cut costs, IP Communications has offered an escape path for many businesses, which might otherwise have been forced to cut staff (or more staff).

 

It’s the ability to ensure business stability and retain staff, while still cutting costs — and improving communications efficiency to boot — that drove a 15 percent increase in attendance at last month’s ITEXPO in Miami. That’s not to say the communications industry hasn’t suffered its share of setbacks; it certainly has, with network equipment vendors struggling in many cases.

 

Still, those focused on less expensive alternatives, and particularly those catering to the SMB market, have seen growth in many cases.  But the communications industry segment that is perhaps performing above anyone’s expectations currently is the video market, driven largely by growing interest in IPTV (News - Alert).

 

Despite service providers, like all businesses, looking to cut costs, which typically starts with cutbacks in CAPEX, video equipment providers saw a boost in demand for their technology, largely driven by a growing interest in IPTV services worldwide, a trend Infonetics Research expects will continue in 2009.

 

In its Q4 2008 IPTV and Switched Digital Video Equipment, Services, and Subscribers report, Infonetics predicts IPTV subscriptions will grow to nearly 45 million this year, up from 25.4 million in 2008. While the expected growth rate of 77 percent isn’t quite the twofold increase last year, it certainly is an indication that the market is growing, despite a global economic downturn.

 

The figures echo growth predictions from both In-Stat (News - Alert), which says the IPTV market will grow to 71.6 million by 2012, and ABI Research, which predicts 79 million by 2014. While those figures also indicate a slower growth rate over a longer term, the message is consistent: IPTV is growing, and as the In-Stat report notes, even a global financial meltdown cannot stop its growth.

 

The increased uptake in IPTV services is a result of a number of factors, creating a perfect storm of sorts, allowing an industry that provides non-critical services to thrive. 

 

Bandwidth is more readily available to support broadband video; the video equipment being developed offers increasingly enticing features combining several communications services (e.g., caller ID on the video monitor); the HD market has exploded, both the hardware and service markets; and of course subscribers also are budget-conscious, and enjoy the opportunity to cut off more expensive cable and satellite TV services.

 

The HD market, in particular, is providing a boost, as potential subscribers are less concerned with the video quality they can expect. After all, you can hardly go into a store and buy a non-HD television anymore (and why would you want to).

 

“Encoder providers like Harmonic, Tandberg (News - Alert) (Ericsson), and Motorola will see a continued uptick in revenue this year as they benefit from the HD arms race currently going on in North America and soon to expand to Western Europe and parts of Asia,” said Jeff Heynen, Directing Analyst, Broadband and Video, Infonetics Research (News - Alert).

 

Mirroring the doubling in IPTV subscriptions in 2008, service provider and cable operator spending on IPTV and switched digital video (SDV) equipment increased 48% in 2008, which Infonetics again says was a result of a shift to HD formats. Though it will slow somewhat, service provider spend on IPTV equipment worldwide is still expected to grow by double digits over the next five years — including integrated digital headend platforms, VoD and streaming content servers, IP video encoders, IPTV middleware/content delivery platforms, video content protection software, and IP set-top boxes.

 

In the U.S., in particular, this will be an interesting space to watch, with IPTV service providers (telcos) battling the cablecos in a race to deliver the most HD content. 

 

Ultimately, though, the driving factor may well be the ability of each provider to effectively bundle high quality services, allowing subscribers to once again cut costs and enjoy a less complicated and better integrated connected home environment.