As European cable operators tentatively begin to roll out next generation platforms, Graham Pomphrey, Digital TV Europe (@DTVEGraham) assesses the chosen strategies and considers the challenges being faced.

On the Horizon

Although we are at an early stage, the maturing of some western pay TV markets, and the potential for saturation within them, has seen some operators look to advance their already popular services. The strategy is to either upsell additional services like huge VOD libraries, connected TV functionality and associated broadband connection, or to attract often scarce new subscribers. Virgin Media and Ono are already doing the former with TiVo technology, Zon Multimédia is using NDS-based middleware for its Iris platform while Liberty Global’s Horizon is set to launch in the Netherlands in the third quarter, to be followed by Switzerland, Germany, and Ireland later this year.

Liberty Global’s CEO Mike Fries has said Horizon will have a transformative effect on the company by enabling the cable giant to satisfy consumer demand to be able to draw content from the web to the TV, and to receive their ‘cable’ experience across multiple screens. “It will set our customer’s expectations and the quality of the consumer experience at a whole new level,” Fries told DTVE at the Cable Congress event earlier this year.

There is no doubt that Liberty Global has a strong market position, with a customer base of around 18.4 million and existing relationships with content partners. The biggest challenge is how to market the service. With around 10 million subscribers taking analogue services and operations in various emerging markets, Liberty Global, will need to market the service carefully. Fries has already said that Horizon will be “not that expensive”.

Making progress

While Horizon has been on the metaphorical horizon for some time – reports first emerged about the platform as far back as 2010 – cable operators Virgin Media and Ono have already launched services that merge traditional TV with web services. Partnering with US middleware-and-DVR specialist TiVo, both operators have been able to pioneer advanced services in their respective countries.

Virgin Media’s TiVo platform allows users to pause and rewind TV, offers advanced search and recommendation, provides access to catch-up services from the UK’s public broadcasters, including iPlayer, and offers access to web apps from Twitter, eBay, Facebook and Spotify amongst others.

The operator has seen pretty impressive take-up of a service that was initially perceived as an early-adopter platform, but is beginning to break into the mainstream.

Virgin Media ended 2011 with 435,00 TiVo customers, and its TiVo customer base more than doubled in the fourth quarter with 273,000 net additions – a third of whom were new TV customers for Virgin Media. By the end of March, TiVo subscribers numbered 677,100, contributing to a boost in Virgin Media’s overall pay TV base of 50,600. Those figures are likely to rise further as word-of-mouth and marketing campaigns increase, according to Virgin Media’s TV product director Simon Hunt.

“Our customers love Virgin Media TiVo, and our on-demand TV service, so it increases loyalty and customer life time value,” says Hunt. “TiVo customers have higher net promoter scores than non-TiVo customers and are 20% more likely to be advocates, so they recommend us to friends and family. And TiVo customers have higher ARPU: they love us more and spend more money with us.”

Looking long term, the operator wants the service in every customer home. It is undertaking a concerted marketing push for TiVo this year; it recently announced that the platform would be offered as standard and bundled with high speed broadband in a number of new packages, called Collections. The combination of TiVo and high speed broadband is providing very strong differentiation in a competitive marketplace, says Hunt: “We continue to make strong progress in rolling out our differentiated products. TiVo has had a fantastic year and we’ve announced that we’re doubling millions of customers’ broadband speeds with a new top-tier of 120Mbps.”

Virgin Media is of course competing against incumbent Sky, but according to Hunt, it is taking firm advantage of the capacity offered by the network. “We already offer over 36 HD channels, thousands of hours of on-demand content, including 3D content, and the UK’s fastest broadband. Each Virgin Media TiVo set-top box has a dedicated broadband connection, on top of the broadband speed you’ve signed up for, and we can do more.” Virgin Media has introduced some content apps on TiVo that leverage its broadband connection, alongside the launch of advanced red button services from the BBC in time for the Olympic Games. “It means we can blend tradition QAM and IP video delivery seamlessly for the best economics and the best customer experience. And we’ve proven that our broadband network can go even faster with successful consumer tests of speeds up to 1.5Gbps,” says Hunt.

TiVo’s advanced search and recommendation functionality has proved particularly popular, potentially changing viewing behaviour for content discovery and consumption. In November, TiVo users made one million content searches and launched 2.4 million apps, with sessions lasting an average of 21 minutes. “We’re unlocking and enabling a strong desire to personalise the TV experience,” says Hunt.

Moving forward, Hunt says the operator plans to further integrate social media and companion screens with the TiVo experience. It is currently working on a companion app to take the platform across various devices.

Partnerships

It is no coincidence that Virgin Media became one of the first European MSOs to launch a next-generation platform using TiVo. The technology company has spent years developing advanced TV services and has begun partnering with operators, reducing the time it takes for them to launch commercial services. TiVo has offered DVR services in the US since 1997, before expanding internationally with a mix of consumer and B2B models.

At its core, TiVo’s software enables operators to group broadcast channels, VOD services and internet content together under a single intuitive user interface with efficient search and navigation. Once the technology has been integrated into the deep pipe of the operator, core functionality is customised for the specific operator, such as country controls, user experience including the general look and tone of the service, which is mostly a one time activity. From this point, operators can deploy their own services within the TiVo ecosystem, including third-party applications.

According to TiVo’s vice-president and general manager of international Joshua Danovitz, the changing landscape of the European TV industry, with broadband players like Netflix and Lovefilm competing with traditional operators, means next-generation platforms are a natural evolution for cable companies. “It’s the perfect environment in which to launch next-generation services,” he says, adding that operators are most likely to make a major investment in their networks where the competitive landscape intensifies. The UK is a prime example. “For years, Sky was seen as the gold standard for user experience in Europe. Virgin Media is now offering something better than Sky. They have used TiVo in a very strategic way to go up against the competition by bringing broadband content onto the platform.”

The challenge for operators is to upgrade networks dogged by legacy infrastructure, from VOD platforms to conditional access systems and billing systems. Using well-established technology from TiVo gives operators access to circa US$100 million (?78 million) of annual R&D and engineering, according to Danovitz. “It doesn’t make sense to do this internally,” he says. “The test is not necessarily how fast you can bring an app onto a set-top box, but how you bring up the entire network.”

With a view of both the US and European markets, Danovitz sees distinct differences in how the ‘advanced-TV’ landscape is developing. Europe operators are taking a keen interest in delivering broadcast video via IP within the home, a trend that isn’t as prevalent in the US, he says. “It used to be the case that there were several years between technology innovation in the US and Europe. In fact, it has flipped to an extent and we are seeing a lot of demand [in Europe] to be able to deliver services in this way. It’s a very dynamic time in Europe right now. The difficulty is not putting video down the line, it’s about consumers being able to find content once it is in the home. That is what TiVo is all about.”

US cable operators, on the other hand, are much more focused on multiscreen and second-screen services, says Danovitz, pointing out another benefit of partnering with TiVo. The company has already developed the kind of technology that enables these services that it can share with its various partners, including Virgin Media, which plans to launch an iPad multiscreen service in the autumn.

Bundling

TiVo is just one option for European operators looking to launch advances services. In Portugal, Zon Multimédia last year launched Iris, its next-generation TV service, based on NDS’s Snowflake user interface. The platform offers advanced DVR functionality including series-recording as well as unified search across linear and on-demand assets. It also includes access to web-based content such as weather, newspapers and other applications as well as providing VOD recommendations based on users’ own stated preferences. Iris has undergone a series of upgrades since launch, including a restart TV function, enabling users to see the beginning of a programme that is being aired. The DVR service has also been enhanced to better manage recording conflicts, making it easier to record two channels simultaneously.

According to chief operating officer Luis Lopes, Zon is using Iris both to up sell to existing customers and to attract new ones, in what is a very competitive market. “We are able to grow ARPU on existing customers that migrate from legacy set-top boxes [but] most of all it is a new tool to acquire customers. Portugal is a very competitive country. There is a massive FTTH deployment and having very strong products is the only way that we are able to compete,” Lopes explained to DTVE.

Iris is not available as a standalone product; it is sold as part of a triple-play bundle that includes Zon’s fibre offering. The operator has seen steady growth, with 10% of Zon’s customer base, or 120,000 subscribers, opting for the service by the end of March. This despite the country’s acute microeconomic conditions.

From a technology point of view, Lopes says Zon has utilised the cloud as much as possible to enhance the user experience whilst taking the load of the set-top box. “It’s a next-generation platform in the sense that most of the functionality is now being managed at the server level so it’s a lighter solution in the set-top box,” he says.

Technology choices

Zon’s user interface is based on NDS Snowflake, one of various solutions offered by the technology company to help cable operators launch innovative services. The software, along with NDS’s unified headend product, will also be used by Liberty Global’s Horizon.

Jonathan Beavon, NDS’s vice-president segment marketing, says that operators looking to develop next-generation platforms should plan for a gradual transition to headend- or cloud-based features once their networks are ready and scaled to provision quality of service and high reliability for large customer bases. “Cable operators should support home-gateways, set-top boxes, as well as headend-based features for the next few years. Cable upgrades won’t happen at once given they need to be balanced with the budgets,” he says.

When cable operators decide they are ready to launch next-generation services, says Beavon, they should begin by offering features including catch-up TV services from popular broadcasters and on-demand content offers which that can compete with new pure OTT offerings delivered directly to the PC or connected TV devices. They key is to tightly integrate these services into existing set-tops and DVRs. “The integration of new features in to an existing cable TV headend system and installed base of set-tops and DVRs is complex,” says Beavon.

Secondly, operators should offer features that enhance the value of the subscription, such as second-screen applications and multiscreen TV. “Second-screen applications can be integrated into the pay TV guide on a mobile or tablet device to offer ‘social recommendations’ and additional information. Multiscreen TV allows a cable operator to deliver its TV, on-demand and OTT services to any connected consumer electronics device,” says Beavon, adding that this is the most technically challenging step. Operators, or their technology partners, must have a detailed knowledge of how end-to-end pay TV operations work as well as expertise in how specific device operating systems, user interface technology and electronic programmes guide work. NDS has developed a Unified Headend product that converts content into IP, which can then be distributed to devices within the home. It also enables the user to manage a single network that integrates TV, broadband and telephony.

However they choose to implement their next-generation platforms, cable operators in mature pay TV markets are acutely aware that they must move quickly to ensure they exploit the their high-capacity networks to launch advanced services before rivals steal their march. “European cable operators need to capitalise on their infrastructure and customer base before other broadband providers, such as telcos, start to offer competitive television packages, on-demand and OTT services bundles with broadband, telephony, mobile and WiFi offers. Cable operators have a key advantage in terms of customer relationships and existing infrastructure that can be transitioned into a superfast two-way broadband network,” says Beavon.

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