Broadband TV Starts With Mixed Signals
By Kim Tong-hyung
Staff Reporter
After months of cross-industry bickering that had more false endings than the last ``Lord of the Rings'' movie, the Internet protocol television (IPTV) era has finally begun.
It remains to be seen, however, whether the futuristic television services will be a messiah or mirage for local telecommunications operators bleeding from erosion in voice revenue.
KT, the country's largest fixed-line telephony operator and broadband Internet provider, began to deliver real-time television to its ``Mega TV'' services Monday, a day after the Korea Communications Commission (KCC) approved its monthly rate of 16,000 won for the Web-based television services.
Subscribers are provided 33 channels, including the four national channels of KBS, MBC, SBS and EBS, and about 85,000 movies and other video-on-demand (VOD) content. The Web-enabled television also allows users to search the Internet, purchase products from e-commerce sites and access online banking services while watching their favorite shows.
KT is also planning to launch a premium IPTV service in June next year, which provides 80 channels for 23,000 won a month, the company said. The company will offer a discount rate of 12,800 won per month through February next year.
The other IPTV operators, SK Broadband and LG Dacom, are also planning to provide real-time television on their IPTV networks by the end of the year.
``After years of preparation, the real-time IPTV service is finally happening,'' said KT senior vice president Yoon Kyung-lim, who looks over the company's IPTV business strategies.
``We are getting increasing attention from cable program providers and other content makers who are betting that IPTV will eventually become the new platform for television broadcasting. The new system will also contribute to expanding markets for finance, shopping and education,'' he said.
KT expects to invest more than 1.5 trillion won (about $1 billion) through 2012 to support its IPTV business, which includes spending on upgrading networks, securing content and developing broadcasting systems and terminals.
The company hopes to break even in 2013, when it expects to have around 3.7 million Mega TV customers, officials said.
Overrated as Money Maker?
IPTV has been getting a lot of press as the future of household television in recent years, embodying the hopes of telephony carriers who are now desperate to find new sources of revenue and gain on their broadband investments.
However, with operators still unsure about how much they could pay television networks for their content, there are concerns that IPTV might prove to be a far less lucrative market than expected.
After disputing with KT for months over content prices, the three major television networks ― KBS, MBC and SBS ― agreed to one of the more bizarre deals witnessed in a market economy, which was to provide their products first and negotiate their value later.
Although KT has yet to determine how it will pay its television partners, the company is planning to generate some of the funds by charging users for VOD programs of terrestrial content.
However, the increase of separately paid content could compromise IPTV's attractiveness to consumers, industry watchers said.
There are also questions whether the IPTV market would be big enough for telecom operators to make up for their decline in the traditional voice business. Koreans have never shown a tendency to spend much on pay-TV, and the struggles of new broadcasting platforms, such as satellite-based mobile television, offer a bad omen.
``VOD programs of terrestrial television content bear the closest resemblance to a killer application for IPTV services,'' said Kim Hong-shik, an analyst from NH Securities.
``So when you are charging 500 won per program for viewers to access those features, you are killing your own relevance as a service and giving viewers fewer reasons to convert from their cable or satellite television services,'' he said, adding that the industry must lower its expectations for IPTV, citing the lack of quality content and the higher-than-expected costs to secure them.
A slow start for the IPTV market will add further strain to KT's bottom line, Kim said, as the company had planned to bundle Mega TV with its telephony and broadband Internet offerings to compete with SK Broadand and LG Dacom.
Hwang Seung-taek, an analyst from Hanadaetoo Securities, said IPTV could still allow an improvement in the revenue structure of operators, but stressed the need of patience.
``IPTV overlaps with the market of digital cable television and there is a possibility of cost competition between the two sectors, which could affect the profitability of the IPTV and the growth of its subscriber total,'' he said.