David Moffatt, the former CEO of Telstra’s Retail Division, has said that the introduction of IPTV is set to be a big “revenue earner” in the future, but getting the model right is set to be difficult.He described IPTV as a “big factory of the future” but getting scale will be difficult.

He claimed that the current content benchmark for the industry is the Foxtel set top box and that “everyone is currently playing off that model”. 

He said that all current carriers must “play in this space to survive”, but not with a “walled garden mentality. They need to learn how to package up their offering and then market it.

“They are going to have to develop content partners to survive,” said Mr Moffatt.

Telstra, he claimed, is going to have to leverage its marketplace management to survive in this market.

“If they choose to build a model solely around sport and popular programmes, they will lose, as will Optus and any other players. Foxtel is the model to watch as it has the right packages and the right subscription model,” he said.

He claimed that the price of set-top boxes is set to drop and the functionality of units set to go up, and that the evolution of IPTV in the future will result in “big fat content factories” emerging, but getting scale and penetration in the Australian market is set to be difficult for a lot of players.

He also said that getting new IP-enabled products out there and accepted is difficult. He cites the roll-out last year of the iiNet “Bob product as an example”. This was a good product but, despite some excellent marketing, it only did “moderately well”.

He said that the “trick in all of this is not to be the guy that writes the cheque that subsidises the box in the early stages of IPTV. If you are going to subsidise the box, it is important that you get contractual commitment from the customer. To do this, your value proposition has to be really good.”

On the question of file sizes, bandwidth and pricing, Mr Moffatt said, “Pricing is the single biggest issue in the whole industry because you have to price in the capital cost of delivering the service. Then you have to take into account the share and volume you might get. Very few people in the past have been able to manage this process”.

He warned that the roll-out of IPTV is going to be extremely difficult for most players and until operators know what their carriage costs are going to be across a network like the NBN they will struggle to get their model right.

“Operators have to be certain of their economic return and right now there is a lot of uncertainty, anyone in this space could lose a lot of money if they don’t get their model right,” he said.

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