• by Erik Sass  @eriksass1, February 7, 2006

Much has been made recently of Internet Protocol TV (IPTV)--TV programming delivered to computer monitors or regular old TV sets via Internet--and Patrick Pfeffer, a leading expert on IPTV's technical and market aspects, tends to agree with these positive assessments, calling IPTV "the wave of the future." But at the same time, Pfeffer cautions that there are a number of serious obstacles in the wave's path.

Pfeffer--who is the chief network architect for Detecon Inc., a telecom consultant, and author of a report released today, titled "IPTV: Technology and Development Predictions"--first outlined the advantages of IPTV for advertisers: "If you look at what it means for advertisers, it's a combination of the most persuasive medium--television--with razor-sharp targeting--Google-type precision, basically, where you 'narrowcast' to a very specific audience."

Elaborating on IPTV's advantage over old-school TV, Pfeffer noted that "advertisers always had a problem with measuring how attentive people were; with IPTV, you have a way of measuring how attentive people are."

Pfeffer added that "with IPTV you have an opportunity to do better tracking, and better analytics on who watches what, and in what order."

Spinning out the scenario, Pfeffer said: "Imagine now you have an advertiser who wants to tell a story in three ads. Today, the viewer has to follow the particular program or programs where they appear and see all three in the right order. But with IPTV, the ads can follow the viewer, and you can make sure they appear in the right order. You can also avoid duplicating ads."

But IPTV faces major structural hurdles before it can compete with the networks and cable TV. Chiefly, Pfeffer notes in an executive summary, the rising popularity of video on demand (VoD) presents IPTV with both its best selling point and its main infrastructure challenge.

Indeed, Internet delivery of TV programming would allow unprecedented choice, but also strain available bandwidth beyond the breaking point: "If VoD becomes a prevalent form of TV viewing, this means that the current network [telecoms] are building to support IPTV will not have enough bandwidth," Pfeffer writes.

Explaining this point, Pfeffer said: "The issue is the level of aggregation that is taking place in the network. The assumption is that in a certain neighborhood, there are a certain number of people who are going to watch any program, and if everyone is calling it up with VoD-and you need a single stream for every user--there's simply not enough bandwidth from the local hub."

Solutions? "The best thing to do is push the aggregation closer to the core," Pfeffer said, meaning massively expanding distribution capability at the telecoms' main hubs--but as Pfeffer observes, this isn't happening.

Furthermore, telecom-driven IPTV networks face a major obstacle when it comes to content. Barring cooperation with cable and network TV content providers, IPTV will need compelling programming of its own to differentiate its product. Although difficult, this is hardly impossible. Pfeffer pointed to an early example in the United States: "For example, you see Comcast in Philadelphia locking out the competition by not allowing them to re-transmit the local sports programs."

In the long run, Pfeffer predicts, as telecoms and cable operators both compete to deliver digital "triple play" (voice, video, and Internet) to every household, if there is no content differentiation, the result will simply be a price war: "In the end, if there is feature parity, the only differentiation will be price."

Pfeffer characterized this as "a likely end result, but not for ten years or so." In the meantime, "you will have fierce competition over content and delivery platforms--and competition is good."