By Kevin Voigt
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HONG KONG, China (CNN) -- For the future of the television industry, eyes worldwide are watching Asia. The computer and Internet businesses may have sprung from the West, but with Internet Protocol Television (IPTV) it's the East that's leading the way.
Nowhere more so than Hong Kong, where 40 percent of residents get their movies, sports programs and news shows via telephone lines rather than satellite dish or cable. The world's largest provider is Hong Kong-based PCCW Ltd., whose Now TV service has 156 channels and more than 650,000 subscribers; in September, the company launched the world's first real-time pay TV service on mobile phones.
"In just three years we're now in 25 percent of the homes (in Hong Kong)," says Paul Berriman, senior vice president of strategic market development for PCCW.
Hong Kong may be in the vanguard, but the rest of the region is catching up. There were 1.2 million IPTV subscribers in Asia-Pacific countries (outside Japan) last year, but the number is expected to swell to 30 million by 2010, according to market research firm IDC.
Telecom firms in Japan, China, Singapore, Taiwan, South Korea and Thailand are getting into the television business, and Asia is expected to be home of half the world's IPTV subscribers, according to In-Stat, a U.S.-based market research firm.
IPTV uses Internet broadband to deliver programs and promises more interactive possibilities for viewers. Subscribers can choose channels instantly with a click of the remote control, rather than buying bundled channel packages as most paid TV providers require.
"Just like the iPod is the latest version of the portable cassette player, IPTV represents the same kind of step in evolution for television," said Claudio Checchia, research manager for IDC Asia-Pacific. "It provides real two-way interactivity ... instead of dialing a number to vote on `American Idol,' you just push a green button on your remote control."
The technology could turn TV sets into virtual online computers able to send e-mail and texts, download films, or make hotel and airline reservations. Advertisers could send commercials directly to subscribers with viewing habits that suggest a potential customer. Though still in its infancy, IPTV opens the door for "much programming and advertisement targeted to niche markets," Berriman said.
Telecom companies hope IPTV will stop the erosion of revenue from traditional fixed-line phone service, which has been pummeled by increased competition, mobile phones and free Internet phone calls.
"By offering what they call 'three-play' service -- combined home, mobile and television subscriptions -- it reduces the churn of customers going from one (telecom) company to another," Checchia said.
Yet telecom companies in the media saturated markets of North America and Europe find it difficult to woo customers away from cable and satellite services.
"TV subscribers are stubborn in their ways ... if they are satisfied with their current provider, why change?" said Paul Erickson, a market analyst with IMS Research, a Texas-based market-research company. "It's much harder to differentiate yourself and a huge barrier to market entry."
However, in emerging markets such as India and China -- where cable and satellite television industries never had a strong foothold and broadband use is skyrocketing -- IPTV has a chance to leap-frog ahead of traditional paid television.
"With new high rises going up around China all installed with broadband, it makes it perfect conditions for IPTV to take off," Checchia said.
Emerging markets in Asia may offer the greatest opportunity for Internet Protocol TV, analysts say.
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