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By Carol Wilson - August 5, 2010
As US telcos grow increasingly concerned about the impact of over-the-top video on their IPTV offerings, a French company is finding success selling its middleware and hybrid set-top box to combine paid TV with OTT video, and is now contemplating an entry into the North American market.
Netgem got its start selling in-country to the IPTV operation of SFR , which acquired Neuf Cegetel in 2008 and has since landed Telstra Corp. Ltd. (ASX: TLS; NZK: TLS), Monaco Telecom , Algeria Telecom, and Melita Telecom in Malta as customers for its middleware and Netbox gear.
Now, Netgem is testing the waters for a US entry, says Yann Courqueux, chief marketing officer.
Netgem products are proving more popular as telcos and cable companies see the value of using OTT video as part of their paid TV package, rather than viewing it primarily as a threat.
"What we can show them is how they can use OTT video to become much more flexible and develop richer content" without massive capital outlay in headend gear and servers, Courqueux says.
Monaco Telecom, for example, was operating what was essentially a cable TV network and needed to add interactivity and video-on-demand for its high-end clientele, according to Martin Perronet, the operator's CEO. Consumers had access to "gray market" satellite services and were increasingly buying TVs with their own Internet connections, which would enable them to bypass the cost of cable and access OTT video.
"It was imperative to launch a new type of user experience on television -- to optimize the user experience and to guarantee the quality of the programs and the quality of what people are watching," Perronet says. "But we also wanted to know what was the most economical solution."
Monaco Telecom looked at other IPTV options but found the capex required was high, while the Netgem approach let the company capitalize on its cable network while adding interactivity via DSL.
Monaco was also attracted to Netgem's search capabilities, Perronet says. Simple, fast search and multiple language options were important to Monaco Telecom because of the diversity of its customers, who expect to find programming in their native tongue [ed. note: Monaconian].
"Using the Web is more clever and scalable in terms of investment," Courqueux says. "Users can access Web TV content using smooth streaming technologies. All operators need to do is have an agreement in place with a CDN [content delivery network] so that as content is in greater demand, it is moved closer to the user."
The idea is that operators don't have to invest in heavy infrastructure before generating revenue. That leaves them free to target spending at new interactive features and the most popular content.
By using adaptive bit-rate technology, Netgem can use shared bandwidth more efficiently, giving users the best of what is available at any given time.
"With a CDN, you get progressive downloads with a little bit of a buffer, so you have a variable bit rate and adaptive streaming. It is a natural discussion between device and source to dynamically reassess the bandwidth you can load at any one time," Courqueux says.
Less popular content is available via a hybrid system, but the video service provider isn't yet investing heavily to deliver a large array of such content to everyone.
Consumers can also use the Netgem Netbox set-top box as an in-home media center, connecting via two USB ports to deliver their own broadband content to the TV. Netgem middleware provides interactive services.
Monaco Telecom estimates it saved almost $400 per customer using Netgem over a pure-play IPTV option. In June, the company launched 180 linear channels, including 22 in HD, along with video-on-demand, multi-lingual soundtracks, and Dolby Digital Surround Sound.
"There's no question their platform works and it can scale," says Steven Hawley, principal analyst and consultant for Advanced Media Strategies. "What I think helps them as US operators look at OTT and ways to blend Internet-delivered TV with apps and content from a lot of sources, is that they are in a good position for an operator that wants to experiment with different user experiences and content from a lot of different places."
Courqueux says his company will continue to talk to potential North American customers before making a decision about entry here, adding that other major customer announcements are expected in September, at least one of which will involve a hybrid model that incorporates satellite television.
That's an approach that will work in North America, Hawley contends, where major telcos are selling satellite services, primarily from DirecTV Group Inc. (NYSE: DTV), in areas where they don't have the infrastructure to support IPTV.
AT&T Inc. (NYSE: T) once had a service known as HomeZone that used a hybrid box from 2Wire Inc. to do this, but that effort was discontinued. The advent of major OTT video content could resurrect that approach, Hawley believes.
"Deutsche Telekom AG (NYSE: DT) is doing that now, and I think we'll see others doing it also," he says.
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