General

Pioneering IPTV:
the pain and the glory

This company was one of the first to deploy IPTV. Here's what they learned.

by Gerry Blackwell [October 24, 2008]

Deploying an IPTV system to round out your triple or quadruple play is no walk in the park even today, but at least the products needed to do it, the skills, the knowledge and experience, are all generally available, and best practices have begun to emerge

Five years ago, when Matanuska Telephone Association Inc. (MTA), a rural phone cooperative in Alaska, set out to make a pre-emptive strike against an encroaching cable TV operator, it was a different story.

"When they say, 'the bleeding edge of technology,' this is what they actually mean," public relations manager Jackie Kenshalo says of MTA's sometimes painful pioneering experience launching IPTV.

But it was a necessary experience and it has paid big dividends for the company.

MTA was the monopoly phone company in a 10,000 square mile swath of south-central Alaska that takes in mostly rural communities but also some Anchorage suburbs. Population: approximately 100,000. The company today has about 40,000 local service telephone customers.

It began adding new services early in the era of deregulation: first mobile telephony in 1991, then internet in 1997 and, finally, TV in 2003. The strategic and tactical drivers behind the last move have since become very familiar.

"We knew the cable TV operator out here, GCI, was competing in Anchorage for local dial tone and they were aggressively looking at coming into our market," explains director of engineering Eric Anderson. "So we looked at offering video service as a way to go after their business before they came after ours."

Introducing TV was also a way to create "stickiness," to keep customers with MTA. It worked. Like all incumbents, MTA has seen some erosion of its local service customer base, but it still commands a dominant 85 percent share.

It's also more than holding its own in the TV market. Sandra Goodale, the company's product manager for TV, says MTA and GCI are "neck and neck." She believes MTA is slightly ahead of GCI with about 40 percent of the market, and well ahead of its other main rival Dish Network, a satellite provider.

MTA offers all or most of the same video content as its competitors, including broadcast, video on demand and pay per view. And it offers a variety of channel packages, patterned quite deliberately after cable TV offerings—that's what customers want and expect, Goodale says.

"We're so new, people tend to want to cram us into a cable pigeon hole. They're very eager to compare apples to apples."

In fact, the company's TV offering is generally superior, she claims. Packages—with undiscounted rates from about $45 to $80—are more flexible. There are no hidden costs or bait-and-switch promotions, as Goodale says there are sometimes with competitors. Dish, which she admits has lower-priced entry level packages, has higher hardware costs—plus weather-related outages. And MTA boasts digital TV quality across the board.

The company also claims to remain the leader in high-speed internet service with about a 40 percent share. With cellular, its "weakest" link, Goodale says, MTA has between 20 percent and 30 percent of the market. But there it's competing against AT&T, exclusive distributor of the wildly popular iPhone.

There are other clear indicators, besides the encouraging market share numbers, that MTA has done the right thing.

"We've seen as competitors start offering service out here, the majority of the customers they are pulling from us are the ones that had [the other company's] TV service," Anderson says. "The customers that had our TV service, or multiple products with us, were not leaving."

Proof positive that IPTV created stickiness.

Part of that "stickiness" is that MTA provides an incentive for customers to take multiple services by offering discounts of 10 percent across the board for customers who take three services, 15 percent for customers who take all four. Once you have all your communications needs filled by one company and the convenience of one bill, you think twice about changing. This is known as "bundling"

But although adding IPTV was a key part of MTA's success, deployment and delivery was a long and agonizing process. Ask MTA managers about the challenges of implementing an IPTV strategy and the floodgates open.

"You have to remember that when we entered this market," Kenshalo says, "there really weren't many operators, or vendors, that were looking at IPTV." Therein lay many of the difficulties.

There were certainly no all-in-one service provider solutions as there are today. But MTA did find an integrator, Allied Telesis, that had implemented IPTV for another rural telephone cooperative in Wisconsin. Allied would help MTA cobble together a system from available components.

The lack of choice in some ways made choosing easier. There were only two vendors of suitable DSLAMs (Digital Subscriber Line Access Multiplexers). For middleware, a crucial component that determines basic capabilities, MTA had three choices, two of which are still slugging it out in the IPTV market today: Minerva Networks and Myrio. It chose Minerva, as much for price as anything, Anderson says.

The price
MTA also had to upgrade its DSL network to ADSL2+. Anderson is a little vague about total cost to implement IPTV, first guessing "a couple of million," then adding, "it's reasonable to say that by the time you build the headend, it's definitely in the millions."

But that was just the capital cost. Then there was, as Goodale says, the "emotional" cost. "You think it's going to be a piece of cake, but it's an iceberg—90 percent is below the water."

For the first few years, it was difficult to consistently provide customers reliable service. Anderson is bluntly honest about the mistakes that were made. In a review a few years after the company implemented IPTV, it found that, as he says, "we still didn't know what we were doing."

"We just said, 'Let's go out and do this,' and we never backed up and said, 'Well, what happens if?' And we've spent a lot of time the last two years trying to recover from that, to get so we can deploy service to a customer with a very good comfort level that we're going to be able to deploy it reliably."

A lot of it was just the steep learning curve involved in working with a brand new technology. In 2003, there was a dearth of IPTV skills and experience available in the market, and the supply was even thinner in remote Alaska. MTA's management had to learn the technology and the TV business as it went, and train employees at the same time.

"A lot of new skills had to be developed," Anderson says. "And often they just weren't available—the industry was not there to train us. We were the guinea pigs for a lot of this."

It was more than just developing new skills. The company had to adopt new mindsets too. For example, while it had experience offering DSL-based internet services, it probably did not fully anticipate how different—on many levels—it would be to operate a TV service over that same network.

"In the case of internet," Anderson points out, "it's a best-effort service, and the protocols are designed to handle that. TV is a little different. Now you're talking about something that has got to have a guaranteed bandwidth in order to provide good service. You can't have latency, you can't have jitter."

For one thing, customers won't stand for it. And that came as something of a shock. MTA was still first and foremost a phone company. It was accustomed to offering service on a rock solid and very well understood and easy to control network that rarely caused problems. And if there were occasionally problems, customers tended to be patient.

"But now," says Goodale, "this was, 'My TV's not working and I want it to work NOW!'"

That was just one aspect of managing and responding to customer expectations. They also weren't happy that MTA rolled out the service across its coverage area piecemeal, as its capital budget allowed. "People don't understand why you can't deliver something everywhere," Kenshalo says. "And that's a tough thing to overcome."

At least one of the key challenges of launching an IPTV service, securing content, was a little easier for MTA than some other pioneers. A little.

The company was lucky enough to be able to join the National Cable Television Cooperative (NCTC) before membership was frozen. The NCTC is a buying group that negotiates favorable licensing and distribution deals for small cable and, later, telco TV operators.

The NCTC removed most of the hassle and complexity of dealing with many networks and studios, and negotiated bulk rates that would be unavailable to a small operator on its own. The group rates made it possible for MTA and other members—including GCI—to compete with big players such as Comcast and Time-Warner.

But NCTC couldn't shield MTA from all of the difficulties inherent in acquiring content. In some cases, its deals with owners had lapsed, or it had never had deals. Then MTA went the direct route.

"That was painful," Goodale says. "Trying to find the right people, trying to get them to talk to you when they're in New York and you're in Alaska. And just trying to execute a contract when—." She trails off. "You have to learn a lot up front and fast."

But for all the pain the MTA management team suffered getting the IPTV system and service up and running smoothly, Goodale insists in the end, "It was a rewarding experience." It's one the team is evidently proud of, despite the bumps. "For the most part," Kenshalo says, "it's a beautiful product. It's awesome. I just want to get that out."

More importantly, it has done what the company wanted it to do. "If we hadn't had TV when local competition came in, I don't know if would fare as well as we do," Kenshalo says. "It's been a huge piece for us."

—End