"We’re going through an evolution. All phone companies are becoming Internet companies, all Internet companies are becoming phone companies and in a couple of years we’ll all be TV companies as well. Companies that do triple play with a single billing relationship and bundled services will have an advantage long-term. I can’t see that not happening," Seeby Woodhouse, Orcon.

Over the next five years home entertainment systems will evolve to deliver an interactive, personalised experience, of on-demand content from a range of audio, visual and data sources.

Screen technology will larger and thinner and the DSL router, set top box and DVD recorder will have been replaced by a home gateway device taking free-to-air and pay TV from all the major content providers over your 50Mbit/sec broadband connection alongside a host of third party services.

Talking about separate voice and Internet access will be so yesterday. New smart phones with 200Gb removable disks will act as mobile conduits for true broadband and as part of the ‘follow me’ option allow phone, email and video traffic to be accessible wherever and whenever you want.

In the ideal world of 2010 New Zealanders will no longer be digitally deprived, we will have bounced back from the bottom of the OECD broadband statistics and be leading the world with high quality locally developed services and content available over the recently unbundled ‘transparent triple play’ IP networks of TelstraClear and Telecom.

In the baby steps along the way to triple play, carriers, computer companies, Internet service providers, home electronics manufacturers and broadcasters are already re-inventing themselves to deliver enhanced services with the TV set as their ultimate destination.

With both VoIP and broadband set to become commodity in the near future, on-demand and interactive video over IP is the next logical service layer for carriers to exploit, putting them in direct competition to pay TV and free-to-air broadcasters.

Telecommunications Review has been able to confirm that Telstra in Australia is interested in delivering TV over IP in the near future and locally its subsidiary TelstraClear has also been evaluating the technology. Government-owned company Broadcast Communications (BCL), responsible for TV transmission sites around the country has taken an interest and Telecom is continuing to run trials.

Pushing TV boundaries

The first signs of consumer readiness include the widespread take-up of liquid crystal display (LCD) and Plasma screens which can handle PC and web content with clarity and the plethora of hybrid devices in the home electronics stores designed to extend the TV experience including games consoles, personal video recorders (PVRs) and wi-fi equipment.

A pivotal convergence point with the television will be the official OEM release this month (October) of Microsoft XP Media Centre for PCs that will look more at home beside the sound system than in the office. They’ll double as entertainment servers; letting you control and record your normal TV channels and access stored or on-line content.

In fact Media Centre challenges many of the devices now competing for customer attention. Its 30 minute buffer lets you rewind to the beginning of a programme while it’s still recording or fast forward through the ads. The electronic programming guide (EPG) won’t be as useful as it could be, as local broadcasters have denied Microsoft access to scheduling. However there will be a sampling of international and local content to stream from the Internet as a taste test. The application will be part of Microsoft’s next operating system due in 2007.

And Microsoft has hedged its bets by delivering a serious carrier level suite of products that are already transforming some of the biggest telecommunications companies into TV network providers (see breakout box).

Overseas cable TV operators have given carriers a bit of a hiding by delivering phone and data services alongside their traditional TV and pay-per-view fare. IPTV is a way for them to get their own back. However, the local situation is quite different with TelstraClear the only competitor able to bundle video, data (10Mbit/sec) and voice through its newly upgraded Saturn digital pay TV network.

For the moment core content is Sky TV plus its own pay-per-view movies delivered to 40,000 customers in Wellington and Christchurch. Video-on-demand is a future possibility and it has been evaluating at IPTV as an option. TelstraClear has a nationwide fibre backbone and recently announced plans to expand fibre loops around the country but without last mile access will still depend on Telecom unless it revisits its earlier plan for a nationwide home network.

Of course Telecom would want to be first off the rank with new media or triple play. It has appearances to keep up and relationships with other key partners, including the commitment to Sky TV for content signed during its JetVideo DSL trials in 2003.

Bigger bundles ahead

Telecom has signaled a return to a single billing package adding Sky TV to voice and data but also plans to stream and deliver on-demand content directly when it delivers the full triple play deal to the suburb of Flatbush in Manukau, which is so new the 400 homes haven’t yet been built. It is currently installing fibre to the curb in to learn the best way forward.

In the meantime it is conducting IPTV tests with 20 individuals and, in cahoots with Sky and others, developing a hybrid PVR to manage and deliver a range of video-based services. And there’s a souped up version of its Jetstream on its way to facilitate true broadcast quality services.

Telecom is working closely with Alcatel, Microsoft’s agent for IPTV, to deliver ADSL2+ chip sets and ensure this latest digital subscriber line release works seamlessly with the Microsoft TV framework. Telecom will need to boost line capacity with ADSL2+ MiniDSLAM multiplexers every 1km to deliver about 15Mbit/sec speeds over copper.

Meanwhile Alcatel have been giving Telecom’s core network a $1.4 billion make-over, so it can deliver full broadcast or on-demand video. Its Multi-Service Core (MSC), 5020 Softswitch and 8690 Open Services Platform can support huge capacity and open the way for guaranteed quality of service (Qos) when bundling voice, data and video.

The $220 million voice component of the next generation IP network was recently given the go-ahead. The robust new network will replace the existing PSTN by 2012 with the first customers migrating during 2007.

Geoff Heydon, director innovation and marketing development based in Australia, says IP voice and high speed Internet are not terribly complex to deliver but video requires a complete transformation. "We have really only been able to deliver true TV and video content over DSL and IP in the last couple of years."

Currently users might get 1Mb from their home to the exchange but from there on the data stream is variable depending on the number of people on-line. "With TV services you need 100 times greater capacity in the middle to get the balance right. The user never needs to know how much bandwidth is being used just that the service is always going to be like TV or better."

Using the Microsoft TV family of standards-based software and related developer tools, network operators can create new services such as video-on-demand (VoD), on-demand storefronts, interactive program guides, managed content services and enhanced programming for a mass market roll out.

Through set top boxes or specialised modems a rich range of content can be received alongside e-mail and instant messaging. The consumer-end software combines instant channel change (ICC), multiple picture-in-picture (PIP) screens, a comprehensive electronic programming guide.

Streaming or VoD content can be recorded on PVRs or IPTV enabled devices. DRM (Digital Rights Management) allows content to be moved between authenticated portable devices but prevents copying of films or TV programmes to DVDs or swapping downloaded files.

While it will soon have immense capability to deliver a full triple play service, Telecom is under no obligation to deliver VoIP, which is set to undermine its existing voice services, or video-based services, until customer demand or competitive threats dictate.

Breaking through the ceiling

The main obstacle for competitors who are looking to use Internet access to deliver rich media services for Microsoft’s Media Centre for example, is the artificial ceiling placed on access speed. There’s no doubt improvements in video compression will continue to make it easier to run fatter services down narrower pipes but dial up will never cut it in this new world and neither will the 128-256kbit/sec entry level that has erroneously been called broadband in New Zealand in the recent past.

That’s where Microsoft, the de-facto standards-maker, has the edge again. Windows Media 9 is already capable of delivering compressed TV at 1.5Mbit/sec, although most players suggest a minimum access speed in to the home to make Internet-based video viable would be 4-5Mbit/sec.

Meantime 2Mbit/sec speeds is all Telecom is letting out of the stable as a wholesale bitstream offering to ISPs and it took a Commerce Commission determination to get that. The reality is without strong competition the regulator is going to have to use a legal crowbar to prize any more until Telecom is good and ready.

Internet service provider Iconz would have been in the content delivery game by now if Telecom had been forced to unbundle its local loop network. John Russell, research and development manager with Iconz, says 2Mbit/sec doesn’t go nearly far enough.

"While it’s relatively easy to push content around the network core we still lack for some decent last mile alternatives. It’s remains absurdly expensive and hard to get a great deal of data to a customer’s home". Iconz has shelved its video-on-demand plans for the meantime.

Another obstacle is the charging regime most ISPs have, which is not conducive to long term use of any rich media services. Orcon seems to be leading the way with its new approach, charging $40 a month for 2Mbit/sec with a 1Gb data cap but for each 10Gb of traffic you only pay $10; something that costs Xtra business users up to $1000.

Seeby Woodhouse, director of Orcom Internet says all ISPs are interested in triple play but without high speed broadband it’s a long way off. In the interim it’s just a matter of being prepared. For Orcon that means becoming a voice provider and upgrading its internal capacity to 10Gb ready for delivering of quality of service.

"We’re going through an evolution. All phone companies are becoming Internet companies, all Internet companies are becoming phone companies and in a couple of years we’ll all be TV companies as well. Companies that do triple play with a single billing relationship and bundled services will have an advantage long-term. I can’t see that not happening."

Behind the scenes though is a promise that still seems too good to be true given our track record. The Government’s Digital Strategy has the visionary goal of 5Mbit/s to most residential homes by 2007 and suggests 50Mbit/sec by 2010.

Fulfilling broadband promises

The task of getting 80% of residences or 600,000 customers connected at 256kbit/sec or greater within the next five years to elevating ourselves from the bottom to the top quarter of the OECD ratings seems daunting enough. Currently broadband penetration is only about 10%.

However Alcatel’s Geoff Heydon doesn’t believe it’s impossibility to achieve 50Mbit/sec to the home by 2010. "If you don’t you will be a laggard in the market". In fact he believes IPTV will force the way forward so that by 2020 most homes will typically have 1Gb connections.

Ian Quinn, lead systems engineer with Juniper Networks suggests the way forward may be in incremental steps which begin with differentiating classes of service. He says data caps will stifle the development of local content unless a new model is introduced, for example subscription fees for gaming or video. "When that happens and access to bandwidth increases video will come in as another service."

Juniper is already providing a way for ISPs to charge separately for content through its ERX edge routers, used by both Telecom and TelstraClear, and its intelligent SDX software layer for services deployment. Working in with billing software the ISP can identify traffic from a subscriber and tariff differently for games, local video or streaming radio content.

If you can’t join them beat them might be the philosophy of Cisco which is literally on the outer as far as delivering IPTV or triple play here. Cisco, normally seen as a key player in enterprise computing is happy to operate on the edge or last mile.

It acquired Linksys two years ago and has just announced a major deal with Dick Smith to resell its ADSL2+ complaint broadband and wireless routers for the home market. It recently acquired large Denmark-based Kiss which makes set-top boxes, DVD recorders and plans a release of new products over the next two years.

While removing data caps and improving last mile bandwidth might go some of the way to opening up the market to competitive services Aaron Scott, Cisco senior consulting engineer, says the key impediment will be ownership of content. "Even if you have all the bandwidth in the world the majority of content here would still be licensed to Sky TV.

Sky TV had 619,000 subscribers by April 2005 - about 87 per cent of them on digital and along with its own channels re-transmits TVNZ, CanWest and Prime. Its $600 My Sky PVR to be launched in December can record two channels at once onto a 160Gb hard disk while you’re watching a third. The EPG simplifies what to watch and when and the recording process.

Sky is expecting to add enough capacity on the Optus D satellite from mid-2006 to double its channel offerings to around 160, increasing its customer appeal and its stranglehold on content rights.

Meanwhile the renewed focus on trying to capture the TV space is a definite concern to the nation’s free to air broadcasters who are being kept in digital limbo by a government that seems reluctant to clear the way ahead, even for its own ‘public good’ future.

The prospect of crisper, clearer, more colourful images, better sound, and compression that delivers 10 times as many channels over similar spectrum is attractive. Even more enticing is the fact that no-one’s making analogue transmission equipment any more and, at an as yet unknown date the government will flick off the analogue switch.

After a decade of wrangling the broadcasters are still waiting to be told how much spectrum they’ve been allocated and at what cost, and whether they have to pay for additional frequencies to add more channels and interactivity.

They’re also waiting on state-owned company Broadcast Communications (BCL) to announce its preliminary technology and business case in late November. Again it’ll come down to the cost involved for transmission services and compatible equipment for each broadcaster.

Head of the New Zealand Television Broadcast Council (NZTBC) Bruce Wallace says his members want to deliver more than just simulcasting, which would force them to run two networks from the revenues of one. The greater the investment required the deeper they’ll have to dig into budgets set aside for local content development and interactivity.

The general consensus is that a mix of terrestrial for the main centres and towns and satellite to fill in the grey areas would do the trick and to avoid a second home dish they’ have to acquire space on the Optus satellite.

Too much information

And there’s still work to do to get widescreen infrastructure in place so the 4 x 3 aspect ration doesn’t make newsreaders and Pop idols look a little fat. And another challenge is the next quality leap of HDTV.

Mobile broadcasting also needs to be taken into account, for example using the new terrestrial DVB-H format, to transmit to mobile phones, in-car TV and public transport. Interactivity may add value but it also requires extra transponder space and massive back office and transmission infrastructure. And digital needs to be open and flexible to embrace changes and enhancements that haven’t even been considered yet.

A New Zealand On Air report Public Broadcasting in the Digital Age, delivered in May warned the current "pervasive air of paralysis" can only be ended by government intervention, incentives to invest in infrastructure and new services, and "the stick of regulation".

New Zealand consumers were behind most of the developed world in the transition to digital broadband, and with no leadership or funding from government there was a risk digital free-to-air television would go into decline

The report says TVNZ in particular must maintain significant enough impact to fulfill its role as a public broadcaster as it moves to digital, ensure programming is accessible to audiences anywhere, anytime and anyhow regardless of device or delivery platform.

But the most striking failure was that of broadband, "the cornerstone of … an effective digital communications environment" which only showed signs of progress when the Government threatened action or regulation. "Competition is essential if new services are to emerge and flourish."

The authors say the Government’s ideal of establishing nationwide 50Mbit/sec broadband access by 2010 is a long way from current reality. With broadcasters likely to be competing directly with telcos in the new converged space they believed it may be time to follow the UK and Australia and appoint a regulator with responsibilities for both broadcasting and telecommunications.

Meanwhile NZ on Air CEO Jo Tyndall on secondment to the Ministry of Culture and Heritage as its Digital Project manager says there needs to be "a clear identification of what is causing the blockage, what is preventing digital television becoming a reality and getting past that."

She says some balancing of interests is required between the different roles the government has to play from spectrum management to its shareholder interests in TVNZ and BCL, the policies it has developed as part of its digital strategy and the wider public policy interests. "The time is right to engage with the free-to-air channels so we can move ahead to a reliance solely on digital."

Perhaps the free-to-air players need to review their tactics. If the game is all about audience penetration then the existing simulcast on Sky and analogue is already achieving part of their goal. Maybe in conjunction with the Government joint pressure should be applied on Telecom to speed up its roll out of ADSL2+ DSLAMs and fibre to the home so it can deliver free-to-air as part of its broadband for all commitment.

Then perhaps TVNZ and its free-to-air peers could focus on delivering more local content, dishing up their archived content for on-demand and creating community-based and special interest channels which would do us all a power of ‘public good’.

Ends