IPTV services: the sum of the parts.

Outside of a telecom operator's ability to offer upfront pricing deals or deliver a higher quality of customer service, what are the essential elements to creating a television service that builds customer loyalty, increases retention and grows revenue streams? We believe that the answer lies with operators that acknowledge and embrace the notion that what they are delivering is much more than 500 channels of high-quality video. It is a service experience with significant enhancements to communications, entertainment and unique content experiences.

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Beyond providing a compelling lineup of high-quality television programming, telco/IPTV service providers must view television services in the context of a number of key technology trends and additional services beyond video.

* Comunications: Our surveys and the real-world experiences from a number of pay TV operators indicate that this feature--among even more advanced television offerings such as DVRs and high-definition content--more directly affects customer satisfaction and additional revenue per month. Service providers must consider the necessary integration between communications and entertainment services to facilitate more basic features such as this and scale to more advanced services, such as video-based voice-mail portals or the aforementioned videoconferencing, as their subscribers begin to demand them.

* Interactive Services: These applications include on-demand games and "widgets" that provide targeted news, sports, traffic, weather and other information. Service providers will need to consider how best to implement advanced interactive features, balancing the costs of licensing services and technologies versus attempting in-house development. There also will be monetization considerations for such services, as they will allow for experimentations with advertising, subscription and other revenue models.

* Home Networking: Although consumers wouldn't necessarily recognize the "digital home," they do see demand for features that will rely on home networking infrastructure and software elements. Whole-home DVR is fast becoming a popular staple among AT&T and Verizon's telco/IPTV efforts, and major cable operators are planning deployments in the next year. These services will require upgrades to set-top boxes that support connectivity. Consumers also view the television set as a portal to content that may be stored on home computers, and rollouts today (Verizon's Home Media DVR) allow the set-top box to be linked to the PC to display photos and music.

* Program Guides and Content Organization: Several elements will account for an evolution in features such as electronic program guides, search elements and content organization. First, more graphics-based layouts of channel guides, including live video in "thumbnails," will be important to helping viewers find desired programming. Second, as video-on-demand grows as a critical staple to the pay TV operator's lineup, displaying richer graphics for titles (using DVD cover art, for example) is an important feature to helping consumers find the right movie. Finally, as we see a blending between operator-provided and viewers' own content--as links between the set-top box and the PC grow--users will want one portal through which to access not only television programming, but their personal music collections, photo slideshows and home videos as well.

* Bandwidth Considerations: With EchoStar's introduction of a "place-shifting" set-top box that allows for content from inside the home to be viewed on Internet devices outside of the home, it won't be long before service providers follow suit. These services will have direct implications on upstream bandwidth, so providers must look at the capacity that their networks will be able to offer both to the home and from the home.

* Content Portability: It's not yet happening, but many conversations are taking place about how service providers allow particular content to move away from the set-top box and to devices like laptops, mobile phones and portable multimedia platforms.

Determining the usage rights for such features is one of the thorny issues being worked out today, but as these features get deployed, they will have significant implications for how rights management and content protection schemes get applied from one piece of content to another or from one device to another.

Kurt Scherf is vice president and principal analyst at Parks Associates. He can be reached at [e-mail].