RIP IP-PRIME. We Hardly Knew Thee, But I Still Want My IPTV

What a week in the world of IPTV … and it’s still only Tuesday.

IP-PRIMEMonday saw satellite juggernaut SES AMERICOM pull the plug on its IP-PRIME service. A telco equivalent to the cable industry’s popular HITS (Headend In The Sky) service, IP-PRIME gave telcos everything they needed to deliver IP-based TV. A telco just had to install two racks of equipment in its headend, align a satellite dish to receive the programming, rollout the set-boxes to its subs, flip the switch … and count the money rolling in.

Despite signing 70 Tier 3 telcos (e.g. small rural phone companies) throughout the country, SES AMERICOM just wasn’t getting the ROI it expected. So they’re shutting IP-PRIME down, though they’ll keep it operating through July 31, 2009 so customers can “transition.”

So that was Monday and the future for IPTV seemed uncertain, if not bleak.

Then first thing Tuesday morning AT&T (truly a Tier 1 telco) announced that it passed the one million subscriber mark for its U-verse IPTV service.

Why the disparity? I think it has to do with patience.

IPTVWhen AT&T launched U-verse it was to great fanfare and miniscule subscription numbers. Many prognosticated that AT&T would grow tired of the tremendous cost of U-verse and the seemingly unreachable ROI. However through dogged perseverance AT&T is now the thirteenth largest provider of TV services based on subscribers, and its numbers are still growing. Only the nine largest U.S. cable operators, Verizon, DishNetwork and DirecTV serve more subs – for now.

So why couldn’t SES AMERICOM stick it out as well? I believe it’s because the revenue model for IP-PRIME just never fit. With a few exceptions – IP-PRIME being the most notable – SES AMERICOM’s traditional business model has been that of the “fat pipe,” in which a network operator carries the content of others. They maintained an intricate satellite network and charged handsomely for companies and governments to transport their “content” over it.

Unfortunately for IP-PRIME it was to make money in a different fashion, with much of it coming from subscriber revenues. With less than 10,000 total subs – and the numbers growing sloooowly – this revenue stream was not nearly enough. I’m guessing the argument went something like: “we’re a fat pipe people, why do we need a loss leader when we can use the IP-PRIME capacity to expand our existing profitable businesses?”

It’s easy to understand the logic – especially in the current economic climate – and yet, it’s hard not to think a great opportunity is being lost. While it may not fit with SES AMERICOM’s traditional business model, IP-PRIME itself is a proven technological marvel that currently allows some three dozen telcos to provide their subscribers with premium quality TV services, including a substantial amount of HDTV. Hopefully a new owner with the resources and patience can be found because IPTV is clearly the future and rural telcos need just such a turnkey solution.

If I don’t sound very objective on this topic it’s because I was on the Mobility PR team that represented both SES AMERICOM and IP-PRIME. I toured the facilities and worked with the people behind IP-PRIME and I know what a jewel they created.

John G