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IPTV Growth Hasn’t Cut Into North American Satellite TV Market… Yet

6:00 am on July 4, 2008 | Category: Business, Telecom Services, Television

Despite runaway growth over the course of 2007, Internet Protocol Television (IPTV) isn’t yet cutting into the revenue of satellite television providers in North and South America, according to a recent report by iSuppli.

The number of IPTV users in the Americas surged to 1.8 million by the end of last year, up 257.1% from 501,000 in December 2006.

The majority of that growth came from two leading U.S. telecom operators, AT&T and Verizon, which continued to expand their fiber-optic IPTV networks throughout 2007, and collectively served almost 1.2 million IPTV customers by year’s end. This represents growth of 294.9%, from a mere 296,000 subscribers at the end of 2006.

At the same time, satellite television services in North and South America have also shown growth, serving a combined user base of 39.5 million at the end of 2007, up from 36.3 million a year earlier. Leading U.S. satellite providers, DirecTV and EchoStar, added 2.1 million subscribers over the course of the year.

“The early hypothesis was that IPTV subscribers would ‘come out of the hide’ of the satellite companies in North America,” noted iSuppli multimedia analyst, Pamela Tufegdzic. “However … satellite subscriber numbers have continued to grow in the region. The initial results show that IPTV subscribers in the United States still are mostly net additions to the pay-television market.”

But despite the satellite industry’s surprisingly strong performance in 2007, iSuppli expects it to start feeling the pinch of IPTV growth by the end of this year.

“Satellite providers are in a bit of a squeeze,” Tufegdzic explained. “These companies previously partnered with the telcos to offer television service to compete with the bundled voice and video offerings from the cable providers. As they try to expand into IPTV, the satellite providers now find that a significant portion of their subscriber base of television subscribers is owned by the telcos.”

This became more obvious than ever earlier this week, when AT&T decided not to renew its contract to resell EchoStar’s Dish Network service alongside its telephone and broadband offerings. Whether the contract will be renegotiated with different terms remains to be seen.

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