Market Insight

Pay TV UHD services draw nearer with NTT trial in Japan

April 28, 2014

Daniel Simmons Daniel Simmons Executive Director – Research and Analysis, Service Provider Technology
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Japanese telco, NTT is trialing Ultra High Definition (UHD) video delivery for its IPTV service, which is branded NTT Plala Hikari TV. The trial is currently operating as part of the video on demand (VoD) service. Japan-based Sumitomo Electric Network is supplying set-top boxes (STBs) for the trial. These are based on a system on a chip (SoC) solution from Canadian vendor ViXS Systems.. The STB can support decoding of ‘4K’ resolution at up to 60 progressive scan frames per second (p60) using the H.265 codec, which is also known as HEVC (High Efficiency Video Codec). Other features of the box include HDMI 2.0 output, MPEG-DASH (Dynamic Adaptive Streaming over HTTP). NTT plans to offer a full commercial UHD service, pending a successful trial.

Our take

UHD is still a nascent technology, and this deployment is one of the first announced instances of a UHD pay TV service. NTT’s decision to launch UHD on an on-demand basis is representative of the state of UHD. There isn’t enough UHD content currently available to support linear channels; the major content houses have yet to release significant volumes of UHD titles and only a few live sporting events are currently captured in the format. The addressable market is similarly limited, making a full-time linear channel uneconomical; there were just 1.9 million UHD TVs in global consumer homes at the end of 2013.

Nevertheless, UHD is an important opportunity for pay TV to consider, because it can serve several strategic purposes. Firstly, it can enable operators to add another premium content tier and potentially increase ARPUs, just as HD, DVR and digitisation have done in the past. Secondly, it can be part of operators’ competitive strategy against OTT rivals such as Netflix.  Pay TV operators will likely need to be more aggressive in addressing early UHD TV set adopters than they were early HD adopters, less they cede ground to OTT providers. When HD TVs first launched in the early 2000s there was little or no competition from IPTV or OTT players and on-demand viewing was in its infancy. Before launching HD, pay TV operators could afford to wait for large addressable TV installed bases and enough content for linear channels. This is unlikely to be the case with UHD. Netflix is being particularly aggressive in building a UHD ecosystem; going so far as to create its own premium UHD content and getting major TV set vendors to support UHD versions of its smart TV app. Pay TV operators could be disadvantaged in procuring the rights to premium content if an OTT platform like Netflix was to build a sizable UHD customer base ahead of them. Pay TV providers cannot afford to be without UHD should it prove to be a hit with customers.

The introduction of UHD also creates opportunities for technology suppliers, with operators upgrading their infrastructure and CPE to support the new format. Operators must ready their networks to accommodate the increased bandwidth required to distribute UHD and to be compatible with the HEVC codec. They will also need to deploy UHD compatible STBs. A step change in technology, such as UHD will provide, is not only an opportunity for large players. It is also a vital period for smaller players to increase their presence and new companies to enter the market, by beating incumbents to market with next generation products such as ViXS has done here at NTT. Despite this early win from ViXS, UHD STB silicon is not expected to be available for mass STB deployment until mid-2015.

UHD is of critical importance for the STB value chain because the value of the STB industry is forecast to decline through 2017, with HD fast becoming a commodity technology and the global pay TV market beginning to saturate. None of the existing STB installed base is compatible with UHD or HEVC, so it’s likely that all pay TV UHD customers will require a new STB creating an opportunity to increase shipments and grow revenues. Addressing this opportunity will be integral to the success of STB vendors over the forecast period

Geography
Canada Japan USA
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