General

Outsource Your Television, Kill Your Telco

If the monopolies have launched the triple play in your market, you don't need your own billion dollar taxpayer funded infrastructure to fight back.

by Gerry Blackwell [October 30, 2007]

Telcos and cablecos hope to lure customers with bundled and discounted triple-play services—internet, phone, TV—and thereby hope to make it tough for independent ISPs to compete. Transforming yourself into a pay TV provider is theoretically possible, but it's definitely a non-trivial undertaking, requiring truckloads of cash, new personnel and an intensive learning process.

But there may be another way.

Plainview, N.Y.-based NeuLion Inc., an IPTV outsourcer launched in 2004, has until now mainly focused on serving the content provider market, helping niche broadcasters reach their audiences over the internet using its proprietary compression technology, TV set top boxes and end-to-end IPTV delivery system. Now NeuLion is interested in talking to ISPs.

"ISPs are a good partner opportunity for us," says Chris Wagner, the company's executive vice president and co-founder. "We provide an application that makes value of their network."

And ISPs are of interest to NeuLion because they already have customer relationships with viewers that NeuLion's customers want to reach. Wagner says the company will likely announce its first ISP partnership within the next 30 days.

The networks
NeuLion launched its first "network," KyLin TV, a service that offers 20 live Chinese TV stations to expatriate Chinese, in 2005. Today, it has 17 networks. They include other services for expat communities—Filipino, South Asian—as well as faith-based networks and services targeted at affinity groups, such as NHL hockey and Cuban baseball fans.

Most subscribers to these services use a NeuLion set-top box connected to their TV to receive the stations over a broadband internet connection. It takes a minimum of 500 Kbps of bandwidth to receive 30 frames-per-second (fps), VGA-resolution video. The system provides an electronic program guide and very fast channel changing.

"We have replicated an experience for the consumer on their TV that from a [video] quality standpoint and use standpoint is exactly the same as what cable and satellite providers deliver," Wagner says. "We compete with them, with the same or better picture quality."

This seems hard to credit when most other IPTV providers figure they need more than 500 Kbps of bandwidth for standard definition TV. Wagner points out, however, that these are subscription services. "If it wasn't good, people wouldn't continue to pay," he argues.

He also notes that the churn rate for NeuLion service providers is less than 2 percent. Both facts, though, may speak as much to the programming not being available anywhere else as to the quality of service.

The most successful two networks, KyLin and ABS-CBN, the Filipino channel, boast over 20,000 subscribers each, paying an average of $25 a month. Sky Angel, a Christian television network that operated over the EchoStar satellite network for 20 years, is now in the process of moving its 110,000 subscribers to NeuLion. Wagner says the company adds two or three new networks every quarter.

It's definitely a niche-y, long tail kind of play. From the content provider/broadcaster's perspective, NeuLion represents a much lower-cost, lower-risk alternative to building their own IPTV capability. NeuLion provides all the technology, plus operations management.

Go Islanders!
It licenses the video compression technology—a proprietary extension of the H.264 standard—and buys TV set-top boxes from Transvideo, a Chinese company acquired by NeuLion investor Charles Wang, founder of software giant CA Inc.

(Wang, a serial entrepreneur, is heavily involved. He is married to NeuLion president and co-founder Nancy Li and he funded KyLin TV. Wang's New York Islanders NHL hockey team was also an early customer of NeuLion's—which presumably played a role in the company bagging the deal with the league.)

The rest of the technology and infrastructure NeuLion built itself. The end-to-end system includes: content management and encoding; subscriber services (authentication, reporting, etc.); billing (pay per view and subscription based); geographic filtering that allows NeuLion to deliver content only where the customer wants, and delivery systems (broadband streaming, media servers, etc.)

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