More than half of communications industry executives believe that IPTV can generate significant revenue within the first three years of service, according to findings of a survey released by Accenture and the Economist Intelligence Unit (EIU).

The survey of nearly 350 executives from telecommunications, broadcasting and media companies across 46 countries in the Americas, Europe and Asia revealed industry-wide confidence in the longer-term outlook for IPTV, with 60 percent believing that IPTV will generate significant revenues within three years.

However, confidence in the short-term outlook remains mixed, with slightly more than half (52 percent) of respondents saying they are not confident in the ability of IPTV to generate significant revenues within the next 12 months. On the other hand, one-fifth (20 percent) of respondents said they are confident or very confident, and more than one-quarter (28 percent) said they are somewhat to fairly confident, that IPTV will generate significant revenues within 12 months.

"The business case for IPTV, its value-added benefits and its potential remain strong," said Dan Elron, managing director for Accenture's Communications practice. "In the long-term, the key to achieving high performance through IPTV is to be visionary, ambitious and open to innovation from many sources. For the shorter term, the key is to quickly adapt to consumer feedback and jump over technology hurdles."

When asked what they believed would be the principal revenue source for IPTV, about half (46 percent) of the industry executives surveyed selected advertising. However, network operators, as a subset of all respondents — which included equipment vendors, consumer electronic companies, content providers and broadcasters/studios — disagreed, with three-quarters (74 percent) of network operators saying they believe that subscription fees for premium content will provide the largest recurring revenue stream, followed by basic content subscription fees and then advertising fees.

"This difference in opinions reflects the broad uncertainty around how media will be delivered and what customers will be willing to pay for," said Elron. "Carriers are used to subscription revenues and believe that the IPTV experience will soon be comparable to or even better than current video offerings, whereas media executives are more cautious and skeptical of a scenario where a new revenue stream is created so rapidly. The reality is that both revenue streams will be important, but the challenge will be to harness the power of this new technology to create a new video experience that makes consumers and advertisers willing to pay more than they do today."

When asked to identify reasons for pursuing the IPTV market, the greatest number of respondents (42 percent) cited new revenue streams, followed by acquiring new customers (28 percent) and increasing sale of broadband access connections (21 percent).

Overwhelmingly, executives believe that discounted pricing through service bundling will be the primary motivation behind consumer spending. Nearly two-thirds (64 percent) of all respondents — and three-quarters (74 percent) of network operators surveyed — said they believe that discounted service bundles provide the greatest enticement to buy IPTV. The ability to move content between devices was also cited as an important enticement, selected by 38 percent of respondents, as was the convenience of a single bill for multiple services, selected by 31 percent of respondents.

Yet there are obstacles to IPTV adoption. One-quarter (25 percent) of respondents said that the primary short-term obstacle to IPTV adoption is a quality-of-service issue relating to unproven architectures, low bandwidth and other technology issues. The same number (25 percent) said they believe that quality-of-service issues will be resolved over the next three years, leaving stiffer competition from alternative TV providers as the toughest challenge to the adoption of IPTV. Another challenge to IPTV adoption, cited by 19 percent of respondents, is high subscription fees due to the high cost of network access and equipment.

When asked which types of companies are most likely to generate revenue from IPTV, the vast majority (87 percent) of respondents selected content providers, followed by telecommunications providers (72 percent). Not surprising, more than two-thirds (69 percent) of respondents said that traditional broadcasters have the least to gain from IPTV, a view held strongly by respondents across all company types, including broadcasters themselves.

For more details of the study, please visit www.accenture.com/iptvmonitor3.

The Economist Intelligence Unit surveyed 341 media executives in October 2006 to identify their beliefs about the potential of IPTV. The survey, conducted via email, covered 46 countries in three major geographic regions, with 35 percent of respondents based in Europe, 33 percent based in the Americas and 32 percent based in the Asia-Pacific region. Forty-six percent of respondents were C-level executives, and the other 54 percent consisted of senior managers such as heads of business units and directors of marketing or planning. Companies represented included fixed network operator / services providers, integrated fixed-wireless telecommunications operators, cable / satellite network operators, telecommunications equipment manufacturers, consumer electronics manufacturers, TV broadcast networks, film studios, other content providers (e.g., news, music, games) and value-added services providers (e.g., billing, customer care), among others.