This fall, south Texas telco Valley Telephone Cooperative will launch IPTV service to its 17 south Texas exchanges. But what's most unique about VTCI's initiative is that it will make the Texas telco the first carrier in the country to launch an IPTV service based on a pre-packaged offering from the National Rural Telecommunications Cooperative, or NRTC, called IP PRIME — an offering that will be made available to telcos nationwide later this year.

As satellite is its only real competition (and that is subject to the storms of the Lone Star State), VTCI expects to win roughly 2600 subscribers in its first year — a 50% to 60% market penetration.

When the NRTC announced plans to offer its members a pre-packaged IPTV service, the idea was to leverage the combined purchasing power of the group's members to negotiate IP video content and transport contracts. But beyond the better price, the NRTC greatly simplifies what would otherwise be a stupefying process for the typically small staffs of most rural telcos.

In partnership with SES Americom (a video transport provider with 44 satellites in orbit), the NRTC's program offers a basket of video content (including some 200 channels); centralized, managed middleware; end-to-end encryption; and satellite transport from SES Americom's center in New Jersey to a 3.8-meter dish at the telco's receiving site (which the telco buys through the NRTC). At the receiving site, the telco feeds the video traffic from the receiving dish to its own IP aggregation routers and sends it out to subscribers.

“Having it already pre-packaged through NRTC makes it a whole lot easier,” said John Bradford, VTCI's business development manager. “They did a lot of leg work and technology selection for us. It's pretty much cookie-cutter so far.”

Though IP PRIME brings the same basket of content to telcos nationwide (across the country, co-ops' video needs are “definitely very similar,” said Mike Carney, NRTC's national IPTV sales director), carriers also can add their own local programming. Unlike the national video, which is encoded in New Jersey and decoded at the set-top box, local content is encoded locally.

SES Americom erects the antennas, the demodulators and the local IP MPEG-4 encoders. After being captured by the antenna and encoded, the local content rides a Gigabit Ethernet link from those encoders to the telco's IP aggregation routers where it joins the national video and heads out toward subscribers. Co-ops are in charge of getting their own local content if they want it, including negotiating with local TV stations and other content providers.

But the NRTC content basket itself includes plenty of specialized content, too. IP PRIME's wide range of Hispanic programming is well-suited to VTCI. Many of its exchange areas are 80% Hispanic.

The NRTC will include high-definition programming, though VTCI doesn't anticipate much demand for it in its region. And at some point, the NRTC wants to add a partner to supply video-on-demand.

One of the incentives for the NRTC program was that a pre-existing source of video content for telcos, the National Cable Television Cooperative (NCTC), stopped accepting new members. In early 2005, the telco co-op community began reporting an apparent moratorium on new members by the NCTC, perceiving it as a defensive move from cable competitors. At the time, the NCTC said there was no moratorium, just a brief pause while it re-evaluated its enrollment practices and fees. But in November 2005, NCTC has acknowledged, a true moratorium on new members went into effect.

Without a consortium of that type brokering content deals with programmers and offering it in packages to members, each telco would need to negotiate separately with each programmer and content provider.

“That's a headache I'm glad I don't have to deal with,” said Steven Milner, general manager of Planters Rural Telephone Cooperative, a Georgia co-op that's currently beta-testing IP PRIME along with VTCI and the West Kentucky Rural Telephone Cooperative.

In addition to its more obvious benefits, the program is also a way for Milner to cope with the unpredictability of future technology changes in the video space.

“Five to ten years from now, I don't know how you'll be getting your video,” Milner said. “This is a way to get into the video business with a small capital expenditure, really high-end equipment and minimal staff.”

To participate in the NRTC program, Planters has deployed five racks of equipment: three at the headend and two at the tower, to add local programs. Without the NRTC program, Planters would have had to deploy eight to 11 racks of gear, Milner said.

Before he crossed paths with the NRTC, Milner was in the market for an IPTV headend and found some with MPEG-2 encoding that were three times the price he expects to pay for an MPEG-4 headend through IP PRIME.

One of IP PRIME's more distinguishing characteristics is its exclusive adherence to the MPEG-4 encoding standard — the bleeding edge of video compression technology. MPEG-4 squeezes video tighter than the MPEG-2 encoding widely used today, takes up less bandwidth and gives video signals a broader reach. Whereas MPEG-2 might require 12 Mb/s to 30 Mb/s for each HDTV signal, MPEG-4 can do it in 8 Mb/s to 10 Mb/s. That's an important tool for many rural telcos because they have long copper loops, many more than 12,000 feet. VTCI, for example, is targeting loops between 8000 and 12,000 feet to deliver ADSL2+. And a longer reach means a broader addressable market.

But MPEG-4 is new and, some say, immature. Several set-top vendors have delayed MPEG-4 gear, promising to be able to ship it in volume this fall. Telcos that have already invested recently in MPEG-2 headends may want to use what they've got before enrolling in the NRTC's program. But for some, including VTCI, the timing isn't a problem.

“Some people are saying the technology's not ready yet,” said Richard Cavin, VTCI's network manager. “We felt like we could wait for the technology to be ready rather than go with MPEG-2 and then upgrade later.”

Milner has been trialing some early MPEG-4 set-tops as part of the IP PRIME beta test and has been happy with them so far. If those set-tops are the biggest cause of concern in the program, he said, it speaks well for the program and its likely popularity among telcos nationwide.

“You always expect some issues in beta [testing],” Milner said. “I've been amazed at how smooth and easy it's been.”

NRTC video package

• Pre-packaged programming

• Only 2-3 video racks

• 1 dish (3.8m)

• MPEG-4 IP transport from SES Americom's IP-PRIME

• Centralized managed middleware system

• Centralized managed encryption system