BOSTON--Differentiation in the IPTV space is largely a factor of consumer demand in each particular market. This was the consensus of a panel of two industry analysts and the director of international marketing for UTStarcom at Telephony’s IPTV Workshop today in Boston. The gray area for the panelists came about when they were asked what the mode of differentiation should be.

Danny Briere, CEO of TeleChoice, said new applications, such as gaming and e-commerce, would be the killer app, while Rory Altman, co-founder and director of Altman Vilandrie and Company, maintained that high-definition content would provide the most differentiation. Altman cited a recent consumer survey in which consumers said they want HD content more than anything else.

“Once you get HD, the tolerance for watching non-HD goes down,” he said, pointing to the number of people buying big-screen HDTVs every day. To this, Briere retorted that most consumers don’t even know how to set up their big-screen sets for HD viewing. They are buying them  because stores like Sam’s Club and Best Buy are putting them on sale, he said.

“Quality does not drive the buying decision, entertainment does,” Briere said. “We are a long way from people appreciating the quality of the image. People just like gimmicks.”

In keeping with the idea that gimmicks sell services, Briere noted that, “the people who are doing a lot more with IPTV are treating the TV as a big screen to do lots of neat things on.” He listed online banking, karaoke, remote controls doubling as telephones and people uploading their own YouTube videos onto the TV set as examples of applications. “I think a lot of the real revenue and differentiation will come from these applications.”

Briere pointed to Verizon as a company that has had success adding alerts to the TV set for things such as the weather, travel delays or breaking news. “It has nothing to do with TV guides, linear programming, or even the search…They are trying to turn the TV into a Web TV, and anyone who is not is going to fail,” he said.

Although he disagreed that these apps would be key differentiators, Altman did agree that there is a great opportunity to put smaller, short-term Web functions – ones that users won’t want to go through the process of booting up their computer and searching for –on the TV set as well as on devices spread throughout the home for easy access.

Another area that all three of the panelists agreed on was that the differentiation is more of a long-term focus for telcos. HD content and interactive applications are desirable, but right now, telcos are primarily concerned with just getting their platforms deployed and achieving market penetration. Differentiation will follow.

UTStarcom’s Manish Matta said providers must factor in the market they are entering and what users really are demanding in that particular area. Having focused on IPTV in emerging markets for years, UTStarcom is just recently moving into the US and targeting second- and third-tier providers. IPTV scalability requirements are so high, he said, that it adds additional challenges for the service provider, and the most important thing they can do is to have a solid and effective business case in place for the particular market they are serving.

“The challenge is knowing what people want to know about,” Altman agreed. “As we develop all these cool applications, the demand splinters, and a long-tail develops.” He predicted that the telcos will look at differentiation eventually, but for now are, like UT Starcom, focusing on gaining market penetration. “In the long run, people will pursue all these applications,” Altman said. “In the short term, now they just need to get out there.”

The panelists did conclude, however, that the user experience was the main priority in considering differentiation and that the key to success would ultimately be in the content of the offerings. “At the end of the day, for most people, there will be fewer reasons to go outside of the enlarged content vehicle that your provider is giving you,” Altman said.