Job one for IPTV providers is to ante up the stakes necessary to compete in the video game: quality basic video programming (including high-definition television content), slick channel guides, deep video-on-demand offerings and highly functional digital video recorders. That's why most IPTV middleware packages come with these capabilities out of the box.

But if telcos want to win big, it will be their ability to create services beyond the basics that sets them apart from cable and satellite competitors. In particular, it may be how well providers mix the addressability and personalization of IPTV networks with the world of the Web — Internet video, Web services and online applications — that helps them leap forward.

But this is where things get tricky. Web standards, formats and tools don't translate directly into IPTV environments. Vendors have a variety of approaches to make the two worlds mix, but such solutions often take Web standards and morph them into something that ends up as proprietary as monolithic, vendor-specific approaches.

And even as IPTV carriers work to integrate and deliver Web services via their networks, Web-centric video providers — startups like Babelgum, Joost and Veoh, along with biggies like Apple and Microsoft — are increasingly delivering high-quality video experiences via the Web to standard PCs or high-powered consumer electronics devices, an approach they believe will ultimately trump carrier-provided IPTV offerings. (See sidebar on page 18.)

It makes figuring out the right approach to the Web and IPTV a difficult one for service providers.

“A lot of companies are putting video on the Internet, and a lot are putting the Internet on TV. Neither one of these is the killer app,” said Jeff Miller, president and CEO of ICTV, adding that the best approach is to blend the Web and IPTV. “Carriers need to use Web 2.0 technology and use them to create TV-like experiences that still look great on the big screen but retain the social elements of the Web, including control, navigation and instantaneous response. IPTV networks are ideal for this sort of thing.”

More than anything, telcos would benefit from patterning their IPTV service creation environments after the Web, analysts said.

“Once everything is on IP, leveraging a Web-based infrastructure makes it possible to put out apps fairly quickly and without having to spend millions of dollars,” said Lisa Abraham, principal analyst for In-Stat. “The idea is that no one really knows what's going to stick with consumers until you try it.”

Web applications are typically built on three tiers: back-end database services, middle-tier application and Web servers, and front-end Web browsers. Blending the Web with IPTV involves a similar three-tier approach: tools and techniques for leveraging the Web as a giant “application” database; a middle tier for converting or transcoding Web formats for delivery over a video or IPTV network; and a set-top box environment that could include a scaled-down Web browser or — more likely lately — a hybrid runtime environment that aims to optimize Web services for display on the TV.

On the back end, there's no sense in duplicating the Web, Miller said: “Why not take advantage of all the infrastructure that's out there? There are tons of RSS feeds [for distributing text-based content] and standards like HTML and XML and Javascript [for building user interfaces]. We think the Web is the best standard in the world; why not use it?”

Microsoft, which was early to the IPTV market, is now reworking its platform with a greater focus on integrating IPTV application development with the Web and existing Microsoft development tools, said Shari Barnett, group product marketing manager for Microsoft TV.

“The whole philosophy of our next-generation platform is that you work with the same tools to build IPTV applications that you do to create Web services,” he said. “Yes, at times you'll have to integrate with IPTV components like a video feed or a [video-on-demand] library. But what will really connect the applications together are off-the-shelf Web tools and a library of [application] calls you need to run apps in an IPTV environment. If you abstract it out, we want to view IPTV as just another screen for Web services.”

Today, Microsoft delivers its applications to a slimmed down Web browser. Among the new features in Microsoft's next-generation IPTV environment — expected late next year — will be a new XML-based application markup language, dubbed Mediaroom Markup Language (MML). Ultimately, MML will be integrated into Microsoft's ASP.NET tools, including the popular Visual Studio development environment. That will enable developers to create standard XML applications using Microsoft tools and have them transcoded to work in the IPTV Mediaroom environment as needed, Barnett said.

Overcoming the challenge of delivering processing-heavy Web services to generally low-powered set-top boxes is a main area of concern for IPTV vendors and service providers.

“Browser-based [set-top box] solutions are not usually good interactive service platforms,” said Brian Mahoney, vice president of marketing for IPTV middleware vendor Espial.

The truth is that when it comes to application development, it is the target run-time environment more than anything that affects what kinds of applications get built and how they are assembled and delivered. Standard set-top boxes typically are kept low-cost by keeping processor power and memory to a minimum. That means heavy client-side processing — such as that required to deliver an interactive AJAX-based Web application or decode a Flash-encoded YouTube video — just isn't available on most set-top boxes.

To combat that challenge, Espial's service creation environment lets developers work with Web tools on the back end — including HTML, Javascript and even Flash — but divides the processing requirements between its middleware and a lightweight, set-top box client, Mahoney said. “Middleware plays a huge role in delivering the applications.” he said. “You basically end up with a data-driven application that is much different than standard Web design, but built using standard Web tools for the user interfaces.”

Beyond Web applications, many IPTV providers are considering delivering so-called “over-the-top” video services to the home, often in the form of clips from Internet video providers such as YouTube. To make such plans work, telcos need to tweak not only their networks but their IPTV business models as well — two steps that actually go hand-in-hand.

“Over-the-top services will play a very significant role [in IPTV systems],” said Ravi Medikonda, director of service provider marketing for Juniper Networks. But he added that they'll only make business sense once revenue-sharing agreements are in place, along with the network capability to measure and meter usage.

“Policy control is the key. The ability to control their networks and bandwidth based on usage by a particular application or app vendor — such as Yahoo! Mail or YouTube — is the crux of the issue,” Medikonda said. “So building intelligent networks, with policy and control — as opposed to a dumb, simple, all-you-can-eat model — will enable them to deliver billable content.”

In the end, the business and technical challenges of delivering next-generation IPTV applications to users can be quite daunting.

“Telcos and PTTs know that … a two-way system like IPTV provides them a long-term advantage. But short term, they are more focused on stealing customers away from satellite and cable [multiple systems operators],” said Jeff Heynen, directing analyst of broadband and IPTV for Infonetics Research. “At the same time you have more and more people — kids especially — spending more time online than watching traditional prime-time TV.”

The real task for IPTV service providers will be to figure out exactly how — not to mention when — to turn the TV experience into something that is more like a Web-based experience. “Providers are in a tough spot,” Heynen said. “They have to figure out when the inflection points hit and how to make that transition.”

INTERNET VIDEO IS READY TO COMPETE

WHEN YOU THINK about Internet video, you may picture grainy clips of birthday parties or campus dorm rooms. Think again. Internet video is close to being a true match to cable TV-style offerings in terms of both content and quality. A variety of approaches have emerged to delivery video content to PCs or other devices via broadband connections.

YouTube (www.youtube.com)

The grandaddy of video sites is now owned by Google, which just recently launched a program to add text overlay ads when publishers embed YouTube videos. The attempt to monetize this massive video store — especially via low-impact text ads — could be an important step forward in the evolution of Internet video.

Joost (www.joost.com)

Joost, which on Oct. 1 released the 1.0 version of its Internet video, aims to deliver high-quality, full-screen video playback combined with Web 2.0 tools for building a social environment around its videos. Joost doesn't traffic in user-generated content but instead has cut deals with a variety of video providers, including Paramount for movies and CBS and Warners Bros. for TV content, among others.

Veoh (www.veoh.com)

Veoh runs a video-sharing site like YouTube but this summer added a twist with Veoh TV, a video browser that viewers use to queue, watch and record video clips from around the Internet. While Joost focuses on delivering video from content partners, Veoh takes on all comers, including user-generated content as well as commercial content from video provider Web sites. Its focus is making the distributed world of Internet video seem like a single, clickable platform.

Babelgum (www.babelgum.com)

Babelgum is perhaps closest in spirit and approach to Joost, with a similar peer-to-peer approach to Internet video delivery and viewing. Perhaps the biggest difference is in content partners: Babelgum has a newsier (Associated Press, Reuters) and more independent feel.

Wild cards: Apple TV, Xbox (www.apple.com/appletv, www.xbox.com)

Internet video isn't all about streaming video to the PC. Apple, for instance, has made some news with Apple TV, a box that delivers downloaded iTunes video and streaming YouTube content to TVs. Microsoft, meanwhile, has its Media Center PC play, which includes a slick interface for delivering Internet video to the TV. Perhaps more interesting are announced plans to equip the Xbox — with its super-charged processing engines — to receive IPTV content.

LEVERAGE OR COMPETE?

The Web and Internet video aren't going away. The question is, how can IPTV providers take advantage of this growing group of viewers?

57%
of U.S. adult Internet users have watched online video content.

74%
of U.S. broadband users have watched Internet video (compared with only 39% of dial-up users).

BY AGE GROUP

WATCH INTERNET VIDEO ON A TYPICAL DAY

31%
of users 18-29

18%
of users 30-49

12%
of users 50-64

Source: Pew Internet & American Life