Internet Protocol Television ("IPTV") — What Is It? Why Should Real Estate Developers and Home Builders Be Interested in IPTV?
Internet Protocol Television ("IPTV") — What Is It? Why Should Real Estate Developers and Home Builders Be Interested in IPTV?
Internet Protocol Television ("IPTV") is among the new video services that utilize advanced technology spawned by the rapidly-expanding worldwide Internet. Although the acronym "IPTV" is commonly used to refer to Internet Protocol Television, many are not quite sure just what Internet Protocol Television or this acronym means. Is IPTV just traditional cable television service delivered over the Internet, or something more? If it is not traditional cable television service over the Internet, what is it? Is IPTV a regulated telecommunications service or not? Why should IPTV be of interest to real estate developers and home builders? If IPTV is of interest, how would it benefit developers and builders?
This article defines IPTV, compares it to traditional cable television services by showing the differences between the two, and concludes that it should not be regulated as traditional cable service. The lack of regulation reduces the cost.
Additionally, this article describes some of the applications of IPTV, and strongly suggests that real estate developers and home builders should quickly embrace IPTV, as well as other telecommunications services that can be integrated with IPTV, since the technology to deliver these services constitutes an amenity that will add significant value to their developments and properties. Indeed, some experts have stated that IPTV represents a substantial component of the $4,000 to $7,000 increase in value of a new home which is served by a fiber-optic delivery system.
What Is IPTV?
IPTV is the process of delivering video signals over the Internet or other types of data networks. If the video signal is in an analog form, the video signals and audio signals associated with the video signals are first converted to a digital form. Routing equipment then adds packet routing information to the digital video and audio signals so that they can be routed through the Internet. Thus, instead of receiving video or television signals broadcast over radio waves, for example, VHF channels 4 through 13, which utilize 6 mHz of radio frequency spectrum each, beginning with the VHF frequencies 54-60 mHz (channel 2) and ending with the VHF frequencies 210-216 mHz (channel 13) and the UHF channels 14-69, which utilize 6 mHz each, beginning with the UHF frequencies 470-476 (channel 14), and ending with the frequencies 800-806 mHz (channel 69), or by means of a cable television system or through a satellite television service, a consumer's television is connected directly to a broadband Internet router and receives the digitized video or television signal, including the audio, directly over the Internet. An IPTV system requires the following key components:
- A device or adapter that converts video and audio signals into a form that enables the consumer to watch such signals on his television set. This device bridges a consumer's computer with his or her television set. There are a multitude of such devices available through an IPTV provider.
- A broadband access provider, which transmits high-speed data to end users by means of a broadband connection. Broadband access providers include local exchange telephone companies, Internet access providers, cable television companies, infrastructure providers, and wireless service providers.
- An IPTV provider, which connects a subscriber's home computer to the Internet through a bridging device and provides software to operate the IPTV system. The computer, including the software, keeps track of which customers are active and viewing IPTV, and which features and services are authorized. When a customer requests a specific television channel to be viewed, the IPTV service provider's equipment sends messages to a media gateway via the Internet, allowing the requested television channel to be connected to a selected media gateway source whose programming is located in a central computer. There are a number of IPTV providers in the marketplace. A broadband access provider and an IPTV provider can be the same entity.
- Content providers, which create programming that is distributed through media distribution channels over the IPTV system. Content providers include entities which offer movies, sports channels, news services, and other sources of programming. There is an abundance of content in the video marketplace which can be delivered to subscribers over an IPTV system.
IPTV can be delivered over a fiber to the home ("FTTH") network, a fiber to the curb (FTTC) network, or enhanced traditional copper wire. In essence, IPTV is a method of delivering and viewing video programming using an Internet Protocol ("IP") network, and a high-speed broadband access technology. IPTV allows a subscriber to obtain video programming whenever the subscriber decides to view it. Put simply, IPTV is not just a distribution or playback method for video programming, but can serve to eliminate a fixed video programming schedule, programs and provide a multitude of offerings similar to how information on the Internet can be accessed by any person at any time.
What Is Cable Television System and Cable Service?
The Federal Communications Commission ("FCC") defines traditional cable television system as a facility, consisting of a set of closed transmission paths and associated signaling generation, reception and control equipment that is designed to provide "cable service," which includes video programming provided to multiple subscribers within a community, with certain exceptions. Cable service means a one-way transmission to subscribers of video programming or other programming service, and subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service. The key characteristic of cable service is one-way transmission.
What Are the Differences Between IPTV and Cable Service?
There are a number of significant differences between cable service as defined by the FCC and IPTV. First and foremost, an IPTV system employs a two-way interactive network, as opposed to one-way transmission system. A subscriber to an IPTV service uses a set-top box to request specific individual video signals from the IPTV service provider. Thus, the subscriber controls the video signal he or she wishes to access. The two-way interactive network differs significantly in functionality from the one-way transmission network of a cable television system. A one-way network transmits a complete set of video channels to a subscriber's set-top box all at the same time. In a one-way system, a subscriber receives video signals on a fixed schedule, except for video on demand ("VOD"). In contrast, in an IPTV system, a subscriber can obtain video programming whenever the subscriber decides to view it. The only apparent exception to a cable system's one-way functionality is when a cable television system provider offers VOD. VOD allows a subscriber to view a video program when the subscriber decides to view it. The FCC has ruled, however, that, in a VOD offering, the cable provider is still in control of the programming. In any case, most programs delivered by cable systems are on demand, but are transmitted based upon the fixed schedule of a television cable network or program source, which are the content providers for programming delivered via a cable television system. The television networks which provide content and cable program content providers generally set their programming at specific times for delivery by a cable system. Moreover, in a cable system, the cable operator is in control of selecting and distributing programming content to subscribers, and the content is usually available to all subscribers at the same time. As stated above, in an IPTV system, the subscriber has complete control of the selection of the programming which he or she intends to view.
Second, IPTV systems offer a greater choice of programming content than for subscribers to a cable system. Thus, an IPTV system can offer hundreds of channels of programming and VOD channels, because of an IPTV system's utilization of digital bandwidth. The number of channels an IPTV system can offer is limited only by the amount of bandwidth that a subscriber has available to him or her through their broadband access provider.
Third, an IPTV system uses a switched Internet Protocol ("IP") network rather than a broadcast network. In an IPTV system, all of the video programming is held in a central location, and only the programming that the subscriber chooses is actually delivered. Moreover, because an IPTV system allows for more bandwidth, a subscriber will likely receive better-quality video signals. The IPTV provider also has the ability to add much more programming or data choices than a cable system provider.
Fourth, IPTV allows not only every subscriber's television set to be connected to the Internet, but all the computers in a subscriber's home to be connected to the same network. Thus, the subscriber can use his or her television to play media files that are stored on his or her computers. Such files may include digital photos, videos, or music.
Fifth, IPTV can produce better video images because of the compression techniques it employs. These techniques are better than the current television standard. Thus, file sizes sent to a subscriber's television set over an IPTV system can be smaller in size, with a higher quality picture image.
Sixth, IPTV allows for integration of a variety of telecommunications services. Thus, IPTV can be packaged or bundled with a normal broadband Internet service, as well as Voice over Internet Protocol ("VOIP"), either an FTTH or FTTC, or by means of traditional copper wire system enhanced by digital subscriber line equipment. The delivery of such integrated services result in a reduction in cost, and affords the consumer a single provider to contract with instead of several providers, making it more convenient for the consumer. We note, however, that cable providers are beginning to bundle cable, Internet and VOIP services over their cable networks.
Finally, IPTV allows for a higher level of alarm and security services, particularly video surveillance, for commercial buildings receiving IPTV integrated with other telecommunications services.
There Are Additional Differences Between Cable and IPTV if IPTV
Is Delivered by a Local Exchange Telephone Company
If IPTV is delivered by a local exchange telephone company, there are other differences between IPTV and a cable system. The first, if a local exchange telephone company delivers IPTV, its IPTV network is generally based on the architecture of its telephone network, which does not necessarily conform to municipal boundaries. In contrast, a cable system has specific boundaries which are set forth in its franchise authorized by a local franchizing entity. Thus, the local exchange carrier's network can be, and usually is, larger than municipal boundaries, covering a metropolitan area or larger territory.
Additionally, if a local exchange telephone carrier provides IPTV, it is delivered over facilities that are already authorized to be in a public or private right-of-way. Local exchange telephone companies have previously been granted use of such rights-of-way for placement of telephone facilities and equipment, which will be used, in part, to deliver IPTV. Assuming a local exchange telephone company's rights-of-way are not restricted to telephone local exchange and long distance service and, assuming the telephone company is not required to get a franchise to provide IPTV, an issue which this article addresses below, the telephone company would incur no additional franchise fees for continued use of such rights-of-way to deliver IPTV. A cable provider, however, must pay a franchise fee of up to five percent of its cable revenues when delivering cable service pursuant to its local franchise. These fees are significantly higher than those which a telephone carrier pays for the use of rights-of-way.
Is IPTV Subject to the Same Regulation as Traditional Cable Services?
Video services delivered by IP presents a question of whether IPTV should be subject to the same regulation as traditional cable television services. This question is the subject of at least two recent lawsuits filed by municipal governments, seeking to enforce franchising requirements on providers of IPTV. IPTV is also the subject of debate in Congress, which has considered and will likely consider this year, legislation that will affect the traditional video services.
On December 6, 2006, the City of Richmond, Virginia, filed a complaint against Cavalier Telephone, LLC, et al., in the Circuit Court for the City of Richmond, Virginia, alleging that Cavalier is providing cable television services within the City of Richmond, but has not obtained a franchise to provide such service, as required by the Cable Policy Act of 1984, as amended by the Consumer Protection and Competition Act of 1992 (the "Cable Policy Act"), set forth in Title VI of the Communications Act of 1934, as amended. Cavalier has removed the case to the federal District Court and has filed a motion to dismiss the Complaint on grounds that Cavalier is not providing cable service as it is defined under the Cable Policy Act, or alternatively, to refer the case to the FCC on the grounds of primary jurisdiction. The Court granted Cavalier's moton to refer, and sent the case to the FCC for a determination. The FCC is not expected to rule on the case until late in 2007.
On December 20, 2006, the City of Milwaukee, Wisconsin, filed a complaint against Western Bell, Inc., d/b/a AT&T Wisconsin and AT&T Teleholdings, Inc. ("AT&T"), alleging that, among other things, AT&T is providing video programming services without a franchise from the City of Milwaukee. AT&T has contended in the past that it is providing IPTV service, and not cable service. AT&T filed a motion to dismiss this complaint. The Court has not made a ruling on AT&T's motion, but is scheduled to do so in late March 2007.
The City of Milwaukee's complaint against AT&T is very similar to an action which Pacific Bell Telephone, d/b/a AT&T California, initiated against the City of Walnut Creek, California in late 2005, in AT&T v. Walnut Creek, 428 F. Supp. 2d 1037 (April 13, 2007) seeking a declaratory judgment that, among other things, AT&T's planned video programming in Walnut Creek, California did not constitute cable service, and therefore did not require a franchise. AT&T argued that a cable operator providing cable service over a cable system controls a cable system, whereas AT&T's planned video service did not fit this requirement. AT&T also contended that the definition of the cable system in Section 522(5) of the Communications Act, 47 U.S.C. § 522(6), includes the facilities of a common carrier only to the extent such facility is used in the transmission of video programming directed to subscribers, unless the extent of such use is solely to provide interactive, on demand services. AT&T argued that its programming would provide such interactive services.
The court ruled that it did not need to resolve this dispute, because the issue of whether AT&T's video programming is, in fact, a two-way interactive service is a matter for an evidentiary hearing, and further, the Cable Act did not preclude local governments from imposing franchise requirements on providers of video programming where such regulation is not expressly forbidden by the Cable Act. Therefore, the court refused to dismiss the case as the City of Walnut Creek has requested. Subsequently in 2006, the California legislature passed a statewide franchising law which grants authority to the California Public Utilities Commission to grant statewide franchises for video programming. Since this law transfers the authority to grant franchises from local authorities to the California Public Utilities Commission, it apparently supersedes the court's decision in the AT&T v. City of Walnut Creek case.
The City of Richmond and City of Milwaukee cases will initially decide the question of whether IPTV is cable service or whether an IPTV provider requires a franchise, but appeals of these decisions will likely ensue to the appropriate federal appeals court, and possibly to the Supreme Court. Thus, it is likely that a federal court decision on this issue will not be forthcoming for some time.
In June, 2006, the U.S. House of Representatives passed the Communications Opportunity Promotion and Enhancement Act of 2006, H.R. 5252, that would create a new national franchising process for entities intending to provide video programming, and for cable television providers which are subject to competition in their franchise areas. This Act would allow a franchising authority to impose franchise fees of up to five percent of a cable system provider's gross revenue, and would require national franchise holders to pay additional fees for public, educational, and governmental access to cable systems. In the United States Senate, in September, 2006, the Senate Commerce Committee marked up a companion bill, but it was not passed. Congress is likely to address this issue again in 2007.
FCC and court rulings addressing the classification of certain cable services have concluded that high-speed Internet access by cable are not "cable services," even though they are provided over the same cable system as video signals. These decisions are highly instructive on the answer to the question of whether IPTV should be regulated as cable service.
In March, 2002, the FCC issued its Declaratory Ruling concerning the appropriate regulatory treatment for broadband access to the Internet over cable facilities ("Declaratory Ruling"). In this decision, the FCC declared that cable modem service by which cable providers offer broadband or Internet access, is an interstate information service, not a cable service, and that there is no separate offering of telecommunications service when the cable operator offers cable modem service. The FCC ruling results in cable modem service not being subject to regulation under the Cable Policy Act. The FCC ruling, in its Declaratory Ruling, was upheld by the United States Supreme Court in National Cable & Television Ass'n, Inc. et al. v. Brand X, et al. ("Brand X"), decided on June 27, 2005. In Brand X, the Supreme Court held that the FCC had lawfully concluded, in its Declaratory Ruling, that cable companies that sell broadband Internet services do not provide telecommunications service as that term is defined under the Communications Act, and that such services are exempt from mandatory, common carrier regulation under the Communications Act. The Supreme Court further held that the FCC had properly concluded that the Internet access offered by a cable system using a cable modem is an interstate information service, because it provides the capability for manipulating or storing information. The Supreme Court affirmed the FCC's determination that, when offering cable modem service, the cable system provider lacks the required control over the selection of information by the user, and that the element of control of the information lies with the cable modem subscriber. As pointed out above, IPTV is a two-way interactive service that is controlled by the subscriber.
For the reasons given by the FCC in its Declaratory Ruling, and the Supreme Court's affirmance of the FCC's Declaratory Ruling in Brand X, and further, based on the differences between cable service and IPTV, particularly IPTV's two-way interactive principal features accessed by the subscriber at his or her discretion, we conclude that IPTV is not a "cable service" within the meaning of the Cable Act, and therefore, is not subject to cable franchising requirements under that Act. Indeed, in a June 7, 2006 decision issued by the Connecticut Department of Utility Control ("DPUC"), the DPUC concluded that AT&T's offering of IP video service is not a cable service within the meaning of the Cable Act, and therefore not subject to state cable franchising requirements. The DPUC stated that AT&T's IPTV services are merely another form of databyte stream transmitted like other data over the Internet, and is not subject to traditional cable franchising requirements. In its decision, the DPUC stressed the significance of the subscriber's interactivity in IP video, the particularized nature of each subscriber's IP video service, and the similarities between IP video service and information services, including data and voice services that use IP technology over telephone networks. Although this decision is on appeal, the DPUC analysis supports our conclusion that IPTV is not a cable service as defined in the Cable Act and is not regulated under that Act.
Moreover, December 20, 2006, the FCC adopted a Report and Order and Further Notice of Proposed Rule Making that establishes rules and provides guidance for the application of Section 541(a)(1) of the Communication Act for new entry into the video market. This section of the Act prohibits franchising authorities from unreasonably refusing to award competitive franchises for the provision of cable services. The FCC's Report and Order was released on March 5, 2007. The Report and Order exempts "multi-use" video systems from the franchising process under the Cable Act, but did not rule on the function of whether IPTV is a cable service or information service.
Applications over IPTV
There are a multitude of applications for IPTV. Generally, a subscriber to IPTV can view more than 300 channels of programming such as live sporting events, local news, feature films, foreign language programming, live music, television network programming, cable network programming, educational programming, and specialty programming, all at his or her discretion. Additionally, because an IPTV system is two-way interactive, the subscriber can participate in video conferencing, including attending homeowners association and other meetings by video, play video games, download photographs, videos, and listen to his or her favorite music. IPTV also highly complements a home theater system. One overlooked application over IPTV is alarm and security service, including video surveillance. IPTV offers the opportunity for video surveillance at a higher quality level than video surveillance over a one-way transmission cable system or local exchange telephone copper network. Thus, a subscriber can employ the highest technology for home or business security and fire protection by means of an IPTV system.
Why Should IPTV Be of Interest to Real Estate Developers and Home Builders?
These applications should be of enormous interest to real estate developers and home builders, particularly since IPTV represents a significant part of an important amenity which can add greater value to a new residential unit or a commercial building in a real estate development. Indeed, experts in the broadband services market have estimated that a FTTH or FTTC only can increase the value of a newly-built home from $4,000 to $7,000. The value of commercial units may even be higher. The IPTV component is a significant and substantial part of this increase in value. While, as this article noted above, an IPTV system can be delivered over an FTTC, an FTTH, or enhanced traditional copper wire, an FTTH system is the best approach. Real estate developers and home builders should seriously consider constructing a fiber delivery system in their real estate developments, by either contracting with an infrastructure provider who would not only manage the system, but negotiate agreements with service providers to provide voice, Internet and especially IPTV service.
© 2007 Michael L. Glaser
