August 25, 2016
By Adrian Pennington
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Electrifying OTT Services With the Cloud: Going Beyond the Box

In search of increased revenue, cost savings, improved service, and customer retention, service providers are migrating key services to the cloud. The number of TV services that are accessed over the network via a service platform or back end for video on demand (VOD), subscription video on demand (SVOD), and other TV Everywhere services such as start-over or catch-up is ramping up fast. The arguments in favor of the cloud are compelling and the momentum unstoppable, although the shift is not always straightforward and should give pause for thought.

Before we take a deeper dive into cloud DVR (cDVR), ad insertion, and the user experience (UX), it may be helpful to define what we mean by “cloud.” As ever, different people mean different things by it.

For example, “cloud” could mean the use of public virtualized IT infrastructure, such as Amazon Web Services (AWS), on which privately licensed software is operated. Or it could mean that the cloud supplies the actual function being offered. In that case, the underlying IT infrastructure may be still be cloud-based or privately owned to create a “private cloud.”

Ian Munford, Akamai’s director of product marketing and media solutions, points out that “Cable and IPTV operator deployments are typically happening in private clouds, which limits the value to viewers. OTT providers such as broadcasters use cloud partners like Akamai to deliver DVR-like services and have done so for many years.”

Another important subtlety is the actual location of the equipment inside the cloud, which becomes very important for certain aspects of TV delivery. There’s a general assumption that because something is “in the cloud,” it doesn’t matter where it is actually located, and that it’s probably centralized somewhere to benefit from economies of scale. That’s not true, and without proper consideration, this could be a very expensive mistake.

“From a technical point of view, cloud can be about moving functions out of client devices and into servers,” says Andy Hooper, VP of cloud, solutions and services EMEA at ARRIS (right). “In that sense you could argue that a telco service provider has been running a telephone network as a ‘cloud’ service for 50 years. In a business context, cloud also implies outsourcing of operations.”

Essentially, we are talking about moving what used to be done in a box in the living room to the network. The most obvious benefit of this is the ability to tap the cost savings of virtualization and rapid response to changing demand.

Cloud DVR

Park Associates’ research suggests worldwide cDVR subscriptions will rise to 24 million by 2018. As Ericsson’s Sarah Paris-Mascicki wrote in TV Technology, this reflects a shift in consumer viewing habits and creates “an imperative for providers to build more flexibility into their services.” A recent study released by Technavio expects the global cDVR market to grow at a compound annual growth rate of more than 30 percent over the next 3 years.

By 2020, Ericsson predicts that more than half of viewing will be time-shifted, with providers able to reap double to triple the current benefits their DVR services provide, simply by upgrading to the cloud. Other vendors see similar growth. TV applications solutions provider Accedo, for example, expects more than 50 percent of cDVR penetration to have occurred by 2022.

“When it comes to processing key functions of the client box, such as the DVR experience, in a more centralized way and reducing the requirements of the STB [set-top box] there is a clear trend,” says ARRIS’ Hooper. “What’s more fragmented is whether this is outsourced to third parties. Some Tier 2 and Tier 3 operators don’t regard TV as core to their business and are more ready to outsource cDVR functions to someone else’s data center. It’s a commercial decision: build versus buy.”

ARRIS says it has a project with a Tier 1 European operator that is building its own cDVR infrastructure, and the company is working with other clients to build the same capabilities in order to sell a white-label service to other operators.

Edgeware customers, including Belgacom in Belgium and Netherlands’ KPN, are using DVR in the cloud quite extensively, according to CMO Richard Brandon (right). “cDVR is usually one of the top three services their viewers use when consuming TV delivered over an IP network—along with Startover TV and VOD,” he says.

The Benefits of cDVR

The value proposition for operators moving to a cloud architecture is well-documented. It includes financial efficiencies such as lower operational expenses in maintaining STBs and reduced overall capital expenses; increased revenue potential by being able to upsell storage services, multiscreen experiences, etc.; and the ability to reduce customer churn by offering advanced services such as parallel recordings, unlimited storage, and improved reliability.

“The cost of supplying and maintaining home DVRs is becoming prohibitive as users demand more and more storage,” says Brandon. “Many of today’s connected devices don’t have sufficient storage for local recording.”

Operators using Edgeware’s TV CDN have achieved increased subscriber satisfaction and loyalty from adding catch-up and cDVR. KPN, for example, tripled its TV subscriber base to more than 1.6 million households since launching cDVR in 2011.

“Additional benefits to the viewer include the ability to access stored programs from multiple devices or locations, escaping from the cycle of upgrading out-of-date equipment and simplifying the buying and configuration experience,” says Brandon.

Ericsson reinforces the capital savings a service provider can generate from theoretically fewer service callouts. It calculates that a typical truck roll costs $75 per subscriber and says cost-efficiencies have been the main driver for the deployment of cDVRs by U.S. operator Cablevision.

However, costs don’t simply vanish with a move to the cloud. Service providers face a huge challenge storing unique copies. “Cloud DVR may bring significant potential for video providers to accelerate monetization opportunities, but that potential quickly loses its luster if storage costs for a large-scale service reach $1,215 per subscriber,” says Yuval Fisher, Imagine Communications’ CTO. That alarming figure is tied up with the thorny legal issue of the legal uncertainties surrounding private/public copies and is the single issue thwarting rapid rollout.

Regulatory Challenges

In most markets, it is completely practical to deploy cDVR services. However, the licensing arrangement for private copies in some countries, notably those in North America, is a sticking point. The pivotal issue is whether a unique copy is required for every subscriber, which in the U.S. is deemed as the standard.

“A private copy system requires a unique copy of a program to be saved for every subscriber that requests it, meaning recordings cannot be shared,” says Itai Tomer, head of the cDVR business line at Ericsson. “Each single, unique copy of the program has to be saved for each user, which requires a huge, growing volume of storage and very high recording and playout concurrency, and that can be problematic to sustain.”

“Technically, it is nonsensical to have to create private copies, but it’s a license requirement from some content owners,” says Brandon. “Where that exists, it makes cDVR more expensive and cumbersome to implement.”

In Europe, copyright laws vary according to region. “In Switzerland, for example, the regulatory framework is very well-defined and in accord with single copies, so you find all the major players like Swisscom and Sunrise offering cloud recording,” says Hooper. “In other places, it’s very much a traditional content rights negotiated issue and therefore a commercial decision as to whether the numbers make business sense for an operator to move to the cloud.”

Imagine Communications has done some calculating. “For content owners that want to stick to the exact letter of the ruling, it means, for example, an operator with a million users and 300 hours of recorded content per user will require 120 Petabytes (Pb) of storage,” says Fisher. “If you just store one physical copy of a year’s worth of content for 500 channels—which is a use case from one of our customers—then it means 20Pb of storage. So whether in private or shared copy mode, there are huge storage costs.”

To make matters worse, he says, delivery to multiple devices in multiple ABR formats ups storage requirements fourfold to six-fold, rapidly becoming an even more expensive proposition.

“For a use case where the aggregate bitrate is 15Mbps with three ABR formats and 200 hours of recorded content for every subscriber, and we assume the cost per TB is $300, then you get a cost per sub of $1,215,” Fisher says.

In another example, taking the aggregate bitrate at 10Mbps with two ABR formats and 75 hours storage per user and a TB at $200, the cost is $135 per user. “Even with a very extreme scenario of very low bitrates, you still end up with a cost of $22 per user,” Fisher says. “Multiply any of those scenarios over millions, in the case of any large service provider, and you can see how the costs quickly stack up.”

Imagine Communications advocates just-in-time (JIT) packaging to encrypt and JIT transcoding to minimize storage costs by 50 percent. “Store assets in a single format but deliver in all adaptive bitrate formats for multiple devices,” advises Fisher. “Operators want the ability to shift between interpretations of the private copy ruling, giving them flexibility at the program level.”

Akamai’s Munford reports that many operators still haven’t been able to secure rights for their cDVRs in a way that allows the benefits of the technology to be fully realized. “Until this problem is fixed, the value proposition for viewers will remain confusing and the economic benefits to operators limited,” he says. “OTT services do not have this problem as rights are readily available or, as is often now the case, owned by the OTT provider.”

The legal framework is evolving to open up the market. For instance, the French Digital Bill, approved in July by the French Senate, encourages the deployment of cDVR in that country.

“New and renewed contracts often add the provision for shared copy storage. Over the next few years, it is expected that most, if not all, non-adversely negotiated contracts will allow shared copy,” says Simon Trudelle, senior product marketing manager at Nagra.

User Interface and Experience

Transplanting user experiences to the cloud offers many of the same advantages to operators, notably the ability to change the UX rapidly and at scale, rather than rewriting the UX for every make and model of CPE, and enabling an operator to innovate a discrete user interface (UI) for every subscriber.

User experiences delivered as MPEG or H.264 streams to every STB with full interactivity enable operators to efficiently deploy services “that are equal to—or better than—experiences that run on the box itself,” according to Murali Nemani, CMO at ActiveVideo.