Really, there is no free lunch. Not even for OTT in Hotels

The recent HTNG Awards for “Most Innovative Hospitality Technology” went to Philips MediaSuite Hotel TV, which says it offers hotel guests online apps like YouTube, Twitter, Facebook, Catch-up TV, local and international news, weather, games and more. In their marketing blurb, TP Vision, who owns Philips’ hotel business in EMEA, claims that with their system “there is no longer a need for a set-top box or heavy head-end investments, reducing the total cost of ownership for a hotel.” 

If only. Of course, eliminating the set top box and head-end equipment is a very attractive proposition for hotels. But, as I said in a previous blog, the scenario of removing a set-top box or head-end is simply not realistic, and won’t be for some time to come. 

To illustrate just how far away Philips and similar OTT-based solutions are from providing a viable option for in-room entertainment for hotels, you only need to do some simple maths around bandwidth requirements for the various services offered on an OTT-based hotel solution.

Sure, social media apps don’t take up a lot of bandwidth, and even VoD is manageable with a streaming bitrate of 2 Mbit/s for SD, and 8Mbit/s for HD. Assuming that the maximum viewing concurrency doesn’t exceed 10% on average, this will require a 250 rooms hotel to have a 50Mbit/s – 200Mbit/s pipe to meet this type of viewing behaviour.   

But TV is where the bandwidth issue becomes more perilous.  If a similar traffic model is applied to a cloud-based TV channel delivery service to a hotel room, the bandwidth requirement would be at least 3 to 4 times higher than for VoD.  So hotels are looking at 150Mbit/s – 800Mbit/s they have to provide to ensure reliable delivery of broadcast quality TV channels to their guests – a big challenge to any hotel in developed countries as it comes typically at a big cost.

According to industry analysts, video currently consumes 29% of network bandwidth, which is predicted to increase to 40% within the next year. However, the same analysts say that the operators they surveyed so far have only set 10% of their network capacity aside for video technologies. But even where investment in FTTH and other infrastructure technologies eases the issue of bandwidth availability, the cost to actually provide the service reliably and offer hotel guests the QoS they expect, will remain prohibitively expensive for a long time to come. And this of course negates the supposed savings suggested by doing away with the traditional walled garden equipment.

And let’s not forget the increasing wariness of network owners about the demands the influx of these bandwidth hungry OTT services have on their infrastructure. South Korea’s KT has been very vocal in chastising big technology companies for free-riding on their networks and has warned of a “big data blackout” if OTT players don't agree to help pay for the rapid growth in data traffic that they are contributing to. 

There is a reason why network operators are nervous about this. A network provider typically pays a price per m/bit far in excess of the charges it passes on to its end customers, hotels included. This is because the retail market is not prepared to pay the same price per m/bit, particularly in Asia, where upstream costs can be as high as US$18 per m/bit. So in order to hedge against this imbalance, network providers use something called over-contention. It’s a bit like the common practice of airlines selling more seats than they have available to minimise empty seats. For the most part it works, but occasionally, for whatever reason, some passengers have their travel plans thrown into chaos. Translated to the hotel business, this means that in-room entertainment QoS cannot be guaranteed, which is probably not the type of experience you want to expose your guests to.   

So unless the day comes when hotels are willing to pay for the bandwidth required or the cost for a 1,000Mbit/s pipe goes down to today’s cost of a 10Mbit/s pipe, OTT in a hotel environment remains only really a best-effort delivery of long-tail content.  

In the light of these issues it is puzzling to me why HTNG would give this technology its stamp of approval as its most innovative technology. What is and isn’t innovative may be debatable, but in my mind, a technology that is endorsed by an industry body should be a viable solution, not a piece of wishful thinking that for the foreseeable future remains out of reach for most hotels.