By IPTV, we mean traditional IPTV which has already been widely deployed by numerous operators, namely, those that offer a triple-play ADSL package to their customers. IPTV is delivered over a dedicated, operator-managed network that is used only for broadcasting TV. The operator has full control over the network and can configure specific parameters, such as bandwidth consumption and jitter prevention to ensure a high level of service quality. Traditional IPTV uses TS (transport stream) transmission technology, which is based on satellite TV broadcasting and delivers content over UDP in datagram mode. OTT TV differs from IPTV as it transmits streams using HTTP, the protocol which has been used for decades to transport web pages over the Internet.

HTTP is based on TCP, a connected transport protocol with more practical features than UDP. It is easier to track a TCP connection. As a result, a TCP connection can be easily managed through firewalls, NAT (network address translation) systems, and home and office networks. It also enables anyone with sufficient web hosting capacity to broadcast audio and video content to a worldwide audience over the open Internet. HTTP has already been used as a transport solution for video-on-demand (VOD) media embedded into web pages, especially on Adobe Flash-based sites, such as YouTube, Hulu, and Dailymotion. However, this solution does not stream in real time, but instead relies on progressive downloading of media files.

The browser downloads the file from the HTTP web server and when it has a sufficient amount of data, it starts to play the content while it continues to download the rest of the file. The main drawback to this approach is the length of time it takes to fill the initial buffer.

Another issue associated with HTTP is streaming quality, which depends on the IP connection. Content streaming may be subject to stalling if there are fluctuations in bandwidth, leading to frame freezing. As a consequence, it is nearly impossible to use this solution to broadcast live channels. Until recently, live broadcasting was, therefore, restricted to operator-managed IPTV networks using the UDP multicast protocol. The arrival of OTT streaming, however, has brought a new approach and it is now possible to achieve levels of streaming quality over HTTP that allows live content to be broadcast over the Internet.

The Future of OTT Services

As OTT adoption rates begin to slow in primary markets, major providers are supplementing their growth by looking abroad. Netflix has invested significantly in its international presence over the past five years by expanding into Canada, Latin America, Europe, and Asia-Pacific. The company plans to continue its strategy by offering its streaming service in 200 countries by the end of 2016, with the notable addition of China. This aggressive growth strategy will improve the company's buying position, but it will also shift Netflix's subscriber base toward international users, requiring them to retain a larger and more diverse content library.

OTT video providers such as Amazon and Netflix have also been successful in creating their own proprietary content, and will continue to invest in production. Owning content presents numerous advantages over licensing, including cost savings and differentiation relative to Pay-TV and other OTT providers, but carries the risk associated with a flop.

Major providers are also looking to incorporate more live content within their service – the most significant differentiator between their content and Pay-TV. For example, Amazon purchased the live-stream service Twitch in 2014, and Yahoo delivered an online broadcast of an American football game in 2015. Next year, CBS plans to offer a free online stream of the Super Bowl, one of the largest TV events each year. The trend is likely to continue as the quality of online distribution platforms improves, enabling OTT providers to more directly compete with Pay-TV operators.