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Watch this space(Electronic Business Via Thomson Dialog NewsEdge)To hear some industry leaders talk, 2006 will be the year of Internet protocol television (IPTV). At January's Consumer Electronics Show, for example, Microsoft Chairman Bill Gates said he expects to see IPTV field trials scale up into large numbers this year. "It will blow away the previous video platform," he predicted. Not everyone is so definitive, however. "The question mark is how fast the service and product rollouts will grow," says Ken Lowe, vice president of strategic marketing at Sigma Designs, a chip company involved in several major IPTV rollouts. IPTV, which uses IP packets to deliver a two-way digital video signal through a broadband connection to the home, is still a fledgling market. In-Stat, a research company owned by EB parent Reed Business, estimates that only three million IPTV set-top boxes (STBs) shipped worldwide last year, generating revenue of about $500 million. But In-Stat forecasts that shipments could grow to 20 million units, with revenue of $3 billion by 2010. ABI Research predicts even higher numbers (see chart). Although there are several midsize IPTV deployments in Asia and Europe (see "IPTV Around the World," page 12), activity in North America was limited until recently to small, rural operators. But during the last two years, as U.S. cable operators have begun offering more "triple play" servicesbundles including voice, data and videomajor U.S. telecommunications vendors have decided to adopt IPTV as a defensive move. The operators see IPTV as a way to deliver many channels of digital TV while also offering enhanced services such as digital mosaic programming guides, which can show what's playing on multiple channels via a mosaic of thumbnail video windows, whole-home digital video recording and integrated services such as on-screen caller display for customers using both phone and TV services. Meanwhile, Microsoft last year began promoting its operating system for IPTV, called IPTV Edition. Until then there was only a cottage industry of software companies selling various operating systems, middleware and browsers for IPTV, according to Lowe. "What got the big telcos across the finish line in many cases was Microsoft's IPTV," he says. Some two thirds of the major telco carriers are either participating as early adopters or are planning wide-scale IPTV deployments based on IPTV Edition, he notes. Everyone is watching two U.S. rollouts in particular, to gauge whether IPTV will catch on in the United States. Project Lightspeed, by AT&T (formerly SBC), is a multibillion-dollar deployment of fiber that the company says will reach approximately 18 million households by the end of 2008. The company launched a pilot project in San Antonio, Texas, and expects to start deploying on a broader scale later this year. Meanwhile, Verizon Communications is rolling out its fiber-optic-based TV service, called FiOS, also in Texas. The company predicts that by the end of 2006, the service will reach nearly 400,000 North Texas households. The fact that both rollouts are in Texas is no coincidence and highlights one of the major barriers to IPTV expansion in the U.S. Currently, local governments must approve local TV services. Cable companies have spent several decades procuring franchises in thousands of municipalities across the U.S., but the telecommunications companies have no such licenses. The telcos are pushing Congress to create national franchising rules. Meanwhile, some states are creating statewide franchising rules. Texas is the first, having passed legislation last year. In addition to regulatory uncertainty, there are significant doubts about whether IPTV technology is ready for widespread deployment. Most of the IPTV deployed to date (in Asia and Europe) has been standard-definition, which uses MPEG-2 for compression. But U.S. operators want to offer more-aggressive services, such as voice over IP or high-definition TV. "This has to come," says Roger Walker, a vice president and general manager with STMicroelectronics. "Otherwise, it'll just be a battleground for a price war." STMicro today has more than a 70 percent share worldwide of the market for MPEG decoders in set-top boxes, he notes. To offer those advanced services, operators need MPEG-4-level compression. There are various flavorsincluding H.264; MPEG-4, Part 10; and VC-1but in general the standard doubles or even triples the compression available from MPEG-2. "Two years ago, the processing power we wanted wasn't there," says David Price, vice president of product marketing and business development at Harmonic, which makes encoders. Many of the processors were DSPs that were designed originally for audio applications, he says. But today "the silicon has definitely caught up with the applications." Indeed, the industry has been awaiting an MPEG-4 SoC that would provide greater processing power but at a reasonable price point, says Marty Stein, a senior director of marketing at Motorola. "All the technology seems to be in place now to launch this market," he says. Motorola plans to start shipping production versions of its IPTV STB, which is based on the Sigma Designs chip, in the second quarter of this year, he says. Motorola is one of two providers of STBs for AT&T's Project Lightspeed. The other is Scientific Atlanta, which Cisco Systems acquired in November 2005. Part of the problem has been getting the chips to work well with the software, notes Manjit Gill, director for telco TV products at Conexant Systems. "It's taken them [chip makers] multiple spins to get it right," he says. And some think that it will take more spins. Although the MPEG-4 chips are available and working, they have not yet been put to the test of broad deployment, says Scot Robertson, director of network media products at Analog Devices, Inc. "We see a big danger of some of these chip sets really not being properly tweaked for broad deployment," he says. Companies such as ADI and Texas Instruments, which sell programmable processors into the IPTV market, argue that it's better to use programmable chips, because of the instability of the MPEG-4 technology. As the big U.S. projects roll out in 2006, many of these questions will likely be answered. "There are a lot of people watching and waiting," says Aidan O'Rourke, director of marketing at Broadcom. "There are a lot of pieces to these networks that have to fit together and scale properly." IPTV around the worldAsia and Europe have already seen several midsize IPTV deployments, but the factors driving these markets are distinctly different from the situation in the United States. So far the biggest IPTV rollout in the world is in Hong Kong, where telecommunications company PCCW has 500,000 customers, according to Michael Arden, principal analyst, ABI Research. Asian countries typically have little cable infrastructure, but a high number of DSL subscribers are highly concentrated in small areas. So Asian operators are trying to increase revenue per subscriber by adding new services such as video. Similarly, Europe has little in the way of cable but has strong satellite and DSL businesses. The European providers view promoting IPTV as a way to get a leg up on their satellite competition, because IPTV enables interactive services that are not possible with satellite. Major deployments in Europe include about 200,000 subscribers in France, 200,000 in Spain and 150,000 in Italy, according to Arden. U.S. set-top-box giants go head to headThe United States historically has had two 800-pound gorillas in its set-top-box market. They used to be Scientific Atlanta and General Instrument. The names have changed, but those same two gorillas are going after the IPTV STB market. In November 2005, Cisco Systems acquired Scientific Atlanta, for $6.9 billion. (At press time, the acquisition was expected to close by late April 2006.) In a press release, Cisco CEO John Chambers said the acquisition would help Cisco broaden its product line in networking and make it easier for its telecommunications customers to integrate video onto their IP networks. Earlier in 2005, Cisco purchased KiSS Technology, which makes DVD players and digital video recorders that can connect to a home network and access content from the Web. Some analysts speculate that Cisco could integrate this technology into Scientific-Atlanta's STBs and wireless home networking routers from Linksys, a company Cisco acquired in 2003. Motorola bought General Instrument in 2000, for about $17 billion. At that time, the purchase included 80 percent of NextLevel, a former GI subsidiary that specializes in DSL and the telecommunications space. In 2003 Motorola purchased the rest of NextLevel. Motorola further bolstered its IPTV offerings in January 2006, when it acquired Kreatel Communications. Kreatel builds IPTV set-top boxes for the European market, basing them on Linux and a variety of middleware. In addition, the venture capital arm of Motorola recently invested millions of dollars in CopperGate Communications, a developer of chip sets for IPTV home networking |