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For more information, consult our: MRG November 2007 IPTV Bulletin
Bell Canada Postpones IPTV Service
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| Provider | HD Channels | Price |
| AT&T U-Verse | 25 HD channels | $10/month |
| Verizon FiOS TV | 20 HD channels (16 national, 4-5 local) |
$9.99/month |
| DirecTV | Over 200 HD (NFL games) |
$9.99/month |
| Comcast | 15 HD Channels | $5/month |
DirecTV has the most HD channels, but most of those are sports programming. Removing those extra channels, AT&T’s U-Verse, an IPTV service, is beating cable and satellite. Comcast has the fewest HD channels, but charges a lower monthly fee also.
This HD advantage is what IPTV providers must push for since IPTV is still a difficult sell for new customers. In fact, AT&T recently announced that it was offering free HD service for 1 year for new subscribers of its U-Verse service.
In the U.S. where cable competition and satellite competition is strong, IPTV service providers have to differentiate their services with HD including HD DVRs. They must also provide better quality than competing HD services. Also, satellite and cable providers have been known to scale back the HD bitrate which means potential quality problems that IPTV operators can exploit.
One thing that can help the economics of delivering HD is to lower the video bitrate. On the NAB exhibit floor, Grass Valley/Thomson was demonstrating its Mustang encoding chip which claims to deliver high-motion HD video at 4 to 5Mbps, which is about half the bitrate of current MPEG-4/AVC encoders that range from 8 Mbps and 12 Mbps. Lower bitrates means more HD channels for providers and consumers and that’s what everyone is after.
IPTV will lead the HD market based on MPEG-4/AVC—faster than cable or digital terrestrial. As providers switch to HD, MPEG-2 equipment will become obsolete. MRG research shows that revenue from MPEG-2 set-top boxes and headends will disappear by 2008 or 2009 and be replaced by MPEG-4 SD and HD equipment.
For more information about HD/AVC IPTV encoders and set-top boxes, see MRG’s new IPTV Global Forecast — 2007 to 2011, April 2007 or visit our website at www.mrgco.com/TOC_IPTV_GF0407.html.
For more information, consult our: MRG April 2007 IPTV Bulletin
Packet Vision Looks to IPTV Advertising
April 2007
With the success of many IPTV deployments, people are starting to ask: What about IPTV advertising? Packet Vision is answering that call by “providing targeting TV advertising to specific households via IPTV.”
Charlie Horrell, CEO of Packet Vision, says that the company’s technology supports local ad insertion, interactive and targeted advertising that can be tailored to match the demographics of individual households and even altered in real-time to reflect viewers’ reactions.
Founded in 2004, Packet Vision is a relatively new company and just recently announced its first customer trial in the US with Alaskan IPTV operator MTA.
Packet Vision’s ad server sits on the edge of the network, cuts in advertising and outputs 200 independent video streams. Aside from the hardware, the system also comes with sales and a traffic management software system so that providers can easily track and manage advertising campaigns.
Horrell said, “telcos are busy getting subscribers and are not focused on advertising much.” But as IPTV subscribers hit the critical mass, he believes providers will start IPTV advertising.
Packet Vision is interested in talking with everyone in the IPTV space, but is specifically looking at the mature European market such as France, Italy and Spain. But they are also interested in U.S. providers like AT&T and Verizon.
There are three types of data that can be gathered by Packet Vision’s technology: CRM information from the telco provider, the address or location, and tracking via IP tools such as channel changes and clicks.
Horrell said Packet Vision is using a “zero-risk, low capital investment model” which means the company will provide the server for free, in exchange for getting a percentage of revenues.
“One-to-one advertising hasn’t gotten very far. It’s more like one to many ones,” said Horrell. He says that viewers will see more relevant advertisements, which can prevent “channel hopping” and start new ad models for TV advertising.
Targeted advertising capabilities are great, but most service providers aren’t even selling conventional linear advertising yet.
“Most of the pieces of the jigsaw to turn IPTV into a mass revolution are in place, and the service that Packet Vision is providing will be the catalyst to turn opportunity into revenue for players in this market,” said Richard Scott George, GM of Packet Vision.
Servers and insertion devices are such a small percentage of the total cost of a system that we think that few system operators will trade off servers for a percentage of revenues. However, there could be a significant opportunity for a vendor that offers a complete, turnkey ad sales and delivery service, including hardware and software along with a qualified local and national ad sales force, in return for a share of ad revenues.
For more information, consult our: MRG April 2007 IPTV Bulletin
Iceland's IPTV Market
March 2007
Iceland Telecom (now called Siminn) says that it has deployed IPTV around the entire country with over 50% of its 52,000 DSL customers subscribing to the TV service.
In November 2004, Siminn launched its IPTV service in 10 towns around Iceland and by late 2005 it began offering full IPTV services with more than 60 channels, and VOD. Siminn is using Thomson middleware, Thales SmartVision broadband service platform and IBM servers.
For more information, consult our: MRG March 2007 IPTV Bulletin
Cablevision Loses Network DVR Lawsuit
March 2007
The U.S. District Court for the Southern District of New York ruled against Cablevision’s attempt to launch a network digital video recorder. Twentieth Century Fox, Universal City Studios, Paramount Pictures, Disney, CBS, ABC, NBC Studios, Turner Broadcasting’s Cartoon Network and CNN sued Cablevision in May 2006 claiming that its network DVR (called RS-DVR) would violate copyright laws.
The judge ruled that a remote-storage DVR would allow Cablevision and its customers to engage “in unauthorized reproductions and transmissions of plaintiffs' copyrighted programs.”
“The RS-DVR is not a stand-alone machine that sits on top of a television,” Chin wrote. “Rather, it is a complex system that involves an ongoing relationship between Cablevision and its customers, payment of monthly fees by the customers to Cablevision, ownership of the equipment remaining with Cablevision, the use of numerous computers and other equipment located in Cablevision's private facilities and the ongoing maintenance of the system by Cablevision personnel.”
Network DVRs lets users store TV shows on a provider’s network rather than on individual set-top-box hard drives. The judge ruled that recordings on a remote hard drive would be unauthorized reproductions.
The studios argued that because Cablevision was hosting the video on its servers, it wasn’t a network DVR, but a video-on-demand service and Cablevision needed permission to “rebroadcast” the programs.
Cablevision argued that its network DVR would not violate copyright laws since it works similar to DVRs in customers’ homes. In fact, Cablevision said it would dedicate separate storage space for each subscriber. In other words, if 500 subscribers decided to record the TV show “Lost,” there would be 500 separate copies saved on the Cablevision network.
Cablevision said it is reviewing the opinion and assessing all of its options, including an appeal.
Content providers are evidently trying to protect their content and possibly try to get TV operators to negotiate separate fees for implementing network DVRs. At the same time TV providers are trying to save money by deploying less expensive set-top boxes to customers and using their own network storage.
Meanwhile, the court decision is good news for TiVo, as well as set-top box makers like Scientific Atlanta and Motorola. As DVRs evolve and become more mainstream, however, it will be difficult to separate VOD from DVR functions. If Cablevision appeals, network DVRs in the U.S. may still be up in the air, however.
{Note: analyst comments are italicized}
For more information, consult our: MRG March 2007 IPTV Bulletin
Hawaii IPTV Service Launches
February 2007
NeuLion announced that its IPTV service was chosen by Hawaii IPTV for its Hawaii Television Network. Hawaii IPTV will deliver live and on-demand content consisting of various Hawaii programming including news, and other local TV shows.
Content is delivered over the public Internet, to the Hawaii IPTV set-top box ($150). Customers need a broadband connection to use the service.
The company said that the goal of the Hawaii IPTV service is to “deliver the Hawaii experience to Native Hawaiians and Hawaii expatriates living away from Hawaii.”
For more information, consult our: MRG February 2007 IPTV Bulletin
Ericsson and Arris Bid for Tandberg
February 2007
In late February, Ericsson made a surprise bid for Tandberg Television pitting it against Arris, which announced in January, that it was acquiring Tandberg for $1.2 billion. Ericsson upped the offer to $1.39 billion cash, which is about 10% more than Arris’ offer. Now it’s up to Arris to respond. News reports say that Arris is looking to make a counter offer, but nothing was announced so far.
Last month, Tandberg executives said they were backing Arris’ bid while calling the Ericsson offer "unsolicited." Still, if Arris does want to make a counter offer, it has to go through Ericsson since it owns a large percentage of Tandberg stock.
For more information, consult our: MRG February 2007 IPTV Bulletin
Mergers and Acquisitions
January 2007
Ericsson Acquires Redback Networks for $1.9 Billion
Telco giant Ericsson is acquiring edge router company Redback Networks for about $1.9 billion. Silicon Valley-based Redback has over 700 carrier customers in 80 countries and has some top-tier customers. Fifteen of the top 20 telephone carriers worldwide use Redback's technology, including broadband routers to manage IP-based data, voice and video services.
Arris and Tandberg Merge
Arris and Tandberg announced that they were merging at a deal valued at $1.2 million. The companies said by combining Arris’ VOIP equipment with Tandberg’s IPTV products they will accelerate the combination of voice, video and data products. According to MRG, Inc. Tandberg enjoys about 30% of the global IPTV video headend (encoder) market, with a strong position in Tier 1 and Tier 2 IPTV service providers.
Motorola Acquires Tut Systems for $39 Million
Motorola announced it was acquiring Tut Systems for about $39 million. Tut is a provider of carrier-class digital video encoding, processing and distribution products using MPEG-2 and MPEG-4 AVC video compression. It also provides local ad insertion, forward error correction, and real-time conditioning of video and audio.
For more information, consult our: MRG January 2007 IPTV Bulletin
Tiscali to Relaunch Homechoice as Tiscali TV
January 2007
Tiscali announced that it expects to gain about 500,000 U.K. subscribers in 2007 for its Homechoice IPTV offering. Tiscali acquired Homechoice TV when it bought Video Networks International in August 2006 and will rename the offering Tiscali TV when it relaunches later this year.
Broadband provider Tiscali has about 1.4 million U.K. DSL subscriber users and it hopes to convince more than half of them to add TV services. Tiscali said it plans to have over 80 TV channels including E4, MTV, Paramount Comedy and Cartoon Network, as well as 1,000 VOD movies.
In a survey commissioned by Tiscali of 1,400 users, 42% of respondents believe that today's traditional TV schedules will no longer exist in 10 years. Seventeen percent of users surveyed said they already watch on-demand TV, and 63% want to watch on-demand. Being able to watch movies at any time is so important to British consumers that more than half (51%) would prefer to rent a movie by downloading it through their broadband connection rather than go to a video rental store.
For more information, consult our: MRG January 2007 IPTV Bulletin
Time for Microsoft to Deliver
December 2006
Microsoft’s software deployments are starting to become commercial. Deutsche Telekom and Swisscom started their service in October 2006 and BT started its service in December 2006. AT&T’s service started in June 2006, but did not start to scale until the end of November 2006.
In addition, Verizon had to develop its own software (instead of using Microsoft’s) to support advanced functions such as whole home PVR in its FiOS TV FTTP IPTV service. Verizon uses Microsoft’s middleware for cable companies to manage channel selection. Since Verizon uses a cable like RF architecture for delivering broadcast channels, it does not use the same Microsoft IPTV Edition software that Deutsche Telekom, Swisscom, BT and AT&T do.
2007 will show how well Microsoft’s software operates. The first clue will be whether or not AT&T expands its IPTV service to 10 or more additional markets by the end of 2006, as it had previously promised. The real test will be to see the rate at which these services add subscribers. If these four IPTV services have 100 or 200 thousand subscribers between them by the middle of 2007, then Microsoft will be on its way. If not, then Microsoft may well see its market position slip.
For more information, consult our: MRG December 2006 IPTV Bulletin
Alcatel/Lucent Merged
December 2006
The Alcatel/Lucent merger completed with the resulting companying being called Alcatel-Lucent. The logo itself is the letter L and the letter A mapped into an infinity sign. Serge Tchuruk of Alcatel will be the Chairman of the Board and Pat Russo of Lucent will be the company’s CEO. The company stated that it will be the number one company in wireline, number three in mobile systems, and in the top three in applications and services. In the presentation it highlight its leading position in IPTV.
Alcatel-Lucent is the number one company in IPTV access systems, both globally and in Europe. It should be able to maintain that position.
It will be interesting to watch the Microsoft relationship. We believe that problems with Microsoft’s software have put a strain on this relationship. Alcatel’s recent video-on-demand patent suits against Microsoft is another sign of this strain.
{Note: analyst comments are italicized}
For more information, consult our: MRG December 2006 IPTV Bulletin
Hong Kong Broadband Flat
November 2006
City Telecom saw an in increase of 13 thousand IPTV subscribers for its Hong Kong Broadband Network Systems IPTV service bringing the total number of subscribers to 116 thousand at the end of August 2006.
City Telecom experienced a decrease in its total broadband subscriber base to 220 thousand compared to 227 thousand 12 months earlier. The company stated that it is upgrading its consumer business to less price sensitive and more service oriented customers. Consequently, its consumer broadband revenue increased 23 percent to $95 million.
For more information, consult our: MRG November 2006 IPTV Bulletin
Alcatel/Lucent Merger Approved
November 2006
George W. Bush, the President of the U.S., gave the final approval for the Alcatel/Lucent merger. This approval was based on agreements between Alcatel/Lucent and U.S. government security agencies. Alcatel’s current CEO Serge Tchurik will be the Chairman of the new company and Lucent’s current CEO Pat Russo will be the CEO of the new company.
This approval followed Congressional hearings addressing the U.S. security aspects of the merger. Lucent Bell Labs does significant defense related contracting with the U.S. government. Alcatel/Lucent addressed this by making Bell Labs a separate subsidiary following the merger.
Source: MRG November 2006 IPTV Bulletin
AT&T's Slow Start
October 2006
In its 3Q06 financial announcement, AT&T stated that it had 3 thousand U-verse IPTV subscribers at the end of September 2006. This is up from 1 thousand at the end of June 2006. It stated that it is getting a strong initial response with 85 percent of subscribers taking higher end video packages
AT&T also stated that its U-verse FTTN deployment passed 1.3 million homes at the end of the third quarter of 2006. It is forecasting 2.4 million homes passed by then end of the year.
AT&T is continuing to discuss a Houston launch with HDTV by the end of November 2006 and that it expects to launch about 15 markets within its territory by the end of 2006. It also stated that its initial market entrance and expansion will be deliberate.
Source: MRG October 2006 IPTV Bulletin
Verizon FiOS TV Booming
October 2006
Verizon made a presentation to the financial community to describe the current and anticipated returns from its FiOS FTTP deployment. It has been under pressure to explain why FiOS is worth the heavy investment that it is making.
Verizon is achieving 15 percent penetration of its FiOS service where the service has been available for at least 12 months. It is achieving a monthly churn rate of less than 1.5 percent. It stated that 70 percent of its FiOS subscribers are new to Verizon broadband.
By the end of 2006 Verizon will have two national super headends in operation along with nine regional headends. There will be 292 central offices supporting FiOS services. Verizon will also have video franchises in 300 municipalities that will cover 6.1 million households.
Source: MRG October 2006 IPTV Bulletin
Google Acquires YouTube
October 2006
Google acquired the Internet video content provider YouTube for $1.65 billion in stock even though YouTube had no significant revenue stream itself. YouTube reportedly attracted 57 percent of visits to Internet video sites in September.
YouTube’s popularity made it an attractive acquisition for Google. Google’s mastery over Internet advertising puts it in a unique position to capitalize on YouTube’s popularity.
Source: MRG October 2006 IPTV Bulletin
Free's First Half Results
September 2006
Free, the competitive carrier in France, announced its first half 2006 results. It now has 1.9 million broadband subscribers. It has 1.26 million TV enabled subscribers and had 273 thousand paying IPTV subscribers at the end of the half.
During the first half of 2006, Free introduced HD services and broadcasted French Open tennis matches in HD. It also introduced the ability to record and time shift TV programming on its HD Freebox set-top box.
Source: MRG September 2006 IPTV Bulletin
Shanghai Telecom IPTV Service
September 2006
Shanghai Telecom introduced its IPTV service together with the Shanghai Media Group (SMG). It stated that there are currently 10 thousand subscribers using this service. It expects the number of subscribers to grow to 80 thousand by the end of 2006 and 200 thousand by the end of 2007. It stated that this service will become profitable at 1 million subscribers.
This service will provide 58 channels, 12 from SMG, 15 from China Central Television (CCTV), 20 feature channels, and 9 from other provincial satellite sources. This service will include a time shifted TV service that will provide the ability to replay programs within 48 hours of their initial airing time.
The service will also include 3 thousand video-on-demand and pay per view services. Viewing a film will cost $.25 to $1.25. Viewing each episode of a TV series will cost $.038 to $.125.
For more information, consult our MRG September 2006 IPTV Bulletin
Market Leader Update
August 2006
MRG has just released the latest version of its IPTV Market Leader report. This shows which companies are leading globally and in four regions worldwide within in each of the six market categories we are tracking.
These ratings were based on ranking companies based on the number of subscribers in the 474 IPTV service providers that we have identified globally.
Mergers and acquisitions have had a big effect on these ratings. Tandberg’s acquisition of Skystream put it into a solid number two position globally and number one in Europe and Asia. Motorola’s acquisition puts it into the number one position in set-top boxes. The Alcatel/Lucent merger will put the resulting company in a strong number one position globally.
The conversion of in-house middleware packages to merchant status is the second major trend. PCCW’s Cascade subsidiary has sold its middleware package to True in Thailand. Converting the Cascade middleware to merchant status put it into the number one position globally.
Lucent has taken over the support of Telefonica’s in-house developed middleware software. Lucent is starting to aggressively market this software as a product, at least to Telefonica subsidiaries in Latin America.
The IPTV market is still forming. We expect that these ratings will continue to change significantly as the Market matures over the next couple of years.
{Note: analyst comments are italicized}
For more information, consult our IPTV Market Leaders Report - Sept. 2006
Source: MRG August 2006 IPTV Bulletin
Verizon Under Siege
August 2006
Verizon lost 4.2 million switched access lines in 2005, which is more than twice the 1.9 million switched access lines that AT&T, BellSouth, and Qwest lost together.
While AT&T and BellSouth have been successful in reducing the rate at which they are losing switched access lines in 2004 and 2005, Verizon took a big turn for the worse in 2005.
Verizon has very strong cable competition, particularly Cablevision in the New York area that has had quite successful VoIP offerings
For more information, consult our MRG August 2006 IPTV Bulletin
Free's Q2 Results
August 2006
The number of broadband subscribers at Free in France grew from 1.8 million to 1.9 million at the end of June. The number of IPTV capable subscribers grew to 1.4 million. The company now has 273 thousand subscribers paying for at least one IPTV service. Its subscribers have purchased 803 thousand video-on-demand features since it was introduce in December 2005.
Source: MRG August 2006 IPTV Bulletin
Cisco to Acquire Arroyo
August 2006
Cisco agreed to acquire video-on-demand system company Arroyo Video Solutions. This extends Cisco’s IPTV coverage into a new market segment and puts it directly into competition with Microsoft.
Arroyo has been focusing on the U.S. cable market and we have not identified any IPTV deployments. Arroyo’s strategy is to focus on personalization, which plays on a real IPTV strength.
The question now is what Cisco will do so that it can compete head-to-head with the Alcatel/Lucent/ Microsoft colossus. Middleware is the key missing element, but Content Protection/DRM is important as well. Cisco is an investor in leading Content Protection/DRM company Widevine.
{Note: analyst comments are italicized}
Source: MRG August 2006 IPTV Bulletin
Motorola to Acquire Broadbus
July 2006
Motorola announced that it would acquire Broadbus to round out its video offerings. Broadbus’ strong position in the U.S. cable market makes it a good addition to Motorola.
Broadbus is using its success with the cable providers to enter the IPTV video-on-demand market. It has 85 cable deployments and stated that it deploys with a tier one carrier in the U.S.
Broadbus uses solid state memory to distribute video-on-demand content from a central disk based library. It stated that it can support 100 thousand streams with six servers and 112 disk drives. Adding time shifted TV to this service would double the system to support 200 thousand streams with 12 servers. The number of disk drives would grow to 154.
The company states that the replacement of disk drives with solid state memory reduces facility costs such as power, space, and cooling by over 80 percent. It also states that its system will reduce the number of software upgrades by more than 90 percent. It has found that these savings can reduce OpEx by about 50 percent.
Source: MRG July 2006 IPTV Bulletin
Sky Offers Free Broadband
July 2006
It seems that offering certain components of an IPTV triple play offering for free is a common strategy. Free, of course, means that it is included in the base price of the bundle. Often a basic set of broadcast channels or VoIP services are offered for free.
In a new twist on this strategy, BSkyB, the satellite video provider is turning it on its head. It will provide a free broadband connection for subscribers to its video service. The range of services offered is given below:
Monthly Price |
Download Speed |
Monthly Allowance |
|---|---|---|
Free |
2 Mbps |
2 GB |
$9 |
8 Mbps |
40 GB |
$18 |
16 Mbps |
Unlimited |
This is a disruptive strategy that repositions BSkyB from a single play video provider to a triple play provider all at once. Its offer of a basic broadband service for free to all video subscribers will be very attractive to the mass market that has not yet committed to broadband. These people know they should have broadband and the ability to get it for “free” will cause many of them to make the move.
This is a direct challenge to the new BT service which is based on free digital terrestrial content and to its 21st century VoIP strategy. It raises the ante against the consolidating cable companies. It also makes it much tougher for the competitive IPTV companies such as Orange and Video Networks.
It seems likely that Sky in Italy will also adopt this strategy to fight off competition from Telecom Italia, FastWeb, and the new digital terrestrial services.
This is also a logical strategy in the U.S. Echostar seems to be exploring its own broadband alternative, including WiMAX technology. Echostar may well find an attractive broadband offering in the U.S. necessary to counter increasing competition from the cable and the IPTV companies.
{Note: analyst comments are italicized}
Source: MRG July 2006 IPTV Bulletin
AT&T Introduces IPTV
June 2006
AT&T introduced its U-Verse IP TV service to 5,000 homes scattered across San Antonio. It is priced at $69 to $124 per month with a family oriented bundle at $54 per month. A Spanish language package is available for an additional $10 per month.
AT&T offers over 200 channels along with a data service with speeds of 1.5 to 6 Mbps. The service comes with three set-top boxes, one with DVR capability. The standard installation fee is $95.
AT&T also introduced its Homezone service that combines Echostar video content with video-on-demand delivered over a DSL line to a 2Wire set-top box.
AT&T plans to introduce its U-Verse service in 15 to 20 markets by the end of 2006. It has not set a date for a full market launch in San Antonio or for any other market. It has stated that it will introduce the service in Houston, Texas.
{Note: analyst comments are italicized}
Source: MRG June 2006 IPTV Bulletin
Ericsson Introduces IPTV
June 2006
Ericsson introduced its IP TV offering at Globalcomm with a formal partnership with Kasenna who will provide its video-on-demand and middleware products. This offering will use Ericsson access systems and support broadcast and video-on-demand services.
In its next phase in 2007, the company plans to add IMS support to its IP TV offering in order to support both communications services and TV services.
The third phase of its implementation in 2008 will include convergence with mobile networks, including services that support both mobile and IP TV devices.
At Globalcomm, Ericsson showed a DLNA based demonstration with products from Sony.
Ericsson comes to the IP TV market later than the other major telecom suppliers such as Alcatel, Lucent, and Siemens. It faces the same problem as Siemens – it must overcome Microsoft’s dominance with large service providers.
Ericsson is taking a smart approach and leverage its mobile and IMS experience. It seems clear that mobile technologies will be increasing in IP TV networks, and Ericsson is well positioned to take advantage of that.
{Note: analyst comments are italicized}
Source: MRG June 2006 IPTV Bulletin
Siemens and Nokia to Merge
June 2006
Siemens and Nokia became the latest pair of major telecom suppliers to announce a merger. This follows hard on the heels of the Alcatel/Lucent Merger announcement in April 2006.
Nokias Networks division will merge with Siemens Carrier division. Both of these organizations offer Wireless and Wireline services and have aggregate revenue of €15.8 billion. They stated that 78 percent of these revenues are from wireless networks and 22 percent from wireline. The companies expect cost savings of €1.5 billion.
The resulting organization will be owned 50-50 by each company and will be headquartered in Helsinki. Most of the top level executives will come from Nokia.
The companies included IP TV as one of the leading market segments that the combined company will address.
The merger will not improve Siemens position in the MRG Market Leader Report. We have not identified any Nokia products in the IP TV market segments that we track in this report.
We expect that the resulting company will continue to put a high priority on IP TV, given the importance of IP TV in the service provider market today.
This merger together with the Alcatel/Lucent and the Ericsson/Marconi mergers will put significant pressure on Nortel, Cisco, NEC, and Motorola, as well as smaller companies such as Tellabs, Fujitsu, and Hitachi to find merger partners.
{Note: analyst comments are italicized}
Source: MRG June 2006 IPTV Bulletin
Siemens IPTV Home Equipment
May 2006
Siemens offers a line of home gateways that support VoIP and WiFi. Siemens has found that 802.11g WiFi is not sufficiently robust for IP TV video traffic. The company does expect that 802.11n will resolve these issues.
Siemens stated that both power line and polymer optical fiber (POF) will be popular methods for networking homes for IP TV. POF is a very thin fiber strand that can be deployed by the home owner. It is unobtrusive and can be easily hidden under rugs or other places. POF does not have the interference problems found with either wireless or power line systems.
Siemens also demonstrated its Tango customer equipment network element manager. Tango can manage both Siemens and non Siemens customer systems. It provides the ability to log events, gather data, and configure home devices. It does not have heuristic systems that provide intelligent filtering that would facilitate managing large populations of subscribers (several hundreds of thousands or millions).
As we reported previously, Siemens is introducing a line of MPEG-4 AVC IP TV set-top boxes. Its low end box will come as an HD/SD or an SD only. These two units are basically the same, except that the SD only unit has less memory to lower its cost. Siemens expects that the HD/SD unit will be widely used in Europe and North America and the SD only unit will be used in Latin America.
Siemens also offers a somewhat larger unit that may have a hard disk included with it. Both of these units support both SD and HD.
The final pair of units are hybrid devices that support both IP TV and DVB digital terrestrial services. A hard disk is available and both of these units support both SD and HD.
Siemens is still on schedule for a September volume delivery of these units; however, any further schedule slips from its chip suppliers will cause their set-top boxes to slip as well.
Source: MRG May 2006 IPTV Bulletin
FastWeb IPTV Treading Water
May 2006
We met with FastWeb in Milan this month about a week after it announced its results for the first quarter 2006. It used this meeting to point out to the financial community that it is now a national service provider in Italy.
FastWeb described its geographic expansion which increased the number of central offices served from 304 in December 2004 to 800 today with the number of metro areas served growing from 14 to 130 at the same time. It now covers 45 percent of the households in Italy and about 70 percent of the enterprise fixed-line market in Italy.
FastWeb is now able to serve national enterprises, which makes it a significant factor in this market for the first time. Previously, it served local and regional business applications as well as consumers.
FastWeb won two large public networking applications in Italy based on its network expansion. The company stated that other large enterprises are starting to consider it to support their network deployments.
The company is continuing to aggressively go after the consumer market in Italy. It is using unbundled ADSL and ADSL-2+ as its primary technology for consumer applications.
FastWeb’s offers only SD video offerings at this time. It does not plan to introduce HD services in 2006. It expects that Italy will lag behind France and Germany in introducing HD services. Both of these companies are planning to introduce HD services in 2006.
FastWeb continues to increase its subscriber base, adding 80 thousand new subscribers in the first quarter of 2006. Its residential subscriber base is now about 675 thousand subscribers, with 160 thousand IP TV subscribers.
The number of IP TV subscribers has remained stable for the last couple of years. It had a successful promotion in 2003 based on the availability of football in its offering that generated a significant number of new subscriptions. Many of these new subscribers have cancelled their subscriptions and have been replaced by new subscribers. Increased satellite competition and new competition from digital terrestrial have also made it more difficult for FastWeb to acquire IP TV subscribers.
FastWeb’s overall customer spending continues a slow decline, primarily due to competitive pressures and the introduction of new services. FastWeb’s video customer spending is fairly stable with about a 3 percent decline in the first quarter.
FastWeb finds that there is less demand in the Italian market for higher speed data services. It is currently offering an upgrade from ADSL to ADSL-2+ for a one time charge of €80 and no increase in monthly fees. The demand for this upgrade has been modest.
FastWeb has no plans to upgrade its network beyond ADSL-2+ at this time. It expects that ADSL-2+ should support subscriber demands for HD services and higher speed data services. Telecom Italia has announced a plan to deploy VDSL, which may put some competitive pressure on FastWeb.
FastWeb’s first response to the Telecom Italia VDSL deployment will likely be to further promote its ADSL-2+ offering. This is a low cost approach that can provide an immediate result.
In the long run, it is likely that FastWeb will expand its FTTH deployment to counter VDSL. FTTH is technically superior to VDSL, which will give FastWeb a significant competitive advantage over Telecom Italia. FastWeb does not have the wiring cabinets located close to the subscriber that Telecom Italia has. These wiring cabinets provide the infrastructure for a fiber to the node VDSL deployment. A direct FTTH approach should be significantly less costly than trying to duplicate Telecom Italia’s fiber to the node VDSL approach.
The fact that FastWeb’s IP TV subscriber base has been flat for the last two years shows the difficulties that IP TV service providers are likely to experience as the competitive environment changes.
{Note: analyst comments are italicized}
Source: MRG May 2006 IPTV Bulletin
Deutsche Telekom Rollout
May 2006
We had two meetings with groups in Deutsche Telekom (DT) that are involved with its IP TV rollout. It had announced that it would deploy VDSL and IP TV in 10 cities in Germany in time to show the World Cup in HD in June of this year.
In May, it made the HD IP TV service available to several dozen friendly homes in time for the start of the World Cup. This is more of a technical trial than a market rollout. Current plans are to rollout the service commercially in these 10 cities in July.
While the VDSL rollout appears to be on schedule, all is not well with the Microsoft IPTV Edition Software that DT will use. We were told that it still does not operate reliably in the lab.
The public broadcasters in Germany, ARD and ZDF, are threatening to boycott the DT service. These broadcasters are protesting that Microsoft’s software is incompatible with some important European TV standards.
We also heard concerns that the Microsoft software does not provide sufficient opportunities for differentiation to permit DT to make a wholesale IP TV offering. There is some discussion that DT might deploy a second middleware platform for its wholesale customers.
In some good news for DT, the German Cabinet passed a bill that exempts DT’s VDSL network from unbundling, which will give DT a significant advantage over its broadband competitors and will give it a unique ability to provide HD IP TV services.
It does not appear that the DT IP TV network is ready for prime time yet. The technical issues with the Microsoft software clearly must be resolved. DT also has to resolve its content issues. It will clearly need all of the important broadcast channels from the start of the service.
{Note: analyst comments are italicized}
Source: MRG May 2006 IPTV Bulletin