Aug 19, 2005 9:57 AM,

SBC pits Motorola set-tops against Scientific Atlanta

By Ed Gubbins

Motorola and Scientific Atlanta will supply the set-top boxes for the video portion of SBC Communications’ fiber-to-the-node deployment, Project Lightspeed.

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The Lightspeed contracts give “equal market opportunity” to both vendors through 2008, though its unknown how the two will compete for SBC’s business—for example, whether the two will compete to supply each geographic portion of the network. SBC will use Motorola’s set top box first, the carrier said, and include Scientific Atlanta’s gear at an unspecified later date.

Though the value of the contracts are unknown, financial analysts at Lehman Brothers estimate SBC could spend more than $1 billion on set-top boxes alone, with no volume commitments to either vendor.

“We believe this is truly going to be a head-to-head battle between the two largest North American set-top box providers, and the winner will be the one that can offer not only the best quality product, but also the one who can provide the best viewer experience, on-time deliveries and advanced functionality, all at the most competitive price,” Lehman Brothers wrote in a research note issued this morning. “While this could lead to limited profitability and margin levels, at least initially, profitability levels should improve as volumes ramp and both manufacturers improve production efficiencies on the new set tops.”

Both set-top boxes use multicasting for IPTV with additional support for video-on-demand, using MPEG4 or VC1 technology to store content in a digital video recorder function. And both will operate Microsoft’s IPTV software.

SBC is currently trialing IP video content distribution equipment from Scientific-Atlanta through a contract awarded in March.

The carrier expects to launch video service late this year or early 2006 through Project Lightspeed, its initiative to deploy triple-play services to 18 million households by the end of 2007. But Motorola and Scientific Atlanta set-tops likely won’t be deployed until later in 2006, Lehman said.