IP VIDEO VOYEURS: THE U.S. KEEPS ITS EYE OVERSEAS

Hakman Kim has the kind of business opportunity other telecom service providers — particularly in the U.S. — lust after. Kim is the business development director for The Contents Co. subsidiary of South Korean telecom giant SK Group. SK not only owns the broadband access lines to its end users, it owns the buildings in which they live. In any language, that's called a captive audience.

The South Korean government also helps things along. Rather than discouraging this kind of apparent monopoly, it tacitly approves it as way to encourage more broadband deployments in a country that has, according to most observers, the densest broadband infrastructure in the world.

Kim downplayed the advantages of a built-in base of customers for his company's groundbreaking IPTV work because apartment dwellers “can also subscribe to cable.” The cable offering, however, is a limited package of analog channels, while TCC is delivering — at least on a trial basis — an IPTV video entertainment package that includes multiple digital channels, video-on-demand and a mixture of Web content over a closed IP network.

Certainly, a similar model will be tougher to come by in the U.S. First, there's our entrenched base of cable operators. Then there's the growing number of satellite-delivered services. Therefore, a third leg of a video entertainment stool is not something Americans are standing in line to use.

The TCC network “really looks like a corporate LAN,” said Reed Majors, vice president of marketing and business development for Minerva Networks, which is supplying IP video entertainment technology to TCC. SK runs fiber to, or at least close to, multi-tenant units, then snakes through the building with Category 5 cable and Ethernet to individual residences to deliver high-speed data and video entertainment.

The advanced network is necessary because TCC, as a telecom company, can't offer traditional cable TV services. “But we have total control of IP, and it's much easier for us to deliver on IP instead of cable,” Kim said.

Minerva sells TCC the hardware, including its iTVManager, to turn video into IP packets. From there, TCC mixes traditional entertainment — including video-on-demand — with Web content and places it into a walled garden for subscribers who pay about $10 a month for basic service.

The video, Kim said, is “DVD quality,” and the private network pipe allows TCC to guarantee a megabit of data speed per household. Voice eventually will be included in the package.

Subscribers get a Pace DSL4000 set-top box to change the IP signals into traditional television. Additionally, they can use the box's Ethernet port to feed computers with high-speed access. “It's an IP-type set-top box that typically sits on an ADSL-type network,” said Steve Farmer, head of marketing for Pace Micro Technology IPTV Division. “What people do is build their own private network — a controlled, managed IP network — and offer entertainment over it.”

The IPTV business is growing phenomenally around the globe, said Farmer. “All over the world, telcos and service providers are now feeling that they have all the checks in the boxes to launch [IPTV] services on a wider commercial scale,” he said.

Make that all over the world except for in the U.S., where IPTV is not nearly as prevalent among the major carriers.

“It's the big telcos overseas, not the small companies and CLECs you see here in the U.S.,” said Majors. “The utility companies in Europe are starting to look into it because there's quite a few utilities that are well positioned to do fiber to the home.”

Korea, however, takes it up a notch, partly because DSL and broadband penetration is so high in that country, said Keith Kennebeck, an analyst with the Strategis Group. European penetration, while growing, is still not that high.

Overseas governments are more willing to step in and help — or interfere — to get the broadband business up and running, while the U.S. government tries to take a laissez faire approach — at least when it comes to video and, increasingly, high-speed data.

“I don't know if something like [government intervention] should be in place” in the United States, Kennebeck said. “The growth has been pretty tremendous [in the U.S.]. Should it be higher? Yeah.”

Kennebeck blamed broadband's slow growth on its price. Cable operators and Bell companies wring every cent they can out of subscribers with high-speed prices in the $40 to $50 range. Cut the price and “you'd see adoption shoot up,” Kennebeck said.

Low prices, though, aren't all they're cracked up to be, said Kim. TCC is contacting several local ISPs to offer service inside its walled garden, but it is finding resistance because there's not a lot of subscription money to be made. “They will need more value-added services for the Korean markets to grow,” he said.

While the IPTV model appears to be gaining momentum worldwide, it's not the only way for telecom carriers to offer competitive video entertainment services, said Jennifer Silcott, mPhase Technologies' marketing director.

Silcott fully admits she's biased in believing IP isn't the best route to follow. “Pure IP television — I just can't imagine that's ever going to achieve quality of service and be cost-effective,” she said.

Silcott prefers the way mPhase compresses video signals and sends them through the DSL spectrum as conventional MPEG 2 digital video.

“You avoid having to install routers; you avoid having to do any kind of caching because there are no servers required,” she said. “It's less expensive and operationally easier to manage than IP networks.”

mPhase's platform is gaining toeholds in Spain, Italy, Turkey and Latin America where there's a proliferation of copper infrastructure. At the same time, unlike Korea, which has a competitive cable industry, the cable infrastructure is much less pervasive in many other parts of the world, opening a market of people who want video entertainment but can't get it. That paves the way for the service provider willing to take a chance on mPhase's proprietary gear.

But those who want to avoid proprietary methods like mPhase's can still use IP over DSL lines. That's where VideoTele.com comes in.

“In some cases the network is IP over ATM, and in some cases it's video over IP,” said Chuck VanDusen, VTC's chief technology officer. Once there, the Europeans are transporting the content via home networks that use IP over Ethernet. At no point, he emphasized, does the content run freely over the public Internet.

“It's packetized, and it runs on an overlay… that is video over IP but not necessarily over the wider World Wide Web,” he said. “We're talking about video content delivered over IP but entertainment quality content that's as good as or better than your cable service today.”

As with the IPTV initiative in South Korea, however, video over IP is happening primarily in overseas markets, where providers are using their own high-speed data networks to deliver video entertainment. “In the U.S., the stuff is basically nonexistent,” said Kennebeck. Things might change with the introduction of an MPEG 4 standard that would allow the insertion of audio and visual objects into an MPEG stream, but that's still a ways off, he said.

In the meantime, while the rest of the world experiments with IP and other more exotic ways of using private networks to deliver video and Web content, Americans will continue to get their video entertainment via more conventional means.