IPTV grows up

Not quite a fully developed market segment, but not a science experiment anymore, IPTV proved it was in that awkward in-between stage at Supercomm 2005. While it was hard not to walk more than 20 feet on the show floor at McCormick Place without running into a vendor claiming to be in the IPTV or triple-play market, some of the largest U.S. carriers at the show were talking more about proceeding cautiously into the market rather than jumping in with both feet.

Wednesday's keynote speaker, BellSouth CEO Duane Ackerman, sounded a more conservative note than perhaps the industry would like to have heard, saying that multiple pieces of the IPTV puzzle have to be in place before the company can move forward. “Both the technology as well as the economic model have to work,” he said in an interview with Telephony after his keynote. “That's one of the reasons we haven't been as loud about it because we're still working through those two prongs.”

Noting that the company has 300,000 video customers through its partnership with DirecTV and that BellSouth has traditionally been a fast follower in new markets such as DSL and long-distance, Ackerman said he knows video must be part of the triple-play equation.

“One of the things we do well is distribute product,” he said. “I'm not too concerned about our ability to sell.”

When that time comes, the biggest challenge may be in differentiating the company's video offering from cable and satellite packages. Based on the technology demonstrations at Supercomm, that may not be as difficult as previously thought. Among the bigger trends this year was a push toward personalization and giving users greater control. Looking over the show floor, SBC Communications Vice President of Broadband Marketing Edward Cholerton said vendors must continue viewing the market from the consumers' perspective and think about differentiation.

“A lot of times you look at the demos in an exhibit and the big thing is a fast channel change,” he said. “That's great, but you can't put it in ad copy.”

SBC, which is sticking to its promise to launch IPTV by the end of the year, will use attributes such as whole-house DVR capability, virtually limitless content, personalization through the company's alliance with Yahoo and expanded parental control to differentiate itself. Admitting that those features won't all be available in the initial offering, which is currently in alpha trials in Texas, the RBOC is aiming to provide most as a follow up to the initial launch.

On the last feature, a hint of what SBC may offer was on display at Alcatel's booth. The vendor, which holds the primary supply contract for SBC's Project Lightspeed, showed a demonstration in which consumers could use any wireless device — in this case an iPaq — to send messages from anywhere in the world to their TV and even control what's being watched. The demonstration took the scenario of a parent wanting to make sure their children aren't watching inappropriate channels.

Though perhaps slightly limited in addressable market, the demonstration was meant to show that once carriers deploy enough bandwidth to the home, the possibilities are virtually limitless.

“There's a strong recognition that once you get to a broadband network, you have a chance to change the business model,” said Hilary Mine, senior vice president of communications for Alcatel.

Long term, she added, carriers must figure out a way to compete with cable operators that have a 30% operating expense advantage. Echoing SBC's strategy, Mine said the key is personalization.

“There's a lot of latent demand for personalization,” she said. “I can imagine 20 years from now wanting to watch a movie in one [picture-in-picture] screen, news in another and instant messaging in another. We are a nation of [attention deficit disorder] people.”

Alcatel's demonstration relied heavily on its work with MicrosoftTV, which in fact has brought a significant amount of credibility to the IPTV world, according to Derek Kuhn, senior director of marketing and business development for Alcatel's strategic solutions development group.

“The big issue now is how do you do portability,” he said. “They're very interested in sell through, but they want to still maintain DRM. The technology is just not there yet.”

As chairman of the Broadband Services Forum, Kuhn is helping guide carriers through the quagmire of getting the rights to all sorts of video content. Having Microsoft involved has helped reassure some Hollywood studios.

Indeed, while IPTV appears to be moving along well with smaller independent telcos, even vendors deep in the market admit that convincing larger carriers the solutions can scale up remains a challenge.

Calix, which used the show to announce interoperability alliances with softswitches from CopperCom, Metaswitch and Nortel Networks, has been focusing attention on those scale concerns, said Carl Russo, president and CEO of Calix. “There are a lot of pieces on the value chain that have yet to be figured out,” he said, “It's much less a technology issue now and much more a cultural issue.”

Among the most important parts of the chain yet to be figured out is in the headend. A handful of vendors on the Supercomm show floor were demonstrating MPEG-4 Advanced Video Compression (AVC), which many expect to be a major part of telcos' IPTV solution. Using MPEG-4 AVC, carriers will be able to compress video down into much narrower streams compared to the more traditional MPEG-2, allowing them to offer more service to more TVs per household. Even more important, it will let carriers offer HDTV using less bandwidth. However, among those demonstrating it such as Tandberg Television, Tut Systems and SkyStream Networks, virtually everyone was using set-top boxes that weren't quite ready for prime time.

“The encoding technology is here,” said Lisa Hobbs, senior director of marketing for Tandberg. “In North America, though, it's been mostly lab systems. At the same time, we're beginning to see requests for transcoding MPEG-2 to MPEG-4.”

Steve McKay, CEO of video-on-demand server vendor Entone, echoed much of the industry by noting that they're waiting on silicon vendors to produce MPEG-4 set-top box chipsets. At the show, Entone teamed with Neterion (formerly S2io Inc.), to demonstrate what both companies claim is the first 10 Gigabit Ethernet high-definition IPTV system.

While impressive in a booth, even McKay admitted that it's still early days for HD.

“We need to remind ourselves that only 5% of U.S. households have high-definition TVs, and many of those don't have the service,” he said.

It's early enough in the process that at least one vendor isn't even focusing on MPEG-4 AVC.

BigBand Networks announced during Supercomm that it had inked an agreement to provide its Broadband Multimedia-Service Router to Hargray Communications as part of a video service the carrier is rolling out in South Carolina. BigBand, which also sells encoding technology and announced an MPEG-4 AVC product in May, isn't rushing into the market just yet.

“As we analyzed the market, we thought the lack of [set-top boxes] as well as several other hurdles didn't make it prudent for us to go into advanced encoding full bore,” said Seth Kenvin, BigBand vice president of strategic marketing and corporate development.

Of course, not everyone is holding back. For those larger vendors with their tentacles in all regions of the world, IPTV is just part of the evolution of carrier networks. In fact, IPTV in triple play has become a central talking point for virtually every carrier, regardless of their past association with the technology. Ericsson, for instance, wasn't necessarily focusing specifically on IPTV in its booth but was talking more about how carriers can use the service as a differentiator against competition.

“When we're talking about broadband, the focus is on how do you develop the service so that you're just not the pipe?” said Peter Linder, technical director for Ericsson's wireline group.

Noting its heritage in wireless networks, the company also was straddling the traditional boundaries by talking about ecosystems that bridge both wireline and wireless markets.

“You can't approach it from a narrow mindset,” said Mikael Halen, director and head of marketing. “You really have to look at this as spanning from the two-inch screen [of wireless handsets] to the 42-inch screen. When you watch things on the 42-inch screen, people are starting to want interactivity, and that's very powerful.”

Telco Systems, while certainly not having the reach of an Ericsson nor being central to the IPTV world, nevertheless was making its own moves into the space. At its booth, the company was focusing on survivability, running a ring of switches and showing that even in the case of a fiber cut, you could recover video streams in less than 50 milliseconds. “Occasionally, you'll see some pixelization, but most of the time, it's undetectable,” said David Lee, vice president of marketing.

UTStarcom, making its first public showing after the acquisition of Pedestal Network, also got in on the IPTV action. The Pedestal deal, which can be viewed as a follow-up to UTStarcom's 2003 acquisition of CommWorks from 3Com, puts the company in position to be a much greater player in the U.S. triple-play market, said Brian Caskey, vice president of international marketing at UTStarcom.

“The CommWorks acquisition helped us get in the face of the service providers,” he said. “With Pedestal, it helps us get that much closer, and it clearly fills out a need we had in our portfolio. I think you're going to see UTStarcom pop in a place you don't expect.”