Monday, February 26, 2007

250,000 IPTV Subscribers in Shanghai Telecom

BesTV reportedly had 250 thousand IPTV subscribers at the end of 2006. BesTV is the IPTV subsidiary of Shanghai Telecom and the Shanghai Medical Group that offers IPTV services in Shanghai and surrounding provinces in China. This service started in August 2005.

It was also reported that BesTV had 80 thousand subscribers at the end of 2006 and has 100 thousand today.

These numbers represent a high rate of growth. It appears that the BesTV IPTV deployment has had a quite successful start.

Broadband Regulatory Battle in Germany

A law is going into effect in Germany that will eliminate any requirement for Deutsche Telekom to offer unbndled access to its new VDSL network. Deutsche Telekom has stated that it would stop deploying VDSL if it had to provide unbundled access to its VDSL network, at least in the short run.

This new law in Germany goes against European Union (EU) rullings. The EU is promising to fight it unless it is brought into line with EU policy.

This is a huge issue in Europe right now. Germany is taking the lead in fighting the EU. Telefonica in Spain has stated that it will not invest in broadband if it has to provide unbundled access. Oh the other hand, the regulators in Italy and France have accepted the EU approach. Telecom Italia is splitting apart to conform with the requirements of the regulator in Italy. In France, an aggressive unbundling policy has created a very active competitive market with some of the best consumer broadband deals globally.

Ericsson Chases Tandberg

Ericsson has submitted an offer for Tandberg TV at $1.4 billion that is 10 percent higher than the recent offer from Arris. Ericsson already owns 11.7 percent of Tandberg.

This offer shows that after a late start, Ericsson is getting more serious about TelcoTV. The addition of Tandberg to Ericsson would put it in the same league as Alcatel-Lucent, Siemens, and Cisco in terms of their IPTV capabilities. If this merger goes through it will likely stimulate more M&A activity. Harmonic is certainly a choice candidate. It is also likely to stimulate activity in the Middleware and Video On Demand area. Minerva, Orca, Bitband, and Kasenna are likely candidates in these areas.

Friday, February 23, 2007

Espial Serious About Middleware

Espial, a firm located in Ottawa, Canada, has been providing browser software for IPTV set-top boxes for several years now. Its browser is used by the Siemens/Myrio middleware platform and by service providers in Japan. More than 30 IPTV service providers and 1 million IPTV subscribers are using its browser in their set-top boxes, according to the company. Its software is also used in hospitality video systems and in consumer products.

Espial's states that its new server based IPTV middleware package was designed to provide fast response. It was also designed for easy porting to new set-top boxes through the use of a portability layer through that isolates the specifics of the hardware. Espial quotes the following performance improvements for its software compared to browser based software:

  • EPG Load Time 0.1 secs (Espial) 4.5 secs (Browser)
  • Navigating between visible programs in EPG 0.1 secs (Espial) 0.2 secs (Browser)
  • Navigating to a non-visible program in EPG 0.2 secs (Espial) 1.9 secs (Browser)
  • Scrolling 100 channels in EPG Guide 12 secs (Espial) 181 secs (Browser)
Espial has also designed its server based middleware to have a adaptable and customizable user interface. The service provider can create its own look and feel. This system gives flexibility in creating graphics and combining graphics with video.

Espial states that this server based middleware software is quite scalable and would require about 35 servers to support 1 million subscribers. Microsoft told us that its software would require 600 servers to support 1 million subscribers. Espial's current middleware deployments are to two small providers today, so it does not support any large deployments with its server based middleware package today.

Espial also provides a middleware package that operates completely in the set-top box without a requirement for servers support. NTT with more than 200 thousand IPTV subscribers is using this software.

Espial is selling its middleware software to tier 1 service providers globally.

Espial appears to have a good system. Its scalability, performance, and customizability are all important to both large and small IPTV service providers. It still has to prove itself in a large deployment. Today, only Cascade at PCCW, Thomson at France Telecom, Lucent at Telefonica, and Siemens at Belgacom are selling packages that are actually supporting more than 100 thousand subscribers. Swisscom is Microsoft's largest deployment which has recently reached 20 thousand subscribers, so Microsoft has to prove that it can support a large deployment as well.

Espial's Tier 1 strategy is a tough one for a small company. Microsoft has received most of the orders from these carriers recently. Microsoft will be difficult to beat assuming when it proves its ability to scale.

Thursday, February 22, 2007

Manitoba Telecom Sees Good Growth

Manitoba Telecom reported that the number of IPTV subscribers that it serves grew to 66,093 at the end of 2006 from 51,561 at the end of 2005, which is 28 percent growth over the year. Its IPTV revenue grew to $32.2 million Canadian ($27.7 million U.S.) in 2006 from $22.9 million Canadian ( $19.7 million U.S.). Its IPTV ARPU was flat at $46 ($40 U.S.) Canadian in 2006 and $45 Canadian ($39 U.S.) in 2005.

Manitoba Telecom offers this service in Winnipeg, the capital of Manitoba, using VDSL systems from Motorola. Its IPTV coverage in Winnipeg grew to 96.3 percent in 2006 to 91.1 percent in 2005. Its market penetration grew to 26.6 percent in 2006 compared to 21.7 percent in 2005.

Manitoba Telecom continues solid growth with its IPTV service. It does demonstrate that a telco VDSL IPTV service can achieve 25 percent penetration, which is good news for AT&T. Of course, Manitoba introduced this service in 2003 before Shaw, its cable competitor, introduced VoIP and a triple play offering. AT&T is facing much stiffer competition introducing IPTV this year.

Tuesday, February 20, 2007

Nortel and Calix Reform Alliance

Nortel and Calix announced a joint marketing agreement that gives Nortel access to Calix's broadband access products. The two companies had a previous agreement for three years that resulted in providing 2,300 Calix systems with 400,000 interfaces to 26 telcos. The previous agreement was terminated last year when Nortel announced plans to form an alliance with Huawei. Now that the Huawei agreement has fallen through, Nortel is coming back to Calix.

Nortel exited the broadband access business more than five years ago. It has been working to find a way back in and into the IPTV market ever since. Its relationship with Calix has been a viable way to serve the small U.S. telcos. It should continue to work.

Monday, February 19, 2007

Siemens Demos 10G PON

As part of a EU sponsored research project, Siemens has demonstrated a PON system that operates at 10 Gbps at distances of 100 km. This is four times the speed of GPON, the highest speed commercially available PON technology today. The distance supported by typical PON systems today are limited to 20 km. In this experimental system, the number of subscribers per splitter was expanded to 512. Siemens implemented an optical amplifier, an erbium-doped fiber amplifier (EDFA) to extend the reach and increase the number of subscribers.

Siemens stated that it plans to implement these capabilities in its product line in 2009.

This demonstration shows how GPON can be taken up to the next level. Broadband carriers need an architecture that can scale to provide higher levels of performance over time. Ethernet has led the market in that regard. It looks like PON may be able to keep up.

FastWeb Shifting Gears

FastWeb reported its 2006 earnings yesterday. Its presentation reflected its transformation from a consumer oriented company to an enterprise oriented company that has been enabled by the completion of its network expansion. The details of its fourth quarter 2006 results are available at

FastWeb added 105 thousand subscribers in the fourth quarter of 2006, giving it a total of 1.062 million. Its ARPU per residential customer was €797 per year, which is about €100 less than 2005. The ARPU from video subscribers was €296 per year in the fourth quarter, which is about €20 less than 2005. The decreases are generally the result of the introduction of lower cost offerings.

FastWeb stated that the number of broadband connections in Italy grew from 6.8 million to 8.4 million in 2006. FastWeb's share grew from 11 to 13 percent and the share of the other competitive providers grew from 5 to 7 percent. Telecom Italia's share shrunk to 67 from 71 percent.

FastWeb will implement its agreement with Sky in Italy in April that will permit FastWeb to offer all of the Sky TV channels over its broadband network. It will also permit Sky to offer FastWeb broadband services. The FastWeb and Sky services will be billed separately. FastWeb will provide an integrated decoder that supports both FastWeb and Sky video content.

In the second half of 2007, Fastweb will offer a new self installed home networking capapbility for both the residential and the SOHO markets. It will use Ruckus Wireless MIMO WiFi technology that has been optimized for video traffic.

FastWeb is also working on a mobile component so that it can expand its triple play strategy to a quadruple play strategy. Its MVNO agreement with Vodafone is on hold while Vodafone waits for rulings on local number portability. FastWeb has declared that it will take an alternative path if the Vodafone deal falls through that could include acquisition or the deployment of its own mobile network.

FastWeb is also seriously considering deploying WiMAX to extend its reach to 90 percent of the market. It has successfully completed trials expects to launch using wholesale services depending on resolution of spectrum issues in 2007. It also plans to deploy WiMAX into areas without broadband coverage today in 2008 and 2009.

While FastWeb is putting strong emphasis on its new enterprise offerings, it remains quite serious about the residential market. It expects 45 percent of its revenue to come from this market in the long term.

Its IPTV strategy is based on offering a profitable as opposed to a market entry service. It is keeping its prices up and formed an alliance with Sky to support this strategy. Its primary competition is a strong free to air digital terrestrial service today.

We expect that FastWeb's strategy will continue to produce strong results. Telecom Italia is clearly a strong competitor that plans to deploy VDSL. As long as FastWeb can get competitive wholesale access to this new VDSL service from Telecom Italia, it should do well.

Friday, February 9, 2007

U.S. Cable Upgrades Set-top Boxes

In the U.S., Comcast, Cox, and Time Warner are adopting set-top boxes that support Docsis Set-top Gateway (DSG) technology and OpenCable Application Platform (OCAP) middleware.

DSG uses DOCSIS cable modem technolgoy for out-of-band video signaling. It enables cable operators to send and receive data from subscriber set-top boxes that include electronic program guides, emergency alerts, and downloadable conditional access.

The OCAP middleware provides a standard interface that can support common third party applications across multiple set-top boxes and across multiple cable operators.

DSG and OCAP bring many of the advantages of IPTV to the cable companies. The cable companies will slowly deploy this technology, using it mainly to support new digital subscribers. It is quite unlikely that they will make a wholesale swap out. This means that the IPTV networks will continue to have significant technical advantages over cable networks in terms of deployed capability.

Tuesday, February 6, 2007

Cisco Goes to the Boonies

Cisco is now offering an IPTV package with satellite transport company SES Americom. This package is intended for the approximately 1,000 small, rural U.S. independent telcos. The offering will include content and the hardware and software to support it.

This is a curiosity for Cisco. The small U.S. telcos are a very competitive market with the lowest prices around. These companies have very small data networks, so they are not going to buy many CRS's, so there is not much upside for Cisco on the network side. The tier one carriers globally are Cisco's natural market, not the U.S. independents.

Accenture: IPTV on the Rise

Accenture has released its third IPTV bulletin available at:

This issue contains the results of a survey that focuses on the level of confidence in IPTV services. The study makes two key conclusions:
  • Confidence is strong that IPTV will generate significant revenue within three years. Confidence in shorter term revenue prospects are lower, but on the rise.
  • Network operators expect content to generate the lion's share of revenue. Other industry players believe that advertising will be the leading revenue generator.
This study (as well as Accenture's previous IPTV studies) is well worth reading. The conclusions appear reasonable to us. Most network operators are in a ramp up phase, so they are building a subscriber base that will generate significant revenues. In fact, advertising revenues are not likely to be significant until their subscriber base reaches critical mass. Consequently, content revenue will dominate in the early years.

Time Warner IPTV Flunks Out

Time Warner has called a halt to its IPTV experiment that it offered to 9,000 subscribers in San Diego. Time Warner provided the abiity to these subscribers to view all 75 cannels that it offers over a PC. Less than 90 people per day used the service.

The PC did not become a replacement for the TV in. Instead, the channels accessed from PCs were used almost as a second thought. Viewers typically would be working on their computer and trying to keep on top of a live sports event or the news.

Time Warner found that the technical approach in this trial was not scalable and is working on a better approach.

While this shows that IPTV on a PC is not a slam dunk, it would be a mistake to count it out. The important usage cases have yet to be defined. In any case, Time Warner has not given up on it and is continuing to develop the technology.

Saturday, February 3, 2007

100 Mbps Coming to Videotron

Videotron is planning to introduce 100 Mbps cable modem service. Its 1.6 million subscribers make it the third largest cable company in Canada. This service will be based on new DOCSIS 3.0 technology. Videotron has not announced when this service will be available.

100 Mbps DOCSIS 3.0 puts cable modem services in fiber territory. The wide deployment of this technology will leave FTTN VDSL deployments at 25 Mbps in the dust. 100 Mbps DOCSIS 3.0 is a killer technology that only Verizon in the U.S. is prepared to counter. ATT will be in big trouble when this technology is widely deployed in its territory.

Thursday, February 1, 2007

Alcatel-Lucent to Develop MyView

Alcatel-Lucent stated that it plans to continue development of the MyView middleware package that Lucent acquired from Telefonica of Spain last year. This is in addition to its continued support of the Microsoft IPTV Edition software.

MyView is a good backup software strategy for Alcatel-Lucnet. It would be difficult for Alcatel-Lucent to revive the OMP middleware product that it backed off from when it announced its partnership with Microsoft two years ago. MyView supports 300,000 IPTV subscribers with Telefonica's South American subsidiaries as they introduce IPTV services. Who know, if the Microsoft package does not sort itself out soon, MyView is waiting in the wings.