SkyStream Networks Lands Content-Distribution Funding

A group led by top-tier broadband names such as AOL Time Warner Investments and Shaw Ventures has invested $44 million in SkyStream Networks, a company that has assembled a suite of broadband gear and software designed to transport complex, "media-rich" content over cable, terrestrial and satellite networks.

SkyStream's fourth round of funding was its largest by a long shot. Its first three rounds raised about $26 million and attracted such investors as Intel Corp. and IVP.

Other fourth-round investors included Amerindo Investment Advisors, Crosslink Capital, Integral Capital Partners and Norwest Venture Partners. SkyStream declined to provide an investor-by- investor breakdown.

SkyStream is proposing a new broadband caching architecture and said it will use the funds to seed and grow its family of network hardware and software. In concert with its latest cash infusion, SkyStream also unveiled a new suite of products, including the "Edge Media Router 5000," a device that receives, routes and caches content to the edge of a broadband network.

On the enterprise front, the company's new "NetSat Express" multicasts video and data to corporate local-area networks via satellite networks.

SkyStream, which made its first push into the satellite arena, is positioning itself as a broadband agnostic provider.

"They're really becoming a leader in the market," said Northern Sky Research principal analyst Christopher Baugh. "They can now increase their addressable market and move into terrestrial and cable."

SkyStream is presently seeking deals with cable operators, but has yet to announce any trials or deployments.

That sector already has some formidable, incumbent "end-to-end" system competition in Harmonic Data Systems (a unit of Harmonic Inc.) and ViaCast Networks Inc. Head-to-head, Harmonic Data is SkyStream's largest competitor, Baugh said.

On the cable front, SkyStream plans to arm operators with network edge devices that capture and cache content, then distribute it more efficiently to end users, avoiding potential bottlenecks on the public Internet, said vice president of marketing and business development Clint Chao.

In that scenario, an operator would install SkyStream's source media router at the content origination point, such as a satellite uplink operated by PanAmSat Corp. or Loral Space & Communications Ltd., and then route it to a cable headend equipped with SkyStream's edge media router. Cable subscribers would then access the information from a number of caching bays on the network.

One possible application for SkyStream's technology is the optimization of such "mission-critical" content as real-time stock quotes, which can suffer from severe latency problems when sent over an Internet backbone, according to Chao.

SkyStream could also enhance streaming quality by inserting data directly into a video stream and making it part of a cable operator's multicast video signal, which is made available to subscribers at the same time. SkyStream's system, Chao said, allows data to piggyback that high-quality signal, rather than routing and delivering it via the Internet's less-efficient unicast method.

The Internet's relatively unreliable video-streaming process has "conditioned" consumers to shy away from it, Chao said, because its extremely choppy nature can be intolerable to watch. That makes top-tier content producers reluctant to offer their fare through such channels, he said.

AOL Time Warner Inc., a SkyStream investor, has both the content (Home Box Office, Cable News Network, Warner Bros., etc.) and an ability to pipe it directly to consumer households through its Time Warner Cable holdings. In fact, some of its properties are starting to get cozy with the idea of delivering streaming content over the Internet.

For instance, CNN said last week it will test TV-quality banner ads from March 1 through April 15, using technology from Bluestreak and EyeWonder Inc.

SkyStream's technology "is important to the integration of the Internet, traditional broadcast and digital cable network services," AOL Time Warner Investments CEO Richard Bressler said in a press release. He indicated the media giant plans to blend all available media to package its products to consumers.

To add value to Internet content, Chao sketched out a scenario in which an operator could enhance its local positioning by packaging all of a sports team's video highlights, and then multicasting them through the in-band portion of the set-top box, rather than via unique streams using Data Over Cable Service Interface Specification (DOCSIS) architecture. From there, customers could cache the highlights using a separate personal video recorder or one that's housed inside an advanced digital set-top, he said.

Still, there's one potentially large problem looming. Cable operators don't have unlimited bandwidth and might already have the network provisioned for video-on-demand.

Chao countered that caching bays on the network could capture the content during idle, non-peak hours and leave it sitting there when a customer wants to grab it.