Vendors Gear Up for the TV Push

The telephone companies’ push into TV and the broader IPTV market presents a potential goldmine for transmission-gear manufacturers, compression vendors and software suppliers.

According to Campbell, Calif.-based Infonetics Research, worldwide IPTV-equipment revenues will grow from $400 million in 2005 to a whopping $6 billion by 2009, a compound annual growth rate of 99%. Vendors are bullish on their prospects.

“Around the world, just about every type of telco is saying they are going to do some kind of IPTV,” says Jonathan Beavon, director of marketing, broadband, for conditional-access and interactive-TV software supplier NDS. The firm will be showing a new IPTV software product, Synamedia Metro, at the Globalcomm show in Chicago this week.

Traditional cable-equipment giants are eager to supply the U.S. telco TV push. Motorola is a prime contractor to Verizon, supplying both set-tops and headend gear, and Scientific-Atlanta (now a subsidiary of Cisco) is supplying AT&T with both set-tops and IP video-networking gear. But smaller players, such as MPEG-4–compression firm Modulus Video, are part of the telco TV mix, as are large computer companies like IBM and HP.

Then there’s Microsoft. After years of knocking on the door of the digital-video business by trying to sell set-top software to cable operators, Microsoft has established itself as a leader in the telco space, supplying EPG software to Verizon and, in combination with Alcatel, a full IPTV solution to AT&T.

Ed Grazyck, Microsoft TV director of marketing, notes that 15 telcos worldwide are using Microsoft IPTV software, including T-Online Hungary, BT, Deutsche Telecom, Slovak Telecom, Swisscom/Bluewin and Telecom Italia. He says two of the biggest differences between IPTV and traditional digital-cable services are fast channel change—an imperceptible 300 milliseconds compared with the usual 1.5-2 seconds of digital cable—and much easier-to-use video-on-demand (VOD), which is integrated directly into the electronic program guide.

“With IPTV, VOD is not just a third-party technology add-on,” says Grazyck. “So VOD looks and acts just like regular programming.”

Since IPTV is inherently two-way, it can easily handle interactive features like viewer polling. And because IPTV doesn’t rely on traditional tuners, it can also support much more dynamic picture-in-picture (PIP) functionality, with up to 16 small video windows per TV screen possible with the latest set-top chips, says Grazyck.

“Since we don’t use tuners, it’s very cost-effective to do multiple pictures,” he says. “We can generate the PIP streams right out of the encoder.”

Generating such low-resolution (200-kilobit- per-second) PIP streams is a standard feature for the MPEG-4 encoders manufactured by Modulus Video, which has worked closely with AT&T and other IPTV operators.

“We were requested to do that by Microsoft last year, so anybody using Microsoft would use that feature,” says Modulus CEO Bob Wilson.

Modulus makes only MPEG-4 encoders and is targeting telcos as its primary market, followed by DBS operators. While the company hasn’t announced official customer wins for IPTV, Wilson says small and midsize telcos are deploying its encoders.

Leading MPEG-2 compression supplier Harmonic is making a renewed push into MPEG-4 with telcos in mind and, like Modulus, is supporting “video mosaics” of low-res video for picture-in-picture applications.

Harmonic, which has also sold video-networking gear to Verizon, has already seen strong sales of its MPEG-2 encoders to telcos throughout Europe, says David Price, VP of business development and product marketing.

Thomson has been providing IPTV software and hardware to France Telecom since its video launch three years ago and recently sold MPEG-4 HD encoders and decoders to Telefonica in Spain. Jean Marcher, director of marketing, network solutions, for Thomson Grass Valley, predicts MPEG-4 adoption will take off for IPTV once MPEG-4 set-top chips make their way broadly into market.

Lots of suppliers are getting in line. Networking supplier Nortel has partnered with other vendors like middleware supplier Minerva, encoder makers Harmonic and Tandberg, conditional-access supplier Irdeto and digital-rights-management firm Widevine to go after the IPTV market. According to Ken Couch, Nortel director of marketing for IPTV and broadband, MPEG-4–based systems are generating interest from small and midsize telcos in the U.S.