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The December 17, 2007 Issue Provided by System Dynamics Inc.
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TelcoTV 2007: Approaching The Tipping Point

Countries like France, Italy and Hong Kong have been offering telco subscription video services for years, while in the US until recently there has been far more talk than action. That has changed.

Several signposts indicate that telco-provided video services are near the tipping point in the US. One is how the discussion time is split between technology and services. A second is how many consumers are actually paying for the services. A third is how many markets the services are offered in. All have advanced a long way in the past year.


Technology

When we covered TelcoTV 2006 a year ago, several technology issues were front and center in the conference discussions. These included:

  • The lateness to market of highly integrated system-on-chip (SoC) chips--and therefore of the set-top boxes based on them;
  • The inability of service providers to isolate and fix the sources of poor video quality occurring between the video headend and the set top box in the home; and
  • Widespread questions and concerns about the scalability of systems, especially those used in AT&T's U-verse IPTV service.

This year, those issues appear to be well along toward resolution.

Motorola high def set-top box with DVR --> Click for larger pictureSoC-based set top boxes (especially those based on Sigma Designs chips) have stabilized, and high-volume chip makers like Broadcom are entering the IPTV SoC market. Second-generation IPTV has matured considerably with global deployments of millions of set top boxes. Improvements in efficiency of the video codecs used in these boxes have resulted in on-going reduction of the bit rate required to provide good quality high-definition video.

In 2006 it was difficult to find many vendors who recognized the critical importance of isolating the causes of quality-of-service problems. This year we visited with several vendors, including IneoQuest and Tektronix, which offer test systems to isolate traditional quality-of-service problems such as packet loss, packet delay, and jitter.

Other vendors, such as Symmetricom, are extending their test suites to include objective field measurements of so-called "Quality of Experience" (QoE), which extends traditional network-oriented QoS with additional measures such as channel change delay and audio/video synchronization. Symmetricom asserts that their metric reflects perceptual quality analysis in real-time, as experienced by end-users. Their products are based on the "Motion Picture Quality Metrics (MPQM) model adapted specifically for end-to-end video quality scoring", and is supposed to take into account both network and content impairments.

During 2006, we heard doubts about the scalability of AT&T's Microsoft IPTV system at every turn. This year, all the AT&T speakers, including Peter Hill, AT&Tís VP of Video and Converged Services, and Paul Whitehead, Executive Director-Project Management, went out of their way to assert that their 126,000 deployed U-verse customers and continuing expansion demonstrated that the Microsoft system will scale.

AT&T's U-verse customers are spread thinly across 33 markets. While their total numbers may indicate scalability of provisioning and installation, we don't believe they yet show the ability of a single system to operate effectively at peak load times. Several AT&T speakers said that they were continuing to make progress in expanding the number of users supported by each server.

Alcatel-Lucent's Lisa Ciangiulli, Jay Fausch, and Ather Chaudhry --> Click for larger pictureOur discussions with knowledgeable sources convinced us that several new techniques promise further improvement. In particular, we came away from our discussion with Alcatel-Lucent convinced that bringing its century of experience in ďtraffic engineeringĒ to bear will make a major contribution to Microsoft's server scalability.


Services

Compared with last year, this year's show had significantly more air-time devoted to describing services -- both those available today and some of those anticipated in the future.

AT&T

AT&T's speakers emphasized how the services provided to its U-verse customers already have features not available from cable:

  • the ability to record up to four shows at once
  • built in picture-in-picture
  • interactive personalized information via the "U-bar," allowing customers to access customized stock, weather, sports and traffic information on their TVs, while "squeezing back" the TV picture to provide room for the customer requested information.

Peter Hill, AT&Tís VP of Video and Converged Services --> Click for larger pictureAT&T's Peter Hill gave a well-received talk on "The Future of Telco TV". Starting with existing U-verse applications, he moved quickly to show forward-looking work by AT&T Labs on new converged services concepts. He described and demonstrated fourteen service concepts illustrated with screen shots.

Screen shot of AT&T's Family Finder service concept --> Click for larger pictureOne example was "Family Finder" which lets you select a member of your family. It then shows on a map the location of the cell phone of the person you are looking for. You can zoom in and out of that location by using Google maps and GPS, see a history of where he or she has been, and click once to call that person.

Another interesting application was "Video Share Mode" which allows customers to share video between cell phones. One person can see what the other is pointing their cameraphone at. The video share can be transferred and displayed on the TV or on the Web, so the person at receiving end doesnít need a video share-capable phone.

AT&T's plans to use such services to distinguish themselves from the incumbent cable and satellite providers.

Verizon

Verizon chose a different approach for its video services. Viewing any DSL approach (even VDSL2 used by AT&T) as a stop-gap, Verizon invested heavily in a PON-based fiber-to-the-premises (FTTP) infrastructure. Rather than using IPTV, it launched its FiOS Video service with conventional RF video while waiting for IPTV to mature.

We missed the talk by Tushar Saxena, Verizon's Director Home Networking Technologies, but caught up through her slides. The talk was focused on the importance Verizon places on remote management of customer home networks for all their TV, PC and telephone services in the home. A key emphasis is that Remote Management via TR-069 "enables Verizon to take the 'IT' out of customerís homes". Verizon's Broadband Home Router acts as the home gateway and router for all data services. [See the MoCA article below for more on Verizon home networking.]

Other Verizon talks focused on additional aspects of their services, including widgets (on-demand access to real-time local weather and traffic info, without interrupting the program they are watching), media manager and multi-room DVR. The focus was more on services than the underlying technology.


The Numbers: Consumers and Markets

At the end of 3Q07, AT&T had 126,000 U-verse IPTV customers (up from 51,000 3 months earlier) and was launched in 33 markets. AT&T says it is installing new U-verse customers at the rate of almost 10,000 per week. During AT&T's recent Analysts Day presentations, the company said it expected to have 1 million U-verse customers by the end of 2008. John Stankey, AT&T's group president of telecom operations, indicated that their installation rate will accelerate to reach 40,000 installations per week by the end of 2008. By the end of 2008, AT&T expects to have its IPTV service available to 17 million homes and is targeting 30 million homes passed by its fiber-to-the-node (FTTN) rollout by 2010.

Verizon, which launched about one year earlier than AT&T, added 202,000 new subscribers to its FiOS TV service in the third quarter, giving it a total of 717,000 subscribers at the end of 3Q07. It is now adding customers at the rate of 3,200 per day. FiOS TV is now offered in 13 states; the availability doubled in 2007 to cover 15% of households in the Verizon serving area. The service was available for sale to 4.7 million premises, and penetration averaged 15.2 percent across all markets.


Open Issues

Standards

Panelists at the TelcoTV  Standards Roundtable --> Click for larger pictureStandards continues to be a key open issue for the telco TV industry. The opening session of the conference--"TelcoTV Standards Roundtable: The Road to Seamless Services"--focused on IPTV standards for Telcos and the consumer electronics industry. An alphabet soup of organizations was represented on the panel, including the Alliance for Telecommunications Industry Solutions IPTV Interoperability Forum (ATIS IIF), Consumer Electronics Association (CEA), the Digital Living Network Alliance (DLNA), the DSL Forum, and the International Telecommunications Union Focus Group IPTV, (ITU-T, FG-IPTV). While there appear to be some attempts at coordination and collaboration, the panel acknowledged that there are numerous overlaps and gaps. It is far from clear to what extent these organizations will collaborate with each other rather than fighting for turf.

Management of the home network highlighted differences between the groups. The telecom service providers view management of home networks as crucial to their successful provision of end-to-end services, and want to see their management protocols embedded in consumer devices. The Consumer Electronics industry disagrees, saying that adding these protocols is in conflict with the economics of consumer electronics--they can't afford to increase the component, software and power budget to support telco network management. Nobody represented the view of the consumers themselves, who might be unhappy about accepting decisions about their home networks imposed from the outside.

Broadband Video

Another issue which sits in the background is how non-traditional broadband video content is going to fit into the video service mix. There is more than enough evidence to suggest that broadband video (from Joost, NeuLion, Vongo, YouTube and Veoh, to name just a few) is a reality. What is not at all clear is the formula for making it a commercial success. Ad supported models and "direct to TV" products from Sony and Hewlett Packard are a couple of the mechanisms that are being tried. Incumbent video providers like Comcast as well as new entrants like Verizon are experimenting with where and how these types of video fit in their offerings. Such a direction will be a departure from previous "walled garden" approaches.

Although not a major topic at TelcoTV, it was raised by a number of speakers. The increasing availability of content, the increasing speed of broadband connections and the efforts to simplify the way content gets to viewing devices are all indicative that this trend will continue. Multiple methods and lots of experimentation are the order of the day. We expect a mix of business models--user-paid, ad-supported, licensing agreements--will continue to play out over the next few years.

( www.att.com ) ( uverse.att.com ) ( www.symmttm.com ) ( www.alcatel-lucent.com ) ( www.verizon.com )