ot-Telcos deliver video, voice, and data
Matthew Miller, Managing Editor -- CommVerge, 12/18/2002
Even though we're in the midst of the NFL playoff race, a baseball term—triple play—seems to be on everyone's lips. In this case, the expression refers not to getting three opposing players out on a single play, but to delivering voice, data, and video over a single broadband connection. Slowly but surely, the triple play is becoming a viable option for telcos and consumers alike.
Both cable- and telecom-oriented service providers have long dreamed of making the triple play, each hoping to steal some of the other's bread-and-butter revenue. However, just as cable companies haven't made a lot of headway delivering telephone services, telecom providers haven't had much to brag about when it comes to delivering TV.
Today, however, telco video is transitioning from a pipe dream to a real-world technology that is gradually gathering steam. Equipment available now makes it possible for a carrier to deliver not only phone service but also, via DSL, high-speed Internet access and a TV experience that arrives via a set-top box and can't be distinguished from cable TV.
In 2001, according to market researcher In-Stat/MDR (a corporate sibling of CommVerge), carriers delivered TV service to about 100,000 subscribers worldwide. But the number should reach the millions by 2004, according to Michelle Abraham, an In-Stat/MDR senior analyst. "I'm seeing more and more players getting into the market," she says. "They obviously are getting more requests from customers, and seeing more of an opportunity."
Grass roots
Interestingly, telco TV is putting down its first roots not in wired metropolises, but in rural communities. Small IOCs (independent operating companies) have been among the first to seize upon the incremental revenue of bundling TV along with their data and phone services.
For example, Israel-based Optibase says a rural telco in the US is among the first to place an order for its MGW 5100, a carrier-grade streaming platform launched last week. The modular system handles the delivery of advanced TV services over both traditional ATM-based and newer-fangled IP-based broadband access networks.
Also last week, Next Level Communications announced that three phone companies in South Dakota have purchased its Full Service Access Platform in order to serve TV fans in towns such as Bryant, Howard, Clark, and Lake Norden. Meanwhile, Midwest Tel Net, a consortium of independent telcos serving southern Wisconsin, recently purchased telco-TV equipment from Swedish vendor Net Insight.
In many cases, these rural telcos are stealing customers away from mammoth cable operators. "Their big advantage is that they are the established local company, they've been there for 100 years, and they're involved in the local community," Abraham says. As long as they can offer a TV package equal to cable TV, people are willing to support them.
Moreover, a small company with perhaps 5000 customers needs to make a relatively small investment to get TV service up an running, says Uzi Yahav, director of marketing and business development for Optibase's broadband TV unit. By contrast, the major RBOCs (regional Bell operating companies), thinking about reaching millions of subscribers, would face much larger expenditures. In addition, the federal government offers subsidies to telcos that serve rural markets, which helps such companies justify such investments.
The market won't always be limited to small players, however. "Today, the RBOCs are mainly evaluating the business justification and doing some small field trials," Yahav says. "There is a lot of interest, but I don't think we will see any major deployments in 2003. In 2004 we will see them jumping in with mass commercial deployments."
Looking beyond North America, European carriers, like their US counterparts, are still in the evaluation stage. However, Asia will be a "huge" market, Yahav says. Only a handful of countries are active, including Korea, Japan, Singapore, and Taiwan, but they nonetheless represent potential bonanzas. For example, he points out, Korea currently has about the same number of DSL lines as the entire United States.
Though many carriers are focused on taking business from cable companies, some are taking different approaches. For example, Abraham points to carriers in Europe and Asia who offer only a few channels of premium content, which subscribers can consume alongside their existing satellite TV services.
The goods
Equipment providers are working to make telco TV an attractive proposition for carriers to consider. For example, Optibase's MGW 5100 is designed in a modular fashion, allowing carriers to start small and then add capabilities in accordance with real-world business demands, Yahav says. The company expects the first deployments to go live late in Q1 of next year.
The system encodes digital video, transcodes, transmits, and recasts up to 24 MPEG-1, MPEG-2, or MPEG-4 channels at a time. The integrated transcoding feature is especially valuable, Yahav says, because it allows carriers to alter the format and bit rate of video streams, reducing the bandwidth required to stream channels to the user. Competing products require additional equipment to achieve comparable compression gains, he adds.
The system also incorporates support for uploading streamed content to video servers, which would allow a carrier to build a network-based PVR (personal video recorder) service, although Yahav allows that such advanced systems won't be deployed for some time to come.
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