Feature Story

Telcos Tuning In to IPTV

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Mother of all networks faces complexities, questions, but early signs encouraging; phone companies rapidly adopting the technology; five-fold growth expected

December 11, 2007

by Charles Waltner, News@Cisco

The picture for IPTV is coming into focus.

After a long wait Internet protocol television has passed its first technical hurdles and is proving itself in real-world deployments. But despite eagerness for what many view as the culmination of modern multimedia networks, IPTV still has a ways to go before it can claim title as the mother of all communications infrastructures.

Despite how ambitious that may sound, most industry observers agree that it is not a matter of if IPTV becomes the dominant digital conduit for television, telephone, and Internet services but when. "Everyone accepts that all communications are moving to IP networks," says Deb Mielke, managing partner at consultancy Treillage Network Strategies. "It's just a matter of how to do it."

Indeed, IPTV still requires some fine-tuning. Significant technical issues remain for the nascent networking system, keeping some telecommunications service providers on the sidelines until IPTV vendors such as Cisco Systems can prove the technology will work impeccably on a massive scale while delivering pristine high-definition images.

Though Web sites such as YouTube also use digitized IP packets to deliver video to computers, IPTV is a "managed service" that requires an array of specialized hardware and software to ensure the impeccable quality TV viewers expect. IPTV networks also need immense bandwidth for transporting large-screen, high-definition images that typical broadband connections simply cannot accommodate. Like the Internet, however, IPTV can travel over various physical infrastructures, including phone lines, coaxial cable, and wireless systems.

Because IPTV speaks the language of the World Wide Web, this networking system holds the promise of seamlessly bringing together the worlds of the Internet and TV by combining all forms of communications and entertainment into one flexible, full-integrated multimedia infrastructure. Service providers will gain the ability to mix and match voice, video and data into an unlimited variety of offerings. And new offerings mean much needed new revenues for players in the highly competitive telecommunications industry.

IPTV also promises much greater operational efficiencies. Service providers will be able to consolidate an assortment of older networks onto one consistent system, offering significant long-term cost savings.

Deployments Ramping Up

IPTV has initially been most appealing to those service providers that are hungry to establish new video services, namely large telephone companies and start-ups. With telephone revenues fading and broadband growth slowing, these organizations view the interactive multimedia capabilities of IPTV as their best shot at taking a big chunk of business away from entrenched competitors, specifically cable and satellite TV providers.

IPTV now only claims about a 1 percent share of the TV market worldwide, with cable, satellite, and standard analog broadcast controlling the bulk of customers. But Kurt Scherf, principal analyst with technology consultancy Parks Associates, says the past year has been a turning point for IPTV. "There's no question things are a lot more solidified this year."

"In the past analysts talked about what might happen with IPTV. Now we're talking about what is happening."

— Kurt Scherf

Scherf estimates worldwide IPTV subscribers will increase five-fold during the next four years, from 10.8 million in 2007 to nearly 60 million in 2011. So far Europe has logged the most IPTV subscriptions, with 5.6 million to date. The Asia-Pacific region has 3.8 million IPTV customers and North American has 1.3 million subscribers, according to Parks Associates.

Worldwide there are now more than 50 IPTV operators. Some of the biggest include AT&T and Verizon Communications in the United States, Deutsche Telekom and British Telecom in Europe, and Softbank BB and China Telecom in Asia. Scherf says he expects it will take no more than 10 years for most telecommunications companies to migrate to IPTV systems as their primary network infrastructure.

He adds that IPTV is also developing as the infrastructure of choice for businesses as high-definition video conferencing and other video-based applications gain popularity in corporations looking to reduce travel expenses and improve communications across increasingly global operations.

Such interest in IPTV is certainly good news for Cisco. Cisco believes its IP network expertise combined with the video and set-top box experience of its subsidiary, Scientific Atlanta, gives it a unique advantage and the best portfolio of products in the IPTV market, says Paul Connolly, vice president of business development at Scientific Atlanta. Cisco now has about 18 IPTV customers including major players such as AT&T and Deutsche Telecom, as well as small start-ups such as Bredband Nord, a Danish utility company.

But IPTV is attracting plenty of attention from other vendors, thanks to the promise of accelerating investments in these complex and expensive "next-generation" networks. In addition to routers, switches, and set-top boxes, IPTV requires a variety of special hardware and software to manage video signal quality, subscribers, and multimedia services.

Some of the other big players in the space include Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens, Nortel, and UTStarcom, Scherf says. And a host of software companies including Microsoft are jumping into the act by creating "middleware" for integrating TV video with Web-based content, home networking devices, and cell phones.

While Cisco takes pride in its ability to provide "end-to-end" equipment and software for IPTV systems, Connolly says service providers are typically spreading their bets by working with a small group of partners to help them pioneer deployments of these promising networks.

For Cisco the situation with IPTV is a bit of deja vu. In the late 1990s, the telephone industry was extremely skeptical that IP networks would be able to reliably manage giant phone systems. But that concern was put to rest in just a few years. These days, however, most phone companies run the bulk of their voice traffic over IP networks.

Connolly says Cisco is now focused on proving IP networks can also handle the demands of video, which Cisco's chief development officer, Charlie Giancarlo, has described as "10-fold more complex than voice."

Working Through the Technical Issues

Despite the challenges of IPTV, Connolly says Cisco has many technical issues well in hand. He points to a landmark independent test of Cisco's IPTV infrastructure by the European Advanced Networking Test Center in Berlin, Germany. (A full report on the test was published in Light Reading). The test emulated a real-world "triple-play" voice, video and broadband IPTV network designed for up to one million customers, and focused on the ability of Cisco's hardware and software to maintain quality and dependability under heavy network loads. The test center concluded that Cisco's IPTV infrastructure showed "excellent results in all test areas."

But the report emphasized that IPTV is far from a plug-and-play technology. "IPTV infrastructure is clearly very complex and requires a different, more holistic focus in implementation and testing," the report states. "In order to successfully implement and make money from these services, [service providers] must partner with a vendor that will do extra and sophisticated network design and that can supply additional technology to prevent network over-subscription and other problems."

Connolly says Cisco has been following just such an approach by working intensely with its customers to address technical issues as they pop up in the field, focusing on developing what he calls "real-world networking tools." For example, the twisted pair of copper wire used in telephone lines generates electrical "noise" that can damage IP packets. But Connolly says Cisco has developed video-quality-of-experience (VQE) technology that preserves video images even if IP packets are harmed by such interference. Connolly says Cisco has also made recent advances in video encoding technology, helping reduce by more than half the amount of bandwidth required by high-definition video.

"We've shown that the various pieces of IPTV do work," Connolly says. "For the next year or two we will now focus on making these networks function flawlessly at even larger scales."

Connolly concedes that despite mounting evidence of IPTV's capabilities, the pace of IPTV adoption and innovation is largely gated by the need for service providers to amortize their investments in their existing network technologies. He also notes that the current costs of migrating to IPTV make it unaffordable for most smaller telecommunications companies, though the price tag for these systems will certainly drop as the technology evolves.

Now one of the biggest expenses is in converting content into the newer MPEG-4 video format, which supports high-definition and advance interactive capabilities. To address this, Cisco has partnered with SES Americom, a satellite communications operator that will lease MPEG-4 formatted television content to smaller operators.

Scherf says another obstacle to IPTV adoption is competition. Europe, North America, and many parts of Asia have multiple television services from satellite, cable, and other providers. Many of these companies already offer basic interactive options, such as video-on-demand or "triple play" voice, video, and Internet service. While IPTV might promise the ultimate network infrastructure, customers must see the difference in IPTV through unique services or better pricing, Scherf says. But if IPTV companies start showing success against incumbents, the industry migration to IPTV could accelerate, he adds.

And, indeed, the technology tide appears to be turning. "Previously, most of the discussions were about just getting IPTV up and running," Scherf says. "This was frustrating since a lot of people thought IPTV would instantly make TV different. But that kind of change takes time. IPTV, however, is no longer taking baby steps. It is now making a difference."

Charles Waltner is a freelance writer in Piedmont, Calif.