General

Set Top Box Maker Challenges ISPs to Deliver End to End Service

Sure, IPTV's a good business. But at least one vendor at the center of it all (i.e., the edge) says that ISPs and WISPs may not be able to deliver the product consistently from the head end to the living room.

by Gerry Blackwell [December 23, 2004]

Gordon Lewandowski, vice president of U.S. operations for i3 micro technology Inc., a Swedish-based developer of IPTV set-top boxes, has some good news for ISPs about the emerging IPTV market, and some—well, not so good news.

The good news? The market is percolating along quite nicely. i3 and its partners, most notably IPTV middleware provider Myrio Corp., have helped as many as 30 independent service providers in North America deploy systems to offer satellite/cable-style pay TV services over broadband IP networks, and a roughly equal number in Europe and the Pacific Rim. Most are now commercial deployments.

"These are smaller independent phone companies, companies with maybe 7,000 to 10,000 [telephone] customers," Lewandowski says. "They're all early in their [IPTV] programs, in the first six to 15 months of their deployments."

More and bigger service providers are coming along. For example, Consolidated Communications, one of the top 15 telecommunications providers in the country, announced recently it would deploy i3 set-top boxes and Myrio technology and services to launch an IPTV service in its Illinois markets in early 2005.

Lewandowski estimates his company has already shipped close to 40,000 set-top boxes and reckons with larger CLECs (Competitive Local Exchange Carriers) and RBOCs (Regional Bell Operating Companies) now entering the IPTV market, it could ship as many as 100,000 more in the next 12 months.

So what's the not so good news? Lewandowski doesn't know how to sugar coat this, but he and his company just don't see independent ISPs—with the possible exception of WISPs, which are still a long shot—being players in the mainstream IPTV market.

"The capital expense involved is definitely a self-limiting factor for ISPs," he says. "And to do this properly, service providers need access to and control over somewhere around 5 to 10 Mbps of bandwidth—also difficult for ISPs. Given just those two factors alone, I don't see ISPs being in the IPTV business."

They might, on the other hand, be able to compete in "the narrowcast" IP video business, offering video on demand services that complement cable, satellite—and IP—pay TV services, Lewandowski believes. And things may change over time. Capital costs will eventually come down.

Costs, costs, and more costs
For now, though, the capital expense to build an IPTV system capable of competing with cable and satellite pay TV services is prohibitive. The headend equipment at the service provider's main point of presence costs anywhere from $750,000 to $1.5 million. The cost for customer premises equipment—set-top boxes or home gateways that can decode and distribute multiple video streams to multiple TVs in the home—comes in at about $100 per video stream. That's if you use i3's relatively inexpensive technology.

Then there are the difficult-to-calculate costs for bandwidth. Emerging advanced digital coding technologies will reduce bandwidth requirements somewhat, but probably not for awhile or enough for ISPs—and they won't come cheap.

VC1, a standard being developed by the Society of Motion Picture and Television Engineers (SMPTE)—which may or may not end up resembling Microsoft Windows Media Video 9 Advanced Profile Codec—is creating much buzz in the IPTV world. So is H.264, an IEEE standard that sends a third of the data needed for digital TV systems using MPEG-2, the current broadcast TV standard. MPEG4, the Motion Picture Experts Group high-compression standard, is also still in the running.

But even with such advanced codec (Code-DECode) technology, you cannot provide 100-channel-plus pay TV service over a standard ISP DSL connection. Not only do you need more bandwidth, Lewandowski explains, you also have to have end-to-end control of the bandwidth to ensure the quality of service (QoS) required for broadcast TV.

Go to page two: More costs, more opportunities >