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Verizon Set-Top RFP Could Be Worth Billions

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner

Verizon Communications Inc. (NYSE: VZ) has put out a huge request for proposal (RFP) seeking "next-generation" set-tops and conditional access technologies that could be valued in the multibillion-dollar range, Cable Digital News has learned.

According to sources familiar with the project, Verizon issued the RFP, titled "Next Generation Set-Top Box (NGSTB) and Conditional Access System (CAS)," on June 15 and recently extended the deadline for vendor submissions to Monday, July 16, 2007. The RFP is looking for a set-top volume on the order of 26.5 million units, which could make it worth multiple billions of dollars.

"This is the largest dollar RFP amount I've ever seen," said one source familar with the request. "It's like getting in with an operator like Comcast on the ground floor."

Verizon has the project on a fast track, as it's believed the telco plans to reply to respondents by August.

A Verizon spokeswoman declined to comment, noting that such requests are issued under non-disclosure agreements. "Typically, we don't comment on that sort of thing until we sign a vendor or are ready to announce something," she said

It's not yet known who has responded to the RFP, but it should draw plenty of attention from set-top box makers and conditional suppliers looking to unseat incumbent Motorola Inc. (NYSE: MOT) as Verizon's go-to video supplier. Likely candidates could include Scientific Atlanta /Cisco Systems Inc. (Nasdaq: CSCO), Samsung Corp. , LG Electronics Inc. (London: LGLD; Korea: 6657.KS) , Pace Micro Technology , NDS Ltd. , Irdeto Access B.V. , Kudelski Group , Widevine Technologies Inc. , Advanced Digital Broadcast (ADB) , and Amino Communications Ltd. , among others.

As an incumbent, Motorola is also a contender, but price competition against Motorola is considered another purpose for Verizon's RFP, so, at the very least, margins could come under attack.

"They [Verizon] just know they want an open system and a choice of CE companies," says a person familiar with the RFP.

Motorola declined to comment on specific questions pertaining to the RFP, noting that it is not the company's policy to comment on customer activities. "We can tell you that Motorola is currently supporting Verizon's successful rollout of video services and will continue to support this and other initiatives going forward," the company said, in a prepared statement.

Among Verizon's aims, it's expected the RFP will vet options for a downloadable conditional access system (DCAS) that would satisfy the Federal Communications Commission (FCC) July 1, 2007, mandate that newly purchased and deployed set-tops use a separable security system. (See Countdown to 'Seven-Oh-Seven'.)

For the moment, Verizon (like many other service providers) is temporarily protected by an FCC-granted "Omnibus" waiver that allows the telco to continue using set-tops with integrated security on the promise that it will migrate to an all-digital platform by Feb. 17, 2009. (See Verizon & Others Get Their Waivers and Waiver Fallout .)

The RFP represents a bit of a threat to Motorola's position at Verizon. Today, Motorola is Verizon's only supplier for set-tops and the integrated CAS. The Motorola QIP product line Verizon employs is outfitted to handle traditional cable-like QAM signals as well as IP-based feeds, but the security is embedded in the device. Down the road, Verizon could opt to run a simulcrypt technique that allows Motorola's CAS and a security system from another provider to operate on the same system.

In seeking a waiver on its current line of QIP set-tops, Verizon disclosed it is looking to implement a "truly interoperable downloadable conditional access system."

Although a downloadable security system could result from Verizon's RFP, it's not necessarily a focus. Sources say the document doesn’t necessarily specify a platform that is downloadable or is akin to physically-modular CableCARD or SmartCard systems.

"They're keeping their options open," says a source familiar with the RFP.

— Jeff Baumgartner, Site Editor, Cable Digital News

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Jeff Baumgartner
Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 3:05:21 PM
re: Verizon Set-Top RFP Could Be Worth Billions
Separately, VZ seems interested in using more than one security scheme at once. Does this throw cold water into CSCO's "end to end" story?

- Not if Verizon opts for the Scientific Atlanta PowerKEY system, but that decision won't be made for some time, I think.

User Rank: Light Beer
12/5/2012 | 3:05:21 PM
re: Verizon Set-Top RFP Could Be Worth Billions
Is there any chance that the struggles MOT management is experiencing with their cell phones and their investor base are spilling over into their network equipment segment? Separately, VZ seems interested in using more than one security scheme at once. Does this throw cold water into CSCO's "end to end" story? If MOT loses set top share, does that also reflect further into the network as share loss?
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