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Video services

Cisco Puts It Together

4:40 AM -- LAS VEGAS -- 2011 International CES -- It was almost like a parlor game where you have to use a given set of words in a sentence. But Cisco Systems Inc. (Nasdaq: CSCO) pulled it off, drawing Flip and Eos into its Videoscape announcement Wednesday. (See CES: Cisco Unveils Master Plan for Video.)

Both are businesses that have had Cisco watchers scratching their heads. Why pursue Eos, a managed service for media-company websites? Why acquire Pure Digital and go gangbusters pitching their Flip video cameras to the world? Both seem like distractions from the switch/router mission. (See Cisco's Eos Reaches for Telcos, Cisco's Latest Buy: Flippin' Sweet and Is Cisco Spread Too Thinly?)

You could still argue that they are. But Cisco found uses for both in Wednesday's demos. Videoscape can quickly upload a homemade Flip video to a friend's TV screen, something that probably wouldn't be so easy if Cisco didn't own the camera's design. And when watching Web content on a high-definition TV, Eos can generate user-targeted ads to surround the margins (since Web content comes in less-than-HD sizes), drawing from information it's gathered about you on media-related websites.

Whether either of those things is useful or even desirable is up for debate. I find myself getting squeamish about businesses finding more ways to throw ads at me.

The point is that Videoscape unites a lot of the vaguely "video" pieces that Cisco has amassed. That's partly why we used the phrase "master plan" in Wednesday's headline. I do wonder, though, just how far back this master plan went. I can believe Cisco bought Pure Digital with something like this in mind. Eos is a little more fuzzy; that's always felt like a model of "let's see where this goes," although advertising was probably the most likely endgame anyway. Its potential for TV was starting to become evident last year. (See Cisco's Eos Reaches for Telcos.)

It does all tie back to switches and routers eventually. CEO John Chambers couldn't help but throw in his usual gloat about how pundits once questioned the need for a router as big as the CRS-1. (Note that there's still no known customer using the maxed-out 72-chassis model.)

But Videoscape also, finally, draws a less sketchy picture of Cisco's video aspirations. Cisco wants to become the infrastructure for what our kids will call television, including capabilities for social media and TV everywhere. It's a big bet, and it will be interesting to see if service providers beyond Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) are interested in handing over that responsibility completely to Cisco.

— Craig Matsumoto, West Coast Editor, Light Reading

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cnwedit 12/5/2012 | 5:16:08 PM
re: Cisco Puts It Together

Did Cisco talk about how large telcos who have already built out an IPTV infrastructure would transition to the Videoscape approach? Are they offering any kind of back-end integration in that SPIT bundle that enables that kind of transition?

paolo.franzoi 12/5/2012 | 5:16:08 PM
re: Cisco Puts It Together

 


Carol,


 


Not bad questions but I think the wrong ones.  I believe the right question is:


"Why should I (a telco) invest a lot of money in equipment and professional services to deliver a service my customers already have over the web?"


 


seven

cnwedit 12/5/2012 | 5:16:07 PM
re: Cisco Puts It Together

So you think they should exit the video business altogether? Time to wave the white flag? Or just try to milk their current investments while they can and not invest more?

paolo.franzoi 12/5/2012 | 5:16:06 PM
re: Cisco Puts It Together

 


Carol,


There is this broadcast video (and some VoD and PPV) business that has represented Telco Video as it has competed with Satellite and Cable.  There is the move to the video on the web that is separate from that.


I have yet to see a company produce an end to end solution for a Telco that does something that is not doable via "The Web".  You can say, well the Telcos will just be another competitor in that business.  Well, with broadcast video there was a clear competition for Triple play bundling and line loss.  The various reactions by different companies can be studied as effective or not.  But both the Satellite and Cable companies are service providers over top of a built infrastructure.  This means that the service competition moves at a similar pace to that of a Telco.


Web companies and competition are very different.  Services arise in months and die in years (remember when Myspace was big?).  That model does not lend itself to a huge infrastructure investment.  As the web model will always be ahead of the equipment version of the same thing.  Then, people resort to the "well only the young or technically inclined can manage it".  Well, the young IS the market for this.  How many 65 year olds want to get their Twitter feed on their TV?  None?  Five?


So, this is the big question to me around the dumb pipe/smart pipe question.  How can a slow moving (okay glacial) set of companies think they can build cutting edge services and offer them?  Is it not more likely that they end up with a large number of smaller commodity services that help enhance the profitability of their core service (see Caller ID on top of Phone Service)?  The way these latter have to be offered requires little new capital equipment or they are just not worth it.


At my last company their view was that companies would rip out their entire routing infrastructure in order to get advanced services by buying their routing from a single vendor.  I laughed out loud at this and was let go soon after.


So, my question remains..."Why spend Billions (if you are AT&T or Verizon) to go compete with services that already exist and are probably obsolete by the time I have them up an going?"


seven


 

paolo.franzoi 12/5/2012 | 5:16:05 PM
re: Cisco Puts It Together

 


Carol,


Thanks for the reply.  See the 3D and such fits very nicely into an extension of the broadcast model, so I can imagine spending a bunch of money to extend the life of that service.


The other one is a bigger issue for the industry.  How do I not be a dumb pipe?  Carriers say it and mean it.  They would really like to raise their value of the price per bit per second.  So, they tell equipment companies this - who then go off and react by making plans and (in my mind much worse) products.


The issue is that the equipment companies do this in a way that they make some very interesting assumptions (which is why I replied to this post you made).  Suppose Cisco made the assumption that these services needed to be offered on the EXISTING equipment as a per user upgrade.  Of course, they didn't - but that is the kind of thing that needs to happen.  If you want the network to be not a dumb pipe and you are a equipment vendor, then assume a dumb pipe and build the smarts incrementally.  This is a lot harder and a lot more restrictive in terms of choices. 


So, let me spell it out simply and directly for those who think I wrote a lot of blather.  If you are going to build "Smart Pipe" products, make them work on top of the existing "Dumb Pipe" network without change.  Make them only required at the places that "Smart Pipe" services are being actually delivered.  If you do that, then you have a deployable "Smart Pipe" solution.  If you do that in a way that makes the "Smart Pipe" solution affordable and profitable, you have a big win.


seven


 

Pete Baldwin 12/5/2012 | 5:16:05 PM
re: Cisco Puts It Together

The AT&T/Verizon question is a good one, since Videoscape seems like an attempt to replace all of IPTV/FiOS TV.


I'm not sure cable companies are a target either, not yet. Jeff Baumgartner and I talked about this briefly - cable just isn't this IP-happy yet.

cnwedit 12/5/2012 | 5:16:05 PM
re: Cisco Puts It Together

Seven,


I wouldn't argue with anything you have said. I just don't know that telco CEOs are thinking the same way.


So I wouldn't be surprised to see the telcos (also the cable cos) try to find a way to blend Web video and social media into their existing product lines in an effort, perhaps futile, to avoid becoming merely dumb pipes. I think they will be most focused on how they can package video, social media, etc. for their wireless operations, while at the same time trying to figure out how to find some way of monetizing the delivery of video streams over their broadband pipes.


Does that mean they will invest heavily in what Cisco is selling? Dunno.


As I write this, I'm listening to Seidenberg and other Verizon execs tout their fiber networks for delivering future services such as 3D and holographic video at CES, as well as their LTE stuff. So maybe I'm being unduly influenced.


Carol

cnwedit 12/5/2012 | 5:16:04 PM
re: Cisco Puts It Together

I think you not only addressed my first question, but gave it more complete context. My point, perhaps not well made, was that Cisco's solutions are less interesting if they require a rip and replace strategy. What you have outlined is an incremental investment, to add smarts where they are needed. And that makes much more sense.

paolo.franzoi 12/5/2012 | 5:16:02 PM
re: Cisco Puts It Together

 


Carriers have not converted to VoIP for a very simple reason:  accounting.


In the old days, people replaced switches with new ones to maintain the size of the rate base.  Why buy a VoIP switch when you have a Class 5 that is sitting there and runs just fine?  There has been no incremental value to voice (prices are going down not up).  So, why spend the money at it.


Video over IP is completely different depending on what you mean.  Nobody in their right mind is replacing infrastructure to run broadcast video over IP unless they are building a new network.  The boxes exist and work just fine.  So, IP video stuff has to be incremental services.  So, NO it is more expensive to build a network with new equipment to do exactly the same thing you do today with equipment that you own.


seven


 

upand2theright 12/5/2012 | 5:16:02 PM
re: Cisco Puts It Together

Cable has been a nice business for Cisco, but IPTV has not.   


One of the more interesting things that Chambers said was that IP video upgrades today are a lot like VoIP upgrades 10+ years ago.    It has been very hard for carriers to make the transition to IP.  10 years ago, carriers fretted about things like 'reliability' when consumers were more concerned about 'high cost' of phone service.


Can IP lower the cost of paid TV services?   Probably.  Delivering a managed TV service over an unmanaged IP network is probably 'good enough' for most consumers in the same way that Netflix is 'good enough' for video and that Skype was 'good enough' for talk.

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