Xbox: From Gaming to Gateway

Microsoft Corp. (Nasdaq: MSFT) has long said the Xbox is designed specifically for gamers, yet the device itself suggests that Microsoft is aiming to be the centerpiece of the "connected home."

Home gateways are emerging as both the termination point and the distribution center for voice, video, and data traffic in the home network. The “next-gen” home gateways now coming to market bundle together cable or DSL modems, a four-port router, a wireless access point, VOIP ports, security, and various other features. (See Cisco: Do-it-All Gateway on the Way .)

“Yes, consumers can use the Xbox 360 as the hub in the home,” writes Todd Holmdahl, corporate VP in charge of Microsoft’s Gaming and Xbox Platform Group in an email to Light Reading.

“They can attach USB devices such as iPods or Flash drives to Xbox 360’s USB ports and play music and show pictures from those devices; they can also use the hard drive to store music and videos to play back," Holmdahl adds.

Like its gaming peers, especially Sony Corp. (NYSE: SNE)'s Playstation and the new Nintendo Wii consoles, the Xbox comes complete with an Ethernet port on the back. “The Ethernet port allows anyone to use their Xbox 360 console to access the Xbox Live service right out of the box,” Holmdahl says. “Users can also connect to a home network using the Ethernet port and connect to Windows XP devices and Windows XP Media Center PCs to access their media."

The Xbox also has a voice component. Gamers can establish a peer-to-peer VOIP connection with fellow gamers to “strategize or talk smack,” as Holmdahl says. [Ed. note: Groovy, man!] Other Xbox features would go nicely in the hub of a home network. The Xbox can draw content from connected PCs on the home network and can play DVDs, CDs, and MP3s, as well as display JPEG images on the television.

The console's processing power could easily be used for managing IPTV video streams. (See IP Video: In the House.) The Xbox comes with three core processors, each running at 3.2GHz with 512 MBytes of memory and a 20-gig hard drive. Microsoft points out early and often that the device supports high-definition video. (See Microsoft Preps for Telco Battle.)

But, while Xbox 360 does connect to game controllers wirelessly, it doesn't yet provide a wireless access point in the home.

Still, service providers and telecom equipment makers are watching with interest as Microsoft nudges its way into homes worldwide. In fact, while carriers are just coming out of the gates with home gateways, Microsoft says it expects to sell 4.5 million to 5.5 million Xbox 360s by June 30.

“If they win the residential gateway business, it could take a lot of services potential away from the service providers,” says Occam Networks Inc. (Nasdaq: OCNW) marketing VP Russ Sharer. He, like others, is convinced that Xbox has potential far beyond what Microsoft has publicly announced. “Microsoft could put a SIP agent in the Xbox and a SIP proxy in Redmond, and all of a sudden they’re switching phone calls instead of the local telcos,” Sharer says.

— Mark Sullivan, Reporter, Light Reading

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paolo.franzoi 12/5/2012 | 3:52:40 AM
re: Xbox: From Gaming to Gateway
Message to Marketing,

Hi there, I am a high end homeowner in need of a home gateway. I have a home theater setup and want to find a device to attach to my network to be the nexus of my home entertainment.

I have spoken to my 15 year old son. He has suggested that I set up his Xbox as the center of this environment. Do you think I should?

High ARPU customer for video services


Are they on drugs? They would be better served to put the dang thing in a new box call it a "media center" and selling it for 3x the current price.

Mark Sebastyn 12/5/2012 | 3:52:36 AM
re: Xbox: From Gaming to Gateway How could you guys miss making the point that MSFT is already the #1 provider of IPTV infrastructure software and has (until now) been partnered with Scientific Atlanta to schlepp low-value add hardware to the subscriber?

It is OBVIOUS that MSFT would want to get into the set-top box business once you start reading transcripts with Gates and XBOX mgmt. In fact, the XBOX VP gave a long speech on IPTV.

Couple this with the big investment they have made in Xbox Live and there is no doubt in my mind that this is where they are going.

Cisco shareholders got stuck with a turkey with SFA. SFA hardware, running MSFT software. Seen this movie before? Know how it ends?

My Summary from Jan 10th Here:

Those that want to process the raw data:

Gates Interview Here:

Robbie Bach, Sr. VP XBOX Here:

whyiswhy 12/5/2012 | 3:52:35 AM
re: Xbox: From Gaming to Gateway Is it just me or did I detect a note of "I invented that" in Gates talk?

Has Gates been taking public speaking lessons from Al Gore, or are they just of the same meglomaniac mindset?

I've rarely seen him slip in what should be rehersed public speaking, but it seems like this move has him so excited, he is going spontaneous.

materialgirl 12/5/2012 | 3:52:35 AM
re: Xbox: From Gaming to Gateway Dear Schmitt:
You forgot MSN, or maybe it is mentioned in those hyperlinks. They will use the lack of Net Neutrality in their IP-TV software, block out GOOG on their end-user boxes, and get rid of that annoyance over high speed lines.
Mezo 12/5/2012 | 3:52:35 AM
re: Xbox: From Gaming to Gateway LR,

Get some gamers on your staff...they would know that this article re-states not only the obvious...but also a well published strategy of Microsoft for the Xbox...MS has said openly that the Xbox is their Trojan horse into the consumer hardware market...without destroying their relationships with PC vendors...Media Center video...check...VoIP...check...data...duhhh...

If you read the back of your xbox it says "...for a full PC...add Windows later!"

OOoohhh Bill Gates...your fooling everybody...I mean nobody...

My guess this will be a series of articles on this subject and that you wanted to bring the old men up to speed...so no worries...

Mark Sebastyn 12/5/2012 | 3:52:34 AM
re: Xbox: From Gaming to Gateway So long as MSFT is involved, there will always be the Legion of Doom that will roll out the Orwellian scenarios. Meanwhile, Apple can lock out everyone from interoperating with their DRM and somehow, that's perfectly acceptable.

I'm pretty damned happy with my PC. It is all the crap that Dell/HP/etc installs on it that I hate.

God forbid this turns into a I love/hate MSFT thread. Just shoot me now if that is the case.
paolo.franzoi 12/5/2012 | 3:52:33 AM
re: Xbox: From Gaming to Gateway
I think it is safe to say that Microsoft is POTENTIALLY the largest supplier of IPTV infrastructure software.

Today, there are many times the number on non-Microsoft infrastructure. AT&T should swamp this assuming that Lightspeed goes somewhere.

Michael Harris 12/5/2012 | 3:52:33 AM
re: Xbox: From Gaming to Gateway "How could you guys miss making the point that MSFT is already the #1 provider of IPTV infrastructure software"

This is key. MSFT is obviously trying to muscle it's way into the entertainment center with Xbox and Media Center. However, both are devices designed for other tasks (gaming and computing, respectively). MSFT hopes to extend that functionality into the broader entertainment category, but really, what is the dominant video entertainment device? The set-top box (STB), and MSFT has been working maniacally to crack into that space for years. MSFT is now finally getting traction through the telcos with IPTV. On the cable set-top side, MSFT is still struggling though. If two-way CableCARD technology (or it's flash downloadable equivalent) ever comes to market, Microsoft will finally be able bypass the MSOs and go direct to consumers with STB products. That's when things get interesting.

"Cisco shareholders got stuck with a turkey with SFA. SFA hardware, running MSFT software. Seen this movie before? Know how it ends?"

This isn't exactly the same as Gates outwitting IBM in the PC world. Cisco also bought SFA because they own a key slice of the cable service provider channel, and in that world, the SP always specifies the software that runs on the box, and value is generated by STB vendors that provide support for multiple software implementations. Also, SFA's video network infrastructure and conditional access technology ensure their fingers are still in the cake.
whyiswhy 12/5/2012 | 3:52:32 AM
re: Xbox: From Gaming to Gateway MSFT will lose this one.

Cheapest hardware wins the market. Software is free (Linux). Otherwise IPTV prices itself out.

opticalwatcher 12/5/2012 | 3:52:31 AM
re: Xbox: From Gaming to Gateway "Cheapest hardware wins the market. Software is free (Linux). Otherwise IPTV prices itself out."

If 'cheapest hardware, free software' always wins, then everyone would be running Linux on their PCs.

Linux is used on a number of set top boxes in the market, but not in in the Lightspeed system.
Microsoft has an end-to-end IPTV solution that precludes the use of Linux on the set-top box.
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