Optical/IP Networks

Scientific-Atlanta Wins $195M SBC Deal

SBC Communications Inc. (NYSE: SBC) filled in another piece of its IPTV puzzle by announcing Thursday that Scientific-Atlanta Inc. (NYSE: SFA) will provide hardware and planning for the video services distribution system (see Scientific-Atlanta Wins SBC IPTV Deal).

The $195 million contract will stretch over the next few years as Scientific-Atlanta supplies the encoders, satellite dishes, video routers, and ongoing maintenance and upgrades.

The deal marks one of the last major planning steps in the IPTV portion of SBC’s Project Lightspeed, a $4 billion initiative to deliver the triple-play of voice, video, and data using fiber-optics all the way to the household. SBC hopes to deliver high-speed connections to 18 million U.S. homes by the end of 2007 (see SBC Sheds Light on 'Lightspeed', SBC Speeds Up FTTH Plan, and Inside SBC's IPTV Factory).

"This contract award is another important step in building a new, efficient, IP-based video network,” said Lea Ann Champion, SBC’s senior VP of IP Operations and Services, in a prepared statement.

SBC’s search for a supplier happened quickly, underscoring the RBOC's need to bring to market a triple-play offering to rival the cable operators. “The RFP went out in December of 2004, the field was narrowed down to three finalists in January, and the contract was just awarded,” says SBC spokesperson Wes Warnock. “So it was definitely an expedited contract.”

The Scientific-Atlanta equipment will reside in a three-part national architecture that includes a video operations center, two national “super hub” offices, and 41 hub offices, according to Warnock.

He says the video operations center will act as a "command center" that will monitor all of the content traveling through SBC's IPTV network. The two super hubs will sit next to dish farms that collect broadcasting signals from national networks such as ESPN. That content is then sent out to the hub offices, which control the provision of IPTV services to customers. The hub offices, which will reside mainly in metro areas, also will aggregate the feeds of local television channels, adds Warnock.

“The SBC IPTV architecture represents a significant milestone in the delivery of video to the home over DSL,” said Scientific-Atlanta CEO Jim McDonald in the company's press release. “The state-of-the-art IP video super hub offices and IP video hubs we are creating will provide SBC companies with the performance needed to support services on one of the world’s most advanced video processing networks.”

Scientific-Atlanta will work with chief Lightspeed integrator Alcatel (NYSE: ALA; Paris: CGEP:PA), which is providing the network access, aggregation, and switching equipment that will connect customers to the video hub offices (see Mais Alors! Alcatel Bags $1.7B SBC Deal ). It will line up alongside Microsoft Corp. (Nasdaq: MSFT), which in November 2004 won a $400 million contract to provide the software that will manage and deliver SBC's IPTV service (see SBC Awards Microsoft $400M IPTV Deal ).

Warnock identifies the residential gateway (the set-top box) as a key remaining piece of SBC’s IPTV plan, but declined to say which vendors were in the running for that contract. “We will announce that in the next couple of months."

News of the deal sent Scientific-Atlanta's share price up by 33 cents, just over 1 percent, to $28.22 by the close of the markets on Thursday.

That slight uptick is likely due to the expected slim margins on the hardware. Merrill Lynch & Co. Inc. analyst Tal Liani believes the financial impact of the deal is modest, assuming "operating margins around 10 percent, in line with our current estimate for the company’s infrastructure business."

With Liani expecting $90 million of the deal to come this calendar year, and a further $52.5 million in 2006 and 2007, he says Scientific-Atlanta's estimated fiscal 2005 earnings per share (EPS) could increase by just 1 cent to $1.50, while fiscal 2006's EPS could rise by 4 cents to $1.41. The company's fiscal year ends June 30.

In addition, Liani believes any follow-on set-top box business from SBC will likely have a similarly modest impact on the vendor's earnings potential.

And while the team at Scientific-Atlanta was celebrating its deal, the mood will have been less cheery at some of its key rivals. Harmonic Inc. (Nasdaq: HLIT) saw its share price drop by 46 cents, nearly 5 percent, to $9.56 on Thursday, while Tut Systems Inc. (Nasdaq: TUTS) saw its stock drop 23 cents, nearly 9 percent, to $2.41.

— Mark Sullivan, Reporter, Light Reading

VideoCentric 12/5/2012 | 3:20:31 AM
re: Scientific-Atlanta Wins $195M SBC Deal from the SA website:

"In this first-of-its-kind network, the IP video super hub offices will use Scientific-Atlanta's state-of-the-art video encoders for efficient advanced video coding (AVC) for standard-definition and high-definition transmissions, and will be capable of serving the entire SBC footprint. Additional Scientific-Atlanta advanced video encoders in the IP video hub offices, located throughout the SBC service area, will provide the essential encoding functions for locally originated content."

Do the math:

* 2 Super Head Ends
* 140 Video Hub Offices
* 300 channels SD
* 50 channels HD
* 350 SA D9154 AVC encoders @ 2 RU and 465 watts power comsumption.

Total Cost of Ownership = Priceless!
rjmcmahon 12/5/2012 | 3:20:30 AM
re: Scientific-Atlanta Wins $195M SBC Deal "Additional Scientific-Atlanta advanced video encoders in the IP video hub offices, located throughout the SBC service area, will provide the essential encoding functions for locally originated content."

The oral history of Robert and Jeanne Burull suggest what is required to build a cable company which originates local content.

materialgirl 12/5/2012 | 3:20:29 AM
re: Scientific-Atlanta Wins $195M SBC Deal A Scientific Atlanta video router? What is that? This sounds like a job CSCO intended for their monster CRS-1. What happened?
OldPOTS 12/5/2012 | 3:20:28 AM
re: Scientific-Atlanta Wins $195M SBC Deal No it is an Ethernet Switch (Alcatel 7450) next to a Scientific-Atlanta Video Encoder. See publicly available PDF below, slides 11 to 14. Slide 14 for details!


Also available as a large glossy.

Think about how SONET/ATM serves this, eye pee-ers?

OldPOTS 12/5/2012 | 3:20:27 AM
re: Scientific-Atlanta Wins $195M SBC Deal Those COs already have a dual power partner.
The 7450 needs at least two large light bulbs and a RU.


VideoKnight 12/5/2012 | 3:20:26 AM
re: Scientific-Atlanta Wins $195M SBC Deal Where is the large glossy found referenced in Msg #4?
OldPOTS 12/5/2012 | 3:20:24 AM
re: Scientific-Atlanta Wins $195M SBC Deal Check with Alcatel Marketing!
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