Sun Microsystems Inc. finally took a big first step into the IPTV market today by introducing the Sun Streaming System, its platform for delivery of on-demand and streaming video content.

Sun's entry into the IPTV market has long been anticipated. The software the system is based on was developed by Sun founder Andy Bechtolsheim while he worked at startup Kaelia, which Sun acquired in 2004. (See Kealia Project Raises Questions, Cisco Big Bolts for Startup, and Sun Deals for Handy Andy.)

Light Reading reported that the company was looking to enter the market as early as July 2005. At that time, Sun said it would be coming to market in 6-to-12 months. In March 2006, Sun provided another update, this time with partners like Advanced Digital Broadcast (ADB) , Digisoft.tv Ltd. , Harmonic Inc. (Nasdaq: HLIT), and Imake Software & Services Inc. attached to the project. (See Sun Shines on IPTV and Sun Still Has an IPTV 'DreaM'.)

Sun's new system consists of the Sun Streaming Software, the Sun Fire X4950 Streaming Switch, and Sun Fire X4500 servers. According to Sun, the offering can reach 160,000 unicast streams and can hold up to 200,000 hours of video storage in less than three racks of equipment.

According to Light Reading's report on IPTV vendors, Who Makes What: IP Video Systems, Sun is joining a crowded market for IP video systems and video-on-demand (VOD) servers. On the hardware side, Sun will compete with major players such as Cisco Systems Inc. (Nasdaq: CSCO) and Huawei Technologies Co. Ltd. , as well as video-focused VOD providers like Kasenna Inc.

The company hasn't yet announced any customers. Those details will follow in another few months.

Eve Griliches, program manager for telecom equipment at IDC , says the VOD market should grow to be worth $2 billion by 2011, so there may yet be room for Sun.

"The reason this market is going to grow so rapidly is that video downloaded to the TV, computer, and mobile phones will all eventually be stored on the same server. The companies buying them will include Tier 1 telcos, cable providers, data center guys like YouTube, and even broadcasting companies that may want to include the same content on their Websites," Griliches says. "When you add up all the players and all the endpoints, it's a pretty good market."

The key advantage that Sun's IPTV delivery system has over its competitors is a higher density and lower cost of delivery, which is about $50 per stream as opposed to $200 to $250 per stream. The system "provides a new cost-point in the industry," says Sandeep Agrawal, Group Marketing Manager of Sun's Systems Group.Microsoft Corp. (Nasdaq: MSFT). While Microsoft's TV Edition platform is tightly integrated, and provided by a single vendor, Sun says its offering is based on open standards such as CORBA, XML, HTTP, and RTSP to allow easy integration with third-party components and applications.

Sun is hoping to use that ease of integration to capture market share with the help of partners. In addition to players like ADB and Harmonic, Sun says it has been working with Minerva Networks Inc. , Tandberg Television , Verimatrix Inc. , and Widevine Technologies Inc.

Gary Schultz, president of Multimedia Research Group (MRG) Inc. , says that a best-of-breed approach could be the way to go. "Best-of-breed has worked in Europe," he says. "In fact, the largest operations tend not to go with one supplier. The concept is pretty much proven."

Agrawal says Sun will be primarily targeting OEMs that do network integration, such as Nortel Networks Ltd. and Siemens AG (NYSE: SI; Frankfurt: SIE), to provide them with the computing architecture for IPTV deployment. However, in some cases Sun plans to sell directly to operators.

Agrawal says the system is currently in six trials and that Sun has customer engagements with a dozen vendors. The system, he says, will become commercially available this quarter.

— Ryan Lawler, Reporter, Light Reading