EXFO Building IPTV With Brix

In an industry in which the amount of money changing hands is often eye-popping, the recent acquisition of Brix Networks Inc. by EXFO (Nasdaq: EXFO; Toronto: EXF) for something south of $40 million probably didn't grab a lot of attention. But it may give EXFO an early-mover advantage in the area of testing video-stream quality.

Despite all the attention being given to IPTV, the market for devices that can measure the quality of the video signal is quite small, although indications are that it will grow quite rapidly. Only a handful of names in this space are readily recognizable, but the great majority of vendors offering video-quality measurement solutions are small companies.

This is not to imply that large vendors have a built-in advantage based on size, because both they and their smaller competitors are new to the business of providing tools that can ensure that the video signal arriving at the subscriber's set-top box after going through the encoder is delivering a broadcast quality-grade picture. Telcos may be in the ramp-up phase of their IPTV services, but the telco TV measurement solutions business is still in Phase I.

Part of the reason for that is that the standards process regarding video quality measurements is moving at a snail's pace. Without impugning anyone's honor, the current situation is a marketing dream for the video-quality measurement folk, since any vendor can lay claim to having a superior solution. And while a fragmented market offers telcos more choices, it also makes it harder for them to choose the right solution to give them an accurate reading about the health of their video streams.

But if history is any guide, the number of vendors offering solutions for video-quality measurement will shrink, even as the demand for their wares grows. That's why I think that with its early buy of Brix, EXFO has made a smart move. Has EXFO bought a company with the best solution for IPTV services? That's debatable. But EXFO's decision may have involved more than just technical considerations, including geographical proximity.

The Brix buy gives EXFO, better known for its optical test equipment, a beachhead in the IPTV solutions space. EXFO's play in the IPTV arena consists largely of handheld test devices; Brix has products that can be placed at various points along the network to measure the quality of video streams. And it doesn't hurt that Brix has built up credibility in the data and VOIP market, though the challenges of IPTV delivery are very different from those of VOIP.

The Brix deal is a good move, but it's not time to pass out the cigars – at least not yet, and not for a while.

— Sam Masud, Senior Analyst, Heavy Reading

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