IPTV's High-Def Holdup
Whatever the cause, at least one of the problems will be on its way to being solved toward the end of this year as AT&T -- arguably the most watched IPTV deployment -- prepares to offer high-definition TV services and set-tops in 15-20 markets.
The chip blip
Meanwhile, carriers are waiting to use set-top boxes that support MPEG-4 compression because that standard is far more bandwidth-efficient than previous methods. That's especially important to carriers relying on copper phone lines to get video to the home.
“Everybody’s waiting for it, the whole market’s been waiting for those boxes,” says SureWest Communications (Nasdaq: SURW) strategic technologies director Carl Murray. “We monitor this pretty closely, and a lot of them are saying that the boxes will be available by the first of the year; but then again we’ve heard that before.”
ThinkEquity LLC analyst Anton Wahlman suggests the middleware integration problems were the first cause. In a recent research note, Wahlman writes that the scarcity of HD chips for IPTV set-tops "is due to numerous reasons primarily involving middleware and operating system integration issues."
If central players such as Alcatel (NYSE: ALA; Paris: CGEP:PA) and Microsoft Corp. (Nasdaq: MSFT) are having trouble making IPTV work, why would chip vendors rush high volumes of chips to an immature market? “Yeah, good question,” replies Aidan O'Rourke, VP of IPTV products at chip maker Broadcom Corp. (Nasdaq: BRCM) (See Microsoft, Alcatel Renew Deals.)
"If you were to look at the U-verse deployment, I think everybody knows they are significantly behind schedule for the roll out of the service," O'Rourke says. “It’s not really the availability of the set-top boxes or the chipsets." O'Rourke adds that "system-level issues" are to blame for IPTV delays. (See AT&T Still Has IPTV 'Jitters'.)
“Well, his chip’s not ready,” Microsoft TV CTO Peter Barrett replies. Barrett, credited as the chief architect of Microsoft’s IP video distribution system for telco and cable systems, says he doesn't buy Broadcom's explanation. “If there have been system integration problems, or if the system didn’t run, then what have people been watching in San Antonio for the past ten months?”
A high-def holdup?
STMicroelectronics NV (NYSE: STM) and Sigma Designs Inc. (Nasdaq: SIGM) claim to be the first to ship its MPEG-4 HD "system-on-a-chip" products to set-top box makers. The two companies say they've been shipping their HD MPEG4 chips since early this year, while Broadcom says it will begin shipping its product late this year.
“If deployments continue on the track they’re on we’ll be shipping a million units per quarter into IPTV by the fourth quarter this year,” says Sigma Designs VP of strategic marketing Ken Lowe.
AT&T says the new HD set-top boxes will be available when the U-verse service spreads beyond San Antonio later this year. “We are using them in testing right now,” says AT&T spokesman Wes Warnock. “I’m not going to comment on order volumes or anything like that, but we are testing them today in Houston as we said we would.”
“We said we were going to launch in 15-20 markets, that’s starting late in the fourth quarter, and when we do launch in those markets we’re going to have HD available to customers,” Warnock says. (See Is Lightspeed Slowing?)
But what of all the alleged integration problems holding up IPTV rollouts? Microsoft says it's got a difficult job, but not one that has it beat.
“We’re kind of an easy target,” says Microsoft spokesman Jim Brady. “In the cable world, rollouts take years and years and years, you look at DSL rollouts, DSL took years. We don’t want to come off as defensive, but we feel really good about where we’re at, and the opportunity’s still there.” Barrett says Microsoft has around 200 people working on IPTV right now.
Microsoft says in the next few weeks it will announce that several of its IPTV set-top box partner companies -- namely Philips, Motorola, and Scientific-Atlanta -- have begun shipping the new MPEG-4 HD boxes in quantity to its carrier customers.
— Mark Sullivan, Reporter, Light Reading