Fast-moving technology advances on several fronts are combining with new web-content strategies to persuade a growing throng of network service providers (NSPs) that it's time to get serious about delivering entertainment services over DSL and other noncable access modes.
Most recently publicized is the involvement of LECs that, in delivering video and other entertainment services, has centered on use of very-high-speed DSL (VDSL) to deliver cable TV and some modicum of interactive services in largely rural markets. But there's now a much broader movement afoot involving incumbent and competitive LECs in the search for ways to exploit new entertainment opportunities without having to take the leap to full VDSL-level capabilities. Business models vary widely, but the underlying driver is widespread recognition that a revolution in the nature of web-based content and its portability to the TV set is at hand, opening a chance for service differentiation that gets away from the "me-too" cable aspects of traditional telco TV models.
"We're seeing a real ground swell across all categories of telephone companies, which is a big change from where things were until fairly recently," says Rob Begg, product marketing manager for iMagicTV (www.imagictv.com), the supplier of IP-based video system software for use in asymmetric DSL (ADSL) networks. "There are so many new trials and services getting underway, it's almost impossible to keep track of them all. We're right on the bubble."
Discussions with other suppliers of new entertainment- oriented systems and sources at various carriers confirm that, a sea change is underway. Players like Verizon Communications Inc. (www.verizon.com), Qwest Communications International Inc. (www.qwest.com) and SBC Communications Inc. (www.sbc.com), as well as smaller incumbents and competitive carriers are taking a hard look at maximizing the entertainment services potential of ADSL using new platforms that weren't available, until recently. In fact, the emergence of so many competitors to iMagicTV, a pioneer in the field, is one clear indication that the market is heating up, Begg notes.
"We've seen a lot of new competition pop up in the past six to 12 months," he says. "I'm very happy more people are jumping into this space, because it helps us get the message through that delivering video services over IP is a good idea."
It isn't just software system-based competitors of iMagicTV, such as Minerva Networks Inc. (www.minervanetworks.com) and Aerocast Inc. (www.aerocast.com), who comprise the growing list of entrants into the DSL entertainment space. Suppliers of next-generation headend gear, like VideoTele.com Inc. (www.videotele.com) and Cisco Systems Inc. (www.cisco.com), through its recent acquisition of PixStream Inc. (www.pixstream.com); and of DSL-compatible set-top boxes, like Motorola Inc. (www.motorola.com), Thomson Multimedia (www.thomsonmultimedia.com) and Pace Micro Technology plc (www.pacemicro.com), also are investing in products that target the telephone industry.
"When iMagic started, the only company with a set-top that we could work with was Pace," Begg says. U.K.-based Pace is set-top supplier on many of the deployments using iMagic software, including the two longest-running operations involving New Brunswick Telephone Co. Ltd., now a unit of Aliant Telecom of Canada (www.aliant.cdn-telco.com), in St. Johns and other areas of New Brunswick, and Kingston Communications plc (www.kingston-comms.com) in the East Yorkshire region of England. With Aliant extending the iMagic reach across much of Canada's east coast, the household base with access to ADSL-delivered TV now exceeds 300,000, Begg notes.
iMagic's model is based on delivery of any video signal, including MPEG-2, over full-rate ADSL connections, using IP as the integrating mechanism to support delivery of single channel streams as requested from each TV set in the home. But it isn't the idea of full-rate ADSL alone that is giving traction to the TV model in the telco world, notes Lee Rainey, vice president of marketing for VideoTele.com, the supplier of an encoding system that allows a mix of variable-bit-rate digital video inputs to be delivered in a constant-bit-rate format over the ATM transport layer used in most DSL systems. Instead, he says, there's growing recognition among service providers that various speeds of DSL, can be used to broaden the base for a service offering beyond the full-rate customers.
"People are looking at being able to deliver over a 1.5mbps link what they can deliver over full rate, with the difference that, with full rate, you can deliver three or four channels [to multiple TV sets] at one time, vs. just one channel," Rainey says. "And maybe in some segments of your market, you're deploying VDSL and are able to offer a premium HDTV-type service as well."
Getting as much reach as possible for the service launch by using multiple DSL speeds has the advantage of locking in customers early. Ongoing advances in compression technology will reduce the bit rates required for any given level of TV signal quality, and improvements in DSL technology will extend the full rate line reach further from the CO.
"We're very focused on reducing the bit rate using our Qualview [compression] technology," Rainey says. "We can see a time when it will be possible to deliver multiple channels over a 1.5 meg connection at quality that is much better than VHS."
The possibility of going to higher bit rates at longer distances is being dramatically demonstrated by Elastic Networks Inc. (www.elastic.com), notes Patrick Sweeney, vice president of marketing at Minerva Networks Inc. (www.minervanetworks.com), another supplier of next- generation video networking solutions. "They have an amazing DSLAM product that can deliver 6mbps at up to 21,000 feet," he says, noting that Minerva is supplying its technology to some of Elastic's customers.
Elastic's performance claim was borne out recently in tests conducted over installed copper plant by Citizens Communications Co. (www.citizenscommunications.com) in its West Virginia territory, where it is launching the Ethernet-based Elastic platform. "We tested EtherLoop extensively, using some of our most challenging copper plant, to verify the technology's reach, ease of deployment and bidirectional bandwidth," says Dean Hudson, vice president of networking planning and engineering at Citizens. "EtherLoop met and exceeded our requirements and removed some of the roadblocks to full-scale DSL service deployment."
EtherLoop passed all four classes of tests on the first attempt, including the ability to work over wire gauge changes and bridged taps, and the ability to fill a binder without restriction. Citizens is launching high-speed Internet access over the platform with installations in 10 COs and 28 remote sites in West Virginia.
Sweeney, declines to talk about specific trial customers, with the exception of one--Irvine, Calif.-based fiber-to-the-home provider Competisys Inc. (www.competisys.com). But he makes clear that companies like Sprint Corp. (www.sprint.com), Verizon, and smaller LECs, are taking a close look at leveraging web-based media as an added attraction to whatever they might do in the way of delivering MPEG-2 cable services. "Hopefully, we'll be announcing deals with three big names within the next 60 days," he says.
The Minerva headend system, which includes IP TV management software, media encoders, media gateways and transcoders, is designed to provide all the functions, including encoding, MPEG-to-IP conversion, and ad and content insertion, that will be needed to give LECs and their ISP customers a business model that goes beyond passing through high-end, web-based content to end users, Sweeney says. The latest addition to the product line is a media gateway that repurposes digital TV satellite signals delivered in the digital video broadcast/asynchronous serial interface (DVB/ASI) format for delivery over DSL, fiber or switched Ethernet networks.
Minerva and other providers of IP-based distribution systems for DSL and other IP-compatible access platforms are designed to supply enabling mechanisms for the full business model, extending beyond the signal processing and transmission layers into the back-office payment systems, and the means to manage the transport, transactional and copyright protection relationships among content suppliers, aggregators and service providers. The models extend to give service providers the ability to add value and revenues through their position in the local marketplace as aggregators and developers of local content, and sellers of local advertising insertions for their programming streams.
"At the lower bit rates of DSL, which is where the largest share of CLECs and ILECs are focused, there's an opportunity to deliver commercials that are targeted to specific users based on their demographic profiles," Sweeney notes. "And a second opportunity has to do with creating purchase opportunities linked with content, where the buyer's account with the ISP allows the transaction to go through without requiring input of all the information you usually have to provide when you purchase something online."
The full IP headend capability includes means by which service providers can add a full lineup of satellite-delivered cable and local broadcast and video-on-demand signals to the IP stream, giving users a fully integrated package of broadband media.
There is growing awareness, even in established cable and program supplier circles, that new service provider business models built around the existence of compelling content on the web are the wave of the future. One case in point is the strategy pursued by Aerocast, a San Diego-based startup with major backing from the company headed by cable veteran John Malone, Liberty Media Corp. (www.libertymedia.com), and the leading supplier of cable set-tops, Motorola, which has named its DSL set-top the StreamMaster 5000, in a clear reference to the IP-enabled next-generation cable set-top, the DCT-5000.
"We're focused on providing broadband streaming media services through an end-to-end solution that's based on many technology elements we've put together from outside sources, and from our own in-house development," says Dario Santana, president of Aerocast. The company, working with a cable operator in the Seattle area, Millennium Digital Media (www.millenniumdigital.com), has just completed the first market trial of its system, which involved delivery of streamed IP content from cable pay TV movie company Starz Encore Group LLC (www.starzencore.com), interactive TV pioneer ACTV Inc. (www.actv.com), web-content provider Oasis TV (www.oasistv.com) and other sources. Terming the trial a success, Santana says the next step is "to expand our field trial base to encompass several operators across the U.S. and internationally, and to demonstrate the market possibilities of these solutions." Commercial launches are targeted to begin in the third quarter, he adds.
Aerocast is attempting to put together all the pieces, from the streaming, security and caching machinery to the national "Aerocast Central" repository of directories that will be used for managing the network, ensuring proper billing across all transactional tiers and authorizing conditional access to content. For everything to work, where a mere 650-700kbps bit stream can deliver a full-motion, full-screen video to the PC or TV from any point of web origination, cooperation among content suppliers, aggregators, Aerocast and service providers will be required. But with fewer middlemen to contend with, content suppliers will incur much lower costs than they typically pay for streaming content at an accelerated rate over IP networks, Santana says.
Costs of delivering full-length movies via IP networks, taking into account storage and acceleration points all along the way, can run as much as $10 per usage versus the few cents it should be if web-based, high-end content-on-demand is to become a working business model, Santana says.
"In business models for cable VOD services, the sweet spot is $300 per stream, which is the benchmark we're targeting with the web model," he adds. "Right now cable is still at about $400 to $450 per stream."
The Aerocast distribution and caching system, designed specifically for streaming rich media, will give suppliers a choice of having all their content stored at the edge, enabling very high quality and fast response times, or storing the first five minutes only. There also will be a low-cost option involving use of Aerocast's support systems, but without use of memory capacity at the edge.
Service providers are key players in the emerging web-media scenario, Santana notes. "Our business model says it makes sense to wrap the last-mile providers into the benefit package and make them part of our operations," he says. For example, Aerospace could collocate its servers and other edge gear with NSPs and hand off a share of its revenues to the SP. "We're further along in working with cable operators, but we see a number of opportunities in the whole DSL environment," he adds.
There are plenty of models. The question now is which SPs will deliver a new generation of web content to end users. If the cable companies recognize the imperative of shifting their business models from the traditional gatekeeper to one that accepts delivery of content from any point on the web, the benchmark for what it will take to deliver compelling DSL service appears sure to move in that direction as well. By all indications, it's a message that's starting to resonate in telco circles.