Ip/tv

AT&T U-verse to Trial 2 High-Def Streams

AT&T is about to begin a trial roll-out of a U-verse service that could deliver two HD streams at once, something that hasn’t worked up to now. There are several ways in which AT&T is looking at this, one through increasingly aggressive compression and the other through upspeeding the loop. It is possible both will be tried. There is no indication of when the capability will be fully rolled out, but AT&T appears committed to it. They have to be; this would be a crippling problem for U-verse if it continued much into 2009. We believe AT&T has major problems with its TV strategy, this change notwithstanding, and that they will eventually be forced to move to another approach.

Router sales up…an IP economic indicator

Infonetics reports that router sales in the first quarter rose sharply, further validating the notion that the IP infrastructure market is more immune to economic problems than the enterprise. Both Juniper and Cisco gained market share, apparently in part at the expense of Alcatel-Lucent, whose IPTV position had previously been gaining it traction. We have long believed that IPTV would not be the silver bullet for ALU; too few regions meet the very special economic demographic requirements to make the strategy optimal.

Alcatel-Lucent losses indicate management change?

Alcatel-Lucent posted another loss, warned on the current quarter, and suspended dividend payments, all of which will almost certainly lead to a management shakeup. The company is suffering under a mobile spending slump that has also hurt some of its competitors, and is unlikely to lift for the balance of 2008. Despite the publicized success of its IPTV strategies, it has also been unable to make the revenue shortage up with broadband success, and there is now indication that it’s shifting strategies to a more generalized access and metro strategy that would offer lower-cost deployment. Recent emphasis on DSL and PON are examples of this trend. We believe the company has little chance of pulling out of the current slump in 2008 even with a management change, and that some major restructuring and cost-cutting will be forthcoming

Verizon’s FiOS plans cause more cable angst

Verizon’s FiOS plans in 2008 include obtaining some franchises in major metro centers and increasing its HD channel count to 150, both of which are likely to cause further angst for the cable companies. In the former area, Verizon faces the issue of efficient delivery to multiple dwelling units (MDUs), a technical step that it’s been working to resolve through the use of in-building fiber or MoCA cable. The latter step is simply a matter of getting the business relationships in place, since FiOS has ample capacity to deliver virtually any number of HD channels. The current Comcast-satellite war over who has the most HD will be moot when Verizon gets its full complement of channels. All of this will be fueled in part by the digital transition that is scheduled for mid-2009. The coupons for customer conversion for over-the-air sets limited to analog tuning will launch shortly, and the campaign to prepare the market is expected to create a major surge in HDTV sales in 2008 and 1H09, making the question of who has the most HD channels an important marketing point.

AT&T To Revamp BellSouth FTTC strategy?

AT&T is rumored to be considering a revamp of the BellSouth FTTC strategy, based on Tellabs, in favor of an FTTC/FTTP strategy based on Ericsson. Ericsson had, via its Marconi unit, a history with BellSouth’s fiber plans and there is some sign that the carrier is now breaking its original plan to have a uniform infrastructure in favor of a more regionalized approach. We have noted in the past that BellSouth’s internal review of fiber options prior to the merger had favored a Verizon-like plan, and this may be an indication that AT&T will now consider that for at least that region. We also believe AT&T may consider broader FTTH deployment and also the Verizon linear RF approach to broadcast.

Stopping the revenue-per-bit plunge

October 25 2007 regarding the future of routers and routing.
Internet pioneer Lawrence Roberts thinks that the cost of routing threatens the Internet’s future. The view is somewhat self-serving given that Roberts is a founder of an alternative-to-routing company, and it also discounts some current market realities, but it raises an interesting question given some other market trends. There is no question that operator revenue per bit is falling rapidly; one operator told us by 50% per year. Given this kind of decline in bit revenue, it is inevitable that operators either seek to increase margins by selling “fat bits” (bits associated with a higher-margin service) or reduce cost per bit. The Internet doesn’t provide a means of supporting fat-bit revenue generation because it lacks settlement, and so only cost reduction is possible. However, most IP deployment today is by network operators with service designs that include but are not exclusive to the Internet. These operators, which include IPTV providers, would have the option to deploy higher-cost capital equipment to generate their bits. If all of this is true (and it seems to us that it is), then router vendors should be promoting non-Internet missions in order to justify their higher costs, and if those missions are not promoted then routing as we know it will inevitably commoditize

AT&T to buy EchoStar to bolster U-verse?

AT&T is reported to be preparing to make an offer for EchoStar, the DBS company with which it partners for its Homezone service. We believe this to be a clear indication that AT&T recognizes that it cannot make U-verse available for a large population of its customers and that they will instead have to rely on a satellite partnership for the broadcast program delivery, reserving IP for VoD. The challenge AT&T faces is that its relatively low demand density makes it difficult for AT&T to push fiber to the home, and without FTTH the mapping of broadcast channels to DSL delivery (U-verse) adds network complexity and cost at the metro level. The decision may induce Verizon to accelerate its own FTTH plans to reduce its reliance on satellite partnership.

Verizon FiOS moving to all-IPTV platform?

September 24 2007: Light Reading reports that Verizon will be moving FiOS to an all-IPTV platform within three years, quoting company sources, but we strongly doubt that statement. We have heard nothing to suggest that Verizon is eager to follow in AT&T’s footsteps, and we would point out that the U-verse model delivers no more channels than the current FiOS and has a higher cost, assuming both “new” and “old” FiOS are based on FTTH. We think this is a misunderstanding on LR’s part.

Relevant Reading
LightReading

Alcatel-Lucent invests in IPTV

September 21 2007: Alcatel-Lucent is acquiring a small IPTV company that focuses in interactivity and advertising links with IPTV. The deal, in our view, reflects a number of important points. First, it shows that Alcatel-Lucent will be pushing its IPTV strategy to cover the revenue shortfall from mobile that it says was the cause of its recent quarter disappointment. Second, it shows that the forces of YouTube have, as we’ve suggested, changed the industry dynamic away from pay-for-view to sponsored viewing. The need to integrate better-targeted advertising is thus key to IPTV success, and to the success of Alcatel-Lucent.

Relevant Reading
Light Reading
Alcatel-Lucent news release