Tipping point

Will MPEG-4 give "telco TV" a push?

By Matthew Miller, Special Projects Editor -- EDN, 4/17/2003

For years, the owners of the world's phone networks have dreamed of the revenues they could reap by using their copper local loops to deliver an alluring trio of services: telephone, broadband Internet access, and television.

The last item on that wish list is the one that really sets their hearts aflutter. TV service, telco companies reason, would pry couch potatoes—and their fat monthly payments—away from the cable companies, not only enriching the telcos but also impoverishing their archrivals.

But like most dreams, the vision of so-called "telco TV" has proven difficult to grasp in the harsh light of day. Even the preliminary step, rolling out simple data service via DSL, resulted in well-publicized struggles. And bandwidth-intensive video would seem to present a far stiffer challenge.

Yet sometimes dreams do come true. And today, telco TV seems to be building real momentum.

The number of people who get their TV service from their phone company is small—about 100,000 worldwide—but growing rapidly, according to market researcher In-Stat/MDR (a corporate sibling of CommVerge and EDN). In fact, the number should hit seven figures in 2004 and 16 million in 2006, according to Michelle Abraham, senior analyst.

In an interesting twist, rural residents are enjoying the fruits of this trend before their urban counterparts. Many small, independent phone companies have already found that selling TV service improves their bottom lines. And it's only a matter of time before larger carriers—even the behemoth RBOCs (regional bell operating companies)—become TV suppliers as well (see the sidebar, "Rural roots").

Getting there

In terms of technology, telco TV is eminently feasible, and emerging equipment promises to make it even more so. Standard ADSL affords ample bandwidth to deliver broadcast-quality TV to a home, says Jeff Schline, manager of digital-TV market relations for VideoTele.com, a division of Tut Systems. Schline's company and others, including Optibase, Minerva Networks, and Harmonic, make video head-ends, which carriers use to stream TV out over their networks.

A video stream in MPEG-2 format, including overhead and audio, consumes between 2.7 and 3.2 Mbits/sec of bandwidth, Schline says. A typical DSL link, even when it's already carrying Internet-access service, can comfortably deliver two such streams concurrently. That's vital because it allows two TVs in the same home to show different programs at the same time. Advocates say the user experience is indistinguishable from television service delivered via a digital cable system.

But of course, many households have more than two TVs. One way to appease such customers is to use a fatter pipe, such as VDSL (very high speed DSL) or fiber-to-the-home. Some companies are taking this approach. However, most carriers favor a second option, better video compression, because it allows them to leverage the investments they've already made in DSL. As a result, a broad transition from MPEG-2 to MPEG-4 is now getting underway.

"I think the industry recognizes that MPEG-4 is the next wave."
—Mark Carpenter, VideoTele.com/Tut Systems

For example, at the recent NAB (National Association of Broadcasters) show (April 5 to 10 in Las Vegas), VideoTele.com debuted an MPEG-4 enabled version of its Astria video head-end. The system can send a broadcast-quality video stream, including overhead and audio, in 2 to 2.5 Mbits/sec of bandwidth. That's a 22 percent reduction compared with MPEG-2, a difference that can translate into delivering three concurrent channels instead of two, Schline says.

The system employs MPEG-4 ASP (Advanced Simple Profile), a standard recently made concrete by the ISO (International Organization for Standardization). Further ahead, carriers will be able to upgrade the DSP-based Astria system to support another MPEG-4 standard, MPEG-4 AVC (Advanced Video Codec). Also known as H.264 and MPEG-4 Part 10, MPEG-4 AVC delivers even better compression; it promises to crush video to half of its MPEG-2 size.

VideoTele.com's Astria system also transcodes video from MPEG-2 to MPEG-4 in real time. This capability is critical because it allows a carrier to grab MPEG-2 streams from a satellite or local feed and immediately send them out to subscribers in MPEG-4 form. The platform also ensures that the outgoing streams conform to a constant bit rate, which helps network engineers sleep at night because they can know with certainty that users won't experience reception hiccups.

At NAB, VideoTele.com demonstrated the Astria system with an MPEG-4 set-top box provided by Kreatel. Other vendors, such as Pace Micro Technology and Samsung, have sworn to provide MPEG-4 customer-premise equipment as well, according to Mark Carpenter, the company's vice president of marketing.

Changing channels

"I think the industry recognizes that MPEG-4 is the next wave," Carpenter says. It maintains high quality while reducing bandwidth demands. And conserving bandwidth, the argument goes, will become even more critical in the future as video-on-demand, multichannel sound, interactivity, and high-definition programming become more pervasive.

On the other hand, one shouldn't conclude that MPEG-4 has already been anointed. First of all, much of the market is waiting for equipment based on MPEG-4 AVC to appear before committing. Capital-challenged companies are apparently reasoning that it's better to wait for higher bandwidth efficiency tomorrow than to invest in a half-measure today, according to In-Stat/MDR's Abraham. Secondly, a rather wealthy and influential company in the Seattle area is pushing its Windows Media 9 technology as a compression scheme for TV distribution. And when Microsoft talks, people listen; some equipment suppliers, notably Tandberg Television, are on board to provide Windows Media-based products.

Author Information

Special Projects Editor Matthew Miller (mdmiller@reedbusiness.com) has been known to act as a couch potato from time to time.

Rural roots

Small phone companies, often referred to as IOCs (independent operating companies), are getting into the TV-distribution business because, at least in their markets, it requires a relatively small investment and provides a clear return. Because they are locally owned, these carriers find it relatively easy to steal customers from the mammoth cable operators. But how soon can we expect the major phone companies to become TV purveyors?

For a snapshot of where the market stands and where it is heading, listen to the claims of just one equipment provider, VideoTele.com, a division of Tut Systems. The company has more than 35 of its Astria video head-ends in service across the US, helping carriers deliver TV service via a variety of network types, including ADSL, VDSL (very high speed DSL), and fiber-to-the-home. The company claims to own 75 percent of the market and boasts what it calls the single largest telco-TV deployment in the US (with Iowa Network Services, a consortium of 150 IOCs serving the Hawkeye State). Another customer, All West Communications, claims 70-percent consumer uptake for the bundled phone/data/TV service it offers in Utah.

VideoTele.com claims that TV translates into profitability for many of its carrier customers. Companies that lit up video service two years ago are now achieving positive cash flow on an overall basis, according to Jeff Schline, manager of digital-TV market relations. For these companies, telephone service and DSL Internet access alone didn't add up to a sustainable business model. Only the addition of video is allowing them to break out the black ink.

Looking ahead, VideoTele.com claims that the market is now growing beyond these pioneering IOCs. Midrange carriers, those whose customers number in the hundreds of thousands, are starting to deploy the company's equipment, Schline says. Meanwhile, the major US RBOCs (regional bell operating companies) are actively exploring their options and placing RFPs (requests for proposal), he adds.

However, don't expect the RBOCs to make massive deployments overnight. "It's not going to happen in 2003," Schline says. "We're thinking 2004....We strongly believe that this will happen in 18 months."

The major carriers today are focusing on their core business and spending just enough to maintain their networks, agrees Michelle Abraham, senior analyst with market-research firm In-Stat/MDR (a corporate relative of CommVerge and EDN). That said, competitive pressure from the cable companies, which are trying to steal telco customers by offering voice services, will force carriers into the TV game eventually. "At some point, I think it's going to be imperative," Abraham says. "Whether 2004 is that year, it's really hard to say."

Finally, it's important to note that telco TV is progressing at different rates around the world. Abraham notes that Canada, where several telcos are already active in TV delivery, will probably boast the largest North American penetration over the next few years. And in general, carriers in Europe and Asia (notably Japan and Korea) are further along than their US counterparts.