Investors' Corner - MRG Multimedia Research Group Inc.

The European Commission said it is endorsing DVB-H as the official mobile TV standard. This is a blow to MediaFLO, a standard developed by Qualcomm. All 27 member states will be required to support the use of DVB-H for mobile television.

Viviane Reding, the commissioner for the information society and media, welcomed the endorsement by a majority of member states. “This shows that political resolve and market developments are in tune to ensure this potentially multi-billion Euro market is on the right track by mid-2008,” she said.

“I welcome the support received today for the Commission’s mobile TV strategy and, by a strong majority of member states, also for DVB-H. At the same time, I call also on the minority of governments who are still reluctant, partly for internal reasons, to endorse DVB-H as a European standard to join the majority quickly.”

Mobile TV: Global Standards Review & Forecast for Infrastrucuture & Handsets - 2007 to 2011
December 2007

This report assesses the spectrum allocation, trials, technology usage & development, content strategies, deployments, business models and global forecasts for the mobile TV subscription growth and the infrastrucuture build-out for five major regions and over seventy Operators. The report also projects which technologies will prevail and in what regions; and shows how "co-operation" between Cellular Operators and broadcasters plays out over the next five years.

MRG's Top 10 IPTV Drivers for 2007
December 2007

Compiled by IPTV Analysts: Jose Alvear, Len Feldman, Steve Hawley and Gary Schultz

#10. 2007 was the year that the first Service Provider (Free) reached 1 million IPTV subscribers. (We're counting actual IPTV users, not customers who can't receive IPTV [due to distance], or who choose not to.) There's also still a chance that either Orange France Telecom and Verizon (or both) will reach the 1 million subscriber mark before the end of the year.

#8. In 2007, Microsoft's Service Providers started deploying IPTV to their customers in quantity. While we still have concerns about the mass deployability of the Microsoft Mediaroom solution, it's clear that systems built on Microsoft's middleware have commercial viability.

#7. 2007 was the year that the first IPTV deployments (albeit small) began in India. Meantime, Korea’s on-demand (VOD) IPTV service is skyrocketing, due partially to Korea being the most broadband-equipped country in the world (with virtually 100% broadband penetration), with the majority of homes receiving 100 Mbps.

#6. In 2007, PCCW was passed as the world's largest IPTV Operator by both Free and Orange France Telecom. As a result, France became the world's largest IPTV market (although PCCW also continues to grow).

#5. For the first time, major Cable Operators like Comcast are publicly expressing concerns that the Telcos' IPTV efforts are starting to eat away at their subscriber bases - and that is impacting shareholders.

#4. When IPTV was an "early adopter phenomenon," making it work was an exercise in creative engineering and the Operator's engineers were driving the train. Now, more than ever, concerns over cost containment, breakeven and profitability have engaged the business side of the house. This has resulted in a rising interest in advertising and content.

#3. From an infrastructure perspective, IPTV turned a corner this year. Operators no longer question whether IPTV can be made to work as a business. Instead, the attention has moved toward refining the consumer’s experience, and therefore toward investing in test, measurement and monitoring.

#2. Now that U.S. Tier-1’s (Verizon and AT&T) are growing their subscribers, the U.S. is being seen as finally starting to catch up with the rest of the IPTV world. However the perception that the U.S. and Canada are "behind" the rest of the world is somewhat inaccurate because smaller North American Operators have been doing IPTV for as long as a decade.

#1. MPEG-4 AVC set-top boxes are shipping in volume, making it the first time that the promises of MPEG-4 AVC could be realized after many years of
waiting.

And here's a "top ten stay tuned in 2008" item: "Convergence" is coming, but it isn't here yet. Operators, middleware, security and other infrastructure suppliers are working together to enable and test multi-service use-cases, but there is still some uncertainty as to which ones will reward them with added revenues.

German IPTV Market Heats Up
November 2007

Europe is home to some of the largest IPTV services. For example, France already has about 2 million total IPTV subscribers. However, Germany has been lagging in IPTV, despite having a big economy, and a tech-savvy population of over 82 million people.

Currently there are three IPTV providers in Germany: HanseNet, Deutsche Telecom and Arcor.

Bell Canada Postpones IPTV Service
November 2007

Bell Canada is reportedly postponing the launch of its IPTV ADSL service. The decision to put it on hold has been known among key players in the industry, but it’s a long road for Bell.

Back in 2003, Microsoft and Bell Canada announced that they were trial testing IPTV. Later, Bell said it would launch commercial IPTV in 2006, but before the year was over, the company said that it would wait until Microsoft released an update of its IPTV software.

Now, about four years later Bell Canada hasn’t launched its service yet. Company officials refuse to talk about when the IPTV service may launch, saying they don’t comment on future products and releases.

Internet Video: Threat or Opportunity for IPTV Operators
October 2007

IPTV operators of managed networks everywhere are wondering how best to deal with (best-effort) Internet Video services that may eventually become either partners or competitors. MRG’s new report "Internet Video for IPTV Service Providers" investigates how IPTV can leverage both professionally-developed and user-generated video content to reduce churn and generate revenue.

"We've found that using Internet Video is a tremendous opportunity if it's tailored around the IPTV operator's local market," states Len Feldman, Director of IPTV Analysis for MRG, Inc. "Internet Video, if brought onto a managed network with superb search and display, can be a significant added value for the IPTV operator."

Verizon vs. Cable Operators
October 2007

Now two years old, Verizon has spent over $18 billion for its FiOS TV service. Verizon said it now has 500,000 customers, and is adding 2,600 new customers every business day. An analyst with Banc of America, predicts that Verizon will have 2 million FiOS TV subscribers by the end of 2008. That would make it the 9th largest provider of TV service in the U.S.

At an investor conference, Comcast said that Verizon is a real competitor and is taking customers away from them.

Arris Acquires C-Cor for $730 Million
September 2007

Arris announced that it is acquiring C-Cor for $730 million. The deal is expected to close in January 2008. The combined company will have over $1.2 billion in sales over the past 12 months.

Arris and C-Cor have had a long standing business relationship, said the companies.

Avail Buys Kasenna's ViewNow Subsidiary
September 2007

Avail Media has acquired Kasenna’s ViewNow subsidiary. Financial terms of the deal were not disclosed.

ViewNow provides video-on-demand programming from major studios, to cable providers and Telcos. Content providers include Buena Vista/Disney, Dream Works, Lions Gate Films, NBC/Universal, New Line Cinema, Paramount, 20th Century Fox and Warner Bros.

Alcatel-Lucent Buys Tamblin
September 2007

Alcatel-Lucent announced it acquired Tamblin, a privately held company for an undisclosed sum. Alcatel-Lucent said that Tamblin will provides applications and tool kits to enhance the company’s IPTV service.

Tamblin provides interactive TV advertising campaigns and can help provider track usage. Tamblin's primary product suite, i-ZoneTV, is an application creation and management system developed for the TV broadcast industry.

Independent Hollywood Studios Consider Simultaneous Release
August 2007

Usually, when a movie is premiered it hits the theaters, then months later it goes through other releases such as DVD, premium TV, VOD and finally free TV. These release windows, as they’re called, have been around for many years and are in place to maximum revenue from each source.

However, with the popularity of Internet TV, some Hollywood studios are looking at something called “simultaneous release.” This means premiering movies in theaters, DVDs and the Internet at the same time.

Simultaneous release is an important topic for service providers in the IPTV space since it affects when movies are available for video-on-demand.

SecureMedia Acquired By Cavalier Telephone
August 2007

SecureMedia announced that it was acquired by Cavalier Telephone and TV, a CLEC provider in the United States. Cavelier is also SecureMedia’s customer.

Largest local exchange carrier, with 350,000 telephone customers and “ambitious plans for IPTV,” said Whit Jackson, VP of Business Development at SecureMedia.

SecureMedia will remain a wholly owned subsidiary and will continue to have its existing customers. “We’re looking to continue to grow the business and still have a road map, with the same team,” he said. SecureMedia will also actually hire more people soon, he said.

iPhone Video Support
July 2007

With the release of iPhone this month, we’re finally getting to hear about real-world usage and reviews. Most reviews are positive, but admit that the iPhone has some flaws. Apple has yet to announce sales for the current quarter, but AT&T’s activations weren’t as high as many expected.

In its second-quarter earnings announcement, AT&T said that 146,000 iPhones were activated in a day and a half. Most analysts predicted that AT&T would report 500,000 to 700,000 activations during the first few days.

However, not all of AT&T’s sales were recorded (just the first two days before the end of the quarter), and there were many reports of delays in signing up for service. So it’s possible that AT&T may still show good numbers for the next quarter. The one good news for AT&T is that 40% of iPhone subscribers were new to AT&T.

Chile Goes IPTV
July 2007

The competition for IPTV service in Chile is heating up. In 2006, Chilean telecom operators CTC and Telsur announced plans to launch IPTV with Telsur investing US$30 million, and CTC investing over US$100 million in IPTV and broadband investments.

In July 2007, Telefónica del Sur (Telsur) launched WiTV, an IPTV service available in parts of southern Chile. Telsur’s 50,000 broadband customers can order the service featuring 80 channels.

Meanwhile Chilean fixed line incumbent Telefónica Chile already launched its IPTV service in the capital, Santiago. Currently, Telefónica Chile’s service is still in its initial phase and is limited to wealthier neighborhoods. In 2008, the company will rollout service to other parts of Santiago.

Symmetricom Unveils QoS Probe
July 2007

Since launching our IPTV Video Quality: QoS & QoE report in 2007, MRG has been publishing articles on Test & Measurement as a means of educating the market in the tools that help operators achieve improved QoS and QoE in their systems. This is one of those articles.

Symmetricom announced the new Q-400 IPTV probe, that enables Quality of Service (QoS) assurance and Quality of Experience (QoE). Symmetricom created and patented a scoring system to measure IPTV service quality, called V-Factor, so that network administrators can see what the customer is experiencing in real time. Symmetricom's probes collect and report aggregate statistics in real time for customer flow simulations and traffic flow analysis.

The Q-400 monitors up to 400 SD or HD H-264 IPTV streams and up to 10,000 VoIP streams in parallel in full passive mode.

IMS Playing Increasing Role in Converged Services
June 2007

IMS for IPTV will likely start with cross platform services like caller ID on TV screens.

IMS will help mobile media devices register with local broadband networks to be able to access media and other information and display it in accordance with the capabilities of the local display (ranging from a small low resolution screen to a large HD wall display).

SES Americom Unveils IP-Prime Turnkey IPTV Solution
June 2007

IP-Prime offers various programming options, a carrier-grade headend, set-top boxes and multiple middleware solutions to make it a complete end-to-end IPTV solution.

Bill Squadron, senior vice president of media partnerships at SES Americom, said that its solution is the closest thing to “flicking a switch” to turn on an IPTV service. During NxtComm, SES showcased IP-Prime with NDS middleware.

IP-Prime is available as a “Transport Only” system where programming is delivered to the telco’s headend in MPEG-4 and distributed using the telco’s own STB solution. Or it can be used as a “Fully Managed” solution where SES takes care of the entire process from ingest to deliver into set-tops.

Internet Video for IPTV Service Providers: A Preview
June 2007

It’s impossible to underestimate the impact of Internet video on service providers. The YouTube phenomenon is driving incredible demand for bandwidth; by some estimates, web video comprises as much as half of all backbone bandwidth. Subscribers are demanding more and more bandwidth to both view and submit video over the web. And when those subscribers are watching web video, they’re not watching broadcast or VOD content on IPTV services. But can the problem of Internet video also represent an opportunity? Can service providers actually make money with Internet video?

In July 2007, MRG will release “Internet Video for IPTV Service Providers,” a comprehensive report that will explain how to utilize Internet video in order to decrease churn and increase both subscription and advertising revenues. The report will cover both user-generated content (“bottom-up”) as well as professionally-produced (“top-down”) content, and the ways in which the video services offered by service providers should differ from YouTube and other sites.

The report will examine the technical and cost aspects of building and operating an Internet video capability, including outsourcing options throughout the content chain. A variety of vendors will be profiled, along with their relevant products and services. The issues of why, when and how to move Internet video to the set-top box will also be explored.

BSkyB Talking to Tiscali; Drops PVR Fees
June 2007

U.K. satellite broadcaster BSkyB is reportedly in talks with Italian-based Tiscali to place its basic selection of in-house channels on Tiscali’s UK IPTV platform. Additionally, BSkyB is dropping its subscription fee for its Sky+ PVR package, which currently costs £10 ($20) per month.

Dropping the fee for PVR means that BSkyB is trying to push the competition and drive down costs. Possibly other TV providers may be forced to drop PVR fees and absorb the costs themselves. Meantime, BskyB has announced plans to stop supplying Virgin Cable with satellite feeds.

{Note: analyst comments are italicized}

Motorola to Acquire Modulus Video
May 2007

Motorola announced this month that it will acquire MPEG-4 encoding company Modulus Video for an undisclosed sum.

Bob Wilson, chairman & CEO of Modulus Video, said that the news of the acquisition was well received by customers, partners and their investors. The acquisition will likely close in June or July 2007.

Motorola has been Modulus’ biggest customer for the last two years, said Wilson. “It’s a natural fit,” he said.

Avail Media Gets Funding
May 2007

Avail Media closed a series-B round with $17 million in funding co-led by Washington, D.C. area funds Novak Biddle Venture Partners and Columbia Capital.

Avail Media's solution allows IPTV content to be acquired directly from programmers in its full-resolution and unaltered format, encoded and encrypted, and finally transported to the customer via satellite.

The funds will assist the company as it expands its suite of services and brings on additional employees for operations and technology development.

Comcast Drops Microsoft from Cable Boxes
May 2007

Comcast said it was dropping Microsoft’s TV software from its digital cable boxes in the Seattle area. Instead, Comcast will use GuideWorks electronic program guide software, which is already in use in the rest of the U.S. GuideWorks is a joint venture between Comcast and Gemstar TV Guide.

Seattle was the only Comcast system using Microsoft software. Microsoft, however, said that its cable TV software is still in use in Latin America.

GuideWorks will be rolled out in stages to existing digital cable boxes from June through early September.

HD: A Must-Have for IPTV in North America
April 2007

During the NAB 2007 conference, MRG’s Bulletin Editor, Jose Alvear, moderated a panel session entitled “IPTV Wanted...Must Do HD” with company reps from Microsoft, Calix, Modulus Video, and AT&T.

The panelists provided a good cross section of the front to end IPTV experience and spoke about the drivers and challenges to HD over IPTV. Microsoft’s Channel Manager, Bruce Churchill, pointed out that many people change how they watch TV after getting an HD set. “Many people with HD only watch HD content, or channel surf HD channels first,” he said.

Overall, all the panelists agreed that HD is a must-have experience for IPTV customers. In 2006, digital TV sets outsold standard sets by 46 percent in the U.S. and total HDTV sets were at 11 million. And with the analog switch-off date (February 2009) fast approaching in the U.S., providers will have to be nimble to keep customers happy.

The U.S. is one of the biggest IPTV HDTV markets. According to MRG research, 15% of IPTV households (about 274,000) in the U.S. already have HD sets. This number will climb to 85% (8.82 million) by 2011, driven by the move to HD and the popularity of HDTVs.

HD is already a “must-have” for most IPTV service providers. If an IPTV provider can offer more HD channels than cable or satellite, it might be able to compete and convince customers to switch to IPTV.

DirecTV has the most HD channels, but most of those are sports programming. Removing those extra channels, AT&T’s U-Verse, an IPTV service, is beating cable and satellite. Comcast has the fewest HD channels, but charges a lower monthly fee also.

This HD advantage is what IPTV providers must push for since IPTV is still a difficult sell for new customers. In fact, AT&T recently announced that it was offering free HD service for 1 year for new subscribers of its U-Verse service.

In the U.S. where cable competition and satellite competition is strong, IPTV service providers have to differentiate their services with HD including HD DVRs. They must also provide better quality than competing HD services. Also, satellite and cable providers have been known to scale back the HD bitrate which means potential quality problems that IPTV operators can exploit.

One thing that can help the economics of delivering HD is to lower the video bitrate. On the NAB exhibit floor, Grass Valley/Thomson was demonstrating its Mustang encoding chip which claims to deliver high-motion HD video at 4 to 5Mbps, which is about half the bitrate of current MPEG-4/AVC encoders that range from 8 Mbps and 12 Mbps. Lower bitrates means more HD channels for providers and consumers and that’s what everyone is after.

IPTV will lead the HD market based on MPEG-4/AVC—faster than cable or digital terrestrial. As providers switch to HD, MPEG-2 equipment will become obsolete. MRG research shows that revenue from MPEG-2 set-top boxes and headends will disappear by 2008 or 2009 and be replaced by MPEG-4 SD and HD equipment.

For more information about HD/AVC IPTV encoders and set-top boxes, see MRG’s new IPTV Global Forecast — 2007 to 2011, April 2007 or visit our website at www.mrgco.com/iptv/0407.html.

Packet Vision Looks to IPTV Advertising
April 2007

With the success of many IPTV deployments, people are starting to ask: What about IPTV advertising? Packet Vision is answering that call by “providing targeting TV advertising to specific households via IPTV.”

Charlie Horrell, CEO of Packet Vision, says that the company’s technology supports local ad insertion, interactive and targeted advertising that can be tailored to match the demographics of individual households and even altered in real-time to reflect viewers’ reactions.

Founded in 2004, Packet Vision is a relatively new company and just recently announced its first customer trial in the US with Alaskan IPTV operator MTA.

Packet Vision’s ad server sits on the edge of the network, cuts in advertising and outputs 200 independent video streams. Aside from the hardware, the system also comes with sales and a traffic management software system so that providers can easily track and manage advertising campaigns.

Horrell said, “telcos are busy getting subscribers and are not focused on advertising much.” But as IPTV subscribers hit the critical mass, he believes providers will start IPTV advertising.

Packet Vision is interested in talking with everyone in the IPTV space, but is specifically looking at the mature European market such as France, Italy and Spain. But they are also interested in U.S. providers like AT&T and Verizon.

There are three types of data that can be gathered by Packet Vision’s technology: CRM information from the telco provider, the address or location, and tracking via IP tools such as channel changes and clicks.

Horrell said Packet Vision is using a “zero-risk, low capital investment model” which means the company will provide the server for free, in exchange for getting a percentage of revenues.

“One-to-one advertising hasn’t gotten very far. It’s more like one to many ones,” said Horrell. He says that viewers will see more relevant advertisements, which can prevent “channel hopping” and start new ad models for TV advertising.

Targeted advertising capabilities are great, but most service providers aren’t even selling conventional linear advertising yet.

“Most of the pieces of the jigsaw to turn IPTV into a mass revolution are in place, and the service that Packet Vision is providing will be the catalyst to turn opportunity into revenue for players in this market,” said Richard Scott George, GM of Packet Vision.

Servers and insertion devices are such a small percentage of the total cost of a system that we think that few system operators will trade off servers for a percentage of revenues. However, there could be a significant opportunity for a vendor that offers a complete, turnkey ad sales and delivery service, including hardware and software along with a qualified local and national ad sales force, in return for a share of ad revenues.

Iceland's IPTV Market
March 2007

Iceland Telecom (now called Siminn) says that it has deployed IPTV around the entire country with over 50% of its 52,000 DSL customers subscribing to the TV service.

In November 2004, Siminn launched its IPTV service in 10 towns around Iceland and by late 2005 it began offering full IPTV services with more than 60 channels, and VOD. Siminn is using Thomson middleware, Thales SmartVision broadband service platform and IBM servers.

Cablevision Loses Network DVR Lawsuit
March 2007

The U.S. District Court for the Southern District of New York ruled against Cablevision’s attempt to launch a network digital video recorder. Twentieth Century Fox, Universal City Studios, Paramount Pictures, Disney, CBS, ABC, NBC Studios, Turner Broadcasting’s Cartoon Network and CNN sued Cablevision in May 2006 claiming that its network DVR (called RS-DVR) would violate copyright laws.

The judge ruled that a remote-storage DVR would allow Cablevision and its customers to engage “in unauthorized reproductions and transmissions of plaintiffs' copyrighted programs.”

“The RS-DVR is not a stand-alone machine that sits on top of a television,” Chin wrote. “Rather, it is a complex system that involves an ongoing relationship between Cablevision and its customers, payment of monthly fees by the customers to Cablevision, ownership of the equipment remaining with Cablevision, the use of numerous computers and other equipment located in Cablevision's private facilities and the ongoing maintenance of the system by Cablevision personnel.”

Network DVRs lets users store TV shows on a provider’s network rather than on individual set-top-box hard drives. The judge ruled that recordings on a remote hard drive would be unauthorized reproductions.

The studios argued that because Cablevision was hosting the video on its servers, it wasn’t a network DVR, but a video-on-demand service and Cablevision needed permission to “rebroadcast” the programs.

Cablevision argued that its network DVR would not violate copyright laws since it works similar to DVRs in customers’ homes. In fact, Cablevision said it would dedicate separate storage space for each subscriber. In other words, if 500 subscribers decided to record the TV show “Lost,” there would be 500 separate copies saved on the Cablevision network.

Cablevision said it is reviewing the opinion and assessing all of its options, including an appeal.

Content providers are evidently trying to protect their content and possibly try to get TV operators to negotiate separate fees for implementing network DVRs. At the same time TV providers are trying to save money by deploying less expensive set-top boxes to customers and using their own network storage.

Meanwhile, the court decision is good news for TiVo, as well as set-top box makers like Scientific Atlanta and Motorola. As DVRs evolve and become more mainstream, however, it will be difficult to separate VOD from DVR functions. If Cablevision appeals, network DVRs in the U.S. may still be up in the air, however.

Hawaii IPTV Service Launches
February 2007

NeuLion announced that its IPTV service was chosen by Hawaii IPTV for its Hawaii Television Network. Hawaii IPTV will deliver live and on-demand content consisting of various Hawaii programming including news, and other local TV shows.

Content is delivered over the public Internet, to the Hawaii IPTV set-top box ($150). Customers need a broadband connection to use the service.

The company said that the goal of the Hawaii IPTV service is to “deliver the Hawaii experience to Native Hawaiians and Hawaii expatriates living away from Hawaii.”

Ericsson and Arris Bid for Tandberg
February 2007

In late February, Ericsson made a surprise bid for Tandberg Television pitting it against Arris, which announced in January, that it was acquiring Tandberg for $1.2 billion. Ericsson upped the offer to $1.39 billion cash, which is about 10% more than Arris’ offer. Now it’s up to Arris to respond. News reports say that Arris is looking to make a counter offer, but nothing was announced so far.

Last month, Tandberg executives said they were backing Arris’ bid while calling the Ericsson offer "unsolicited." Still, if Arris does want to make a counter offer, it has to go through Ericsson since it owns a large percentage of Tandberg stock.

Mergers and Acquisitions
January 2007

Telco giant Ericsson is acquiring edge router company Redback Networks for about $1.9 billion. Silicon Valley-based Redback has over 700 carrier customers in 80 countries and has some top-tier customers. Fifteen of the top 20 telephone carriers worldwide use Redback's technology, including broadband routers to manage IP-based data, voice and video services.

Arris and Tandberg announced that they were merging at a deal valued at $1.2 million. The companies said by combining Arris’ VOIP equipment with Tandberg’s IPTV products they will accelerate the combination of voice, video and data products. According to MRG, Inc. Tandberg enjoys about 30% of the global IPTV video headend (encoder) market, with a strong position in Tier 1 and Tier 2 IPTV service providers.

Motorola announced it was acquiring Tut Systems for about $39 million. Tut is a provider of carrier-class digital video encoding, processing and distribution products using MPEG-2 and MPEG-4 AVC video compression. It also provides local ad insertion, forward error correction, and real-time conditioning of video and audio.

Tiscali to Relaunch Homechoice as Tiscali TV
January 2007

Tiscali announced that it expects to gain about 500,000 U.K. subscribers in 2007 for its Homechoice IPTV offering. Tiscali acquired Homechoice TV when it bought Video Networks International in August 2006 and will rename the offering Tiscali TV when it relaunches later this year.

Broadband provider Tiscali has about 1.4 million U.K. DSL subscriber users and it hopes to convince more than half of them to add TV services. Tiscali said it plans to have over 80 TV channels including E4, MTV, Paramount Comedy and Cartoon Network, as well as 1,000 VOD movies.

In a survey commissioned by Tiscali of 1,400 users, 42% of respondents believe that today's traditional TV schedules will no longer exist in 10 years. Seventeen percent of users surveyed said they already watch on-demand TV, and 63% want to watch on-demand. Being able to watch movies at any time is so important to British consumers that more than half (51%) would prefer to rent a movie by downloading it through their broadband connection rather than go to a video rental store.

Time for Microsoft to Deliver
December 2006

Microsoft’s software deployments are starting to become commercial. Deutsche Telekom and Swisscom started their service in October 2006 and BT started its service in December 2006. AT&T’s service started in June 2006, but did not start to scale until the end of November 2006.

In addition, Verizon had to develop its own software (instead of using Microsoft’s) to support advanced functions such as whole home PVR in its FiOS TV FTTP IPTV service. Verizon uses Microsoft’s middleware for cable companies to manage channel selection. Since Verizon uses a cable like RF architecture for delivering broadcast channels, it does not use the same Microsoft IPTV Edition software that Deutsche Telekom, Swisscom, BT and AT&T do.

2007 will show how well Microsoft’s software operates. The first clue will be whether or not AT&T expands its IPTV service to 10 or more additional markets by the end of 2006, as it had previously promised. The real test will be to see the rate at which these services add subscribers. If these four IPTV services have 100 or 200 thousand subscribers between them by the middle of 2007, then Microsoft will be on its way. If not, then Microsoft may well see its market position slip.

Alcatel/Lucent Merged
December 2006

The Alcatel/Lucent merger completed with the resulting companying being called Alcatel-Lucent. The logo itself is the letter L and the letter A mapped into an infinity sign. Serge Tchuruk of Alcatel will be the Chairman of the Board and Pat Russo of Lucent will be the company’s CEO. The company stated that it will be the number one company in wireline, number three in mobile systems, and in the top three in applications and services. In the presentation it highlight its leading position in IPTV.

Alcatel-Lucent is the number one company in IPTV access systems, both globally and in Europe. It should be able to maintain that position.

It will be interesting to watch the Microsoft relationship. We believe that problems with Microsoft’s software have put a strain on this relationship. Alcatel’s recent video-on-demand patent suits against Microsoft is another sign of this strain.

Hong Kong Broadband Flat
November 2006

City Telecom saw an in increase of 13 thousand IPTV subscribers for its Hong Kong Broadband Network Systems IPTV service bringing the total number of subscribers to 116 thousand at the end of August 2006.

City Telecom experienced a decrease in its total broadband subscriber base to 220 thousand compared to 227 thousand 12 months earlier. The company stated that it is upgrading its consumer business to less price sensitive and more service oriented customers. Consequently, its consumer broadband revenue increased 23 percent to $95 million.

Alcatel/Lucent Merger Approved
November 2006

George W. Bush, the President of the U.S., gave the final approval for the Alcatel/Lucent merger. This approval was based on agreements between Alcatel/Lucent and U.S. government security agencies. Alcatel’s current CEO Serge Tchurik will be the Chairman of the new company and Lucent’s current CEO Pat Russo will be the CEO of the new company.

This approval followed Congressional hearings addressing the U.S. security aspects of the merger. Lucent Bell Labs does significant defense related contracting with the U.S. government. Alcatel/Lucent addressed this by making Bell Labs a separate subsidiary following the merger.

AT&T's Slow Start
October 2006

In its 3Q06 financial announcement, AT&T stated that it had 3 thousand U-verse IPTV subscribers at the end of September 2006. This is up from 1 thousand at the end of June 2006. It stated that it is getting a strong initial response with 85 percent of subscribers taking higher end video packages

AT&T also stated that its U-verse FTTN deployment passed 1.3 million homes at the end of the third quarter of 2006. It is forecasting 2.4 million homes passed by then end of the year.

AT&T is continuing to discuss a Houston launch with HDTV by the end of November 2006 and that it expects to launch about 15 markets within its territory by the end of 2006. It also stated that its initial market entrance and expansion will be deliberate.

Verizon FiOS TV Booming
October 2006

Verizon made a presentation to the financial community to describe the current and anticipated returns from its FiOS FTTP deployment. It has been under pressure to explain why FiOS is worth the heavy investment that it is making.

Verizon is achieving 15 percent penetration of its FiOS service where the service has been available for at least 12 months. It is achieving a monthly churn rate of less than 1.5 percent. It stated that 70 percent of its FiOS subscribers are new to Verizon broadband.

By the end of 2006 Verizon will have two national super headends in operation along with nine regional headends. There will be 292 central offices supporting FiOS services. Verizon will also have video franchises in 300 municipalities that will cover 6.1 million households.

Google Acquires YouTube
October 2006

Google acquired the Internet video content provider YouTube for $1.65 billion in stock even though YouTube had no significant revenue stream itself. YouTube reportedly attracted 57 percent of visits to Internet video sites in September.

YouTube’s popularity made it an attractive acquisition for Google. Google’s mastery over Internet advertising puts it in a unique position to capitalize on YouTube’s popularity.

Free's First Half Results
September 2006

Free, the competitive carrier in France, announced its first half 2006 results. It now has 1.9 million broadband subscribers. It has 1.26 million TV enabled subscribers and had 273 thousand paying IPTV subscribers at the end of the half.

During the first half of 2006, Free introduced HD services and broadcasted French Open tennis matches in HD. It also introduced the ability to record and time shift TV programming on its HD Freebox set-top box.

Shanghai Telecom IPTV Service
September 2006

Shanghai Telecom introduced its IPTV service together with the Shanghai Media Group (SMG). It stated that there are currently 10 thousand subscribers using this service. It expects the number of subscribers to grow to 80 thousand by the end of 2006 and 200 thousand by the end of 2007. It stated that this service will become profitable at 1 million subscribers.

This service will provide 58 channels, 12 from SMG, 15 from China Central Television (CCTV), 20 feature channels, and 9 from other provincial satellite sources. This service will include a time shifted TV service that will provide the ability to replay programs within 48 hours of their initial airing time.

The service will also include 3 thousand video-on-demand and pay per view services. Viewing a film will cost $.25 to $1.25. Viewing each episode of a TV series will cost $.038 to $.125.

Market Leader Update
August 2006

MRG has just released the latest version of its IPTV Market Leader report. This shows which companies are leading globally and in four regions worldwide within in each of the six market categories we are tracking.

These ratings were based on ranking companies based on the number of subscribers in the 474 IPTV service providers that we have identified globally.

Mergers and acquisitions have had a big effect on these ratings. Tandberg’s acquisition of Skystream put it into a solid number two position globally and number one in Europe and Asia. Motorola’s acquisition puts it into the number one position in set-top boxes. The Alcatel/Lucent merger will put the resulting company in a strong number one position globally.

The conversion of in-house middleware packages to merchant status is the second major trend. PCCW’s Cascade subsidiary has sold its middleware package to True in Thailand. Converting the Cascade middleware to merchant status put it into the number one position globally.

Lucent has taken over the support of Telefonica’s in-house developed middleware software. Lucent is starting to aggressively market this software as a product, at least to Telefonica subsidiaries in Latin America.

The IPTV market is still forming. We expect that these ratings will continue to change significantly as the Market matures over the next couple of years.

Verizon Under Siege
August 2006

Verizon lost 4.2 million switched access lines in 2005, which is more than twice the 1.9 million switched access lines that AT&T, BellSouth, and Qwest lost together.

While AT&T and BellSouth have been successful in reducing the rate at which they are losing switched access lines in 2004 and 2005, Verizon took a big turn for the worse in 2005.

Verizon has very strong cable competition, particularly Cablevision in the New York area that has had quite successful VoIP offerings

Free's Q2 Results
August 2006

The number of broadband subscribers at Free in France grew from 1.8 million to 1.9 million at the end of June. The number of IPTV capable subscribers grew to 1.4 million. The company now has 273 thousand subscribers paying for at least one IPTV service. Its subscribers have purchased 803 thousand video-on-demand features since it was introduce in December 2005.

Cisco to Acquire Arroyo
August 2006

Cisco agreed to acquire video-on-demand system company Arroyo Video Solutions. This extends Cisco’s IPTV coverage into a new market segment and puts it directly into competition with Microsoft.

Arroyo has been focusing on the U.S. cable market and we have not identified any IPTV deployments. Arroyo’s strategy is to focus on personalization, which plays on a real IPTV strength.

The question now is what Cisco will do so that it can compete head-to-head with the Alcatel/Lucent/ Microsoft colossus. Middleware is the key missing element, but Content Protection/DRM is important as well. Cisco is an investor in leading Content Protection/DRM company Widevine.

Motorola to Acquire Broadbus
July 2006

Motorola announced that it would acquire Broadbus to round out its video offerings. Broadbus’ strong position in the U.S. cable market makes it a good addition to Motorola.

Broadbus is using its success with the cable providers to enter the IPTV video-on-demand market. It has 85 cable deployments and stated that it deploys with a tier one carrier in the U.S.

Broadbus uses solid state memory to distribute video-on-demand content from a central disk based library. It stated that it can support 100 thousand streams with six servers and 112 disk drives. Adding time shifted TV to this service would double the system to support 200 thousand streams with 12 servers. The number of disk drives would grow to 154.

The company states that the replacement of disk drives with solid state memory reduces facility costs such as power, space, and cooling by over 80 percent. It also states that its system will reduce the number of software upgrades by more than 90 percent. It has found that these savings can reduce OpEx by about 50 percent.

Sky Offers Free Broadband
July 2006

It seems that offering certain components of an IPTV triple play offering for free is a common strategy. Free, of course, means that it is included in the base price of the bundle. Often a basic set of broadcast channels or VoIP services are offered for free.

In a new twist on this strategy, BSkyB, the satellite video provider is turning it on its head. It will provide a free broadband connection for subscribers to its video service. The range of services offered is given below:

This is a disruptive strategy that repositions BSkyB from a single play video provider to a triple play provider all at once. Its offer of a basic broadband service for free to all video subscribers will be very attractive to the mass market that has not yet committed to broadband. These people know they should have broadband and the ability to get it for “free” will cause many of them to make the move.

This is a direct challenge to the new BT service which is based on free digital terrestrial content and to its 21st century VoIP strategy. It raises the ante against the consolidating cable companies. It also makes it much tougher for the competitive IPTV companies such as Orange and Video Networks.

It seems likely that Sky in Italy will also adopt this strategy to fight off competition from Telecom Italia, FastWeb, and the new digital terrestrial services.

This is also a logical strategy in the U.S. Echostar seems to be exploring its own broadband alternative, including WiMAX technology. Echostar may well find an attractive broadband offering in the U.S. necessary to counter increasing competition from the cable and the IPTV companies.

AT&T Introduces IPTV
June 2006

AT&T introduced its U-Verse IP TV service to 5,000 homes scattered across San Antonio. It is priced at $69 to $124 per month with a family oriented bundle at $54 per month. A Spanish language package is available for an additional $10 per month.

AT&T offers over 200 channels along with a data service with speeds of 1.5 to 6 Mbps. The service comes with three set-top boxes, one with DVR capability. The standard installation fee is $95.

AT&T also introduced its Homezone service that combines Echostar video content with video-on-demand delivered over a DSL line to a 2Wire set-top box.

AT&T plans to introduce its U-Verse service in 15 to 20 markets by the end of 2006. It has not set a date for a full market launch in San Antonio or for any other market. It has stated that it will introduce the service in Houston, Texas.

Ericsson Introduces IPTV
June 2006

Ericsson introduced its IP TV offering at Globalcomm with a formal partnership with Kasenna who will provide its video-on-demand and middleware products. This offering will use Ericsson access systems and support broadcast and video-on-demand services.

In its next phase in 2007, the company plans to add IMS support to its IP TV offering in order to support both communications services and TV services.

The third phase of its implementation in 2008 will include convergence with mobile networks, including services that support both mobile and IP TV devices.

At Globalcomm, Ericsson showed a DLNA based demonstration with products from Sony.

Ericsson comes to the IP TV market later than the other major telecom suppliers such as Alcatel, Lucent, and Siemens. It faces the same problem as Siemens – it must overcome Microsoft’s dominance with large service providers.

Ericsson is taking a smart approach and leverage its mobile and IMS experience. It seems clear that mobile technologies will be increasing in IP TV networks, and Ericsson is well positioned to take advantage of that.

Siemens and Nokia to Merge
June 2006

Siemens and Nokia became the latest pair of major telecom suppliers to announce a merger. This follows hard on the heels of the Alcatel/Lucent Merger announcement in April 2006.

Nokias Networks division will merge with Siemens Carrier division. Both of these organizations offer Wireless and Wireline services and have aggregate revenue of €15.8 billion. They stated that 78 percent of these revenues are from wireless networks and 22 percent from wireline. The companies expect cost savings of €1.5 billion.

The resulting organization will be owned 50-50 by each company and will be headquartered in Helsinki. Most of the top level executives will come from Nokia.

The companies included IP TV as one of the leading market segments that the combined company will address.

The merger will not improve Siemens position in the MRG Market Leader Report. We have not identified any Nokia products in the IP TV market segments that we track in this report.

We expect that the resulting company will continue to put a high priority on IP TV, given the importance of IP TV in the service provider market today.

This merger together with the Alcatel/Lucent and the Ericsson/Marconi mergers will put significant pressure on Nortel, Cisco, NEC, and Motorola, as well as smaller companies such as Tellabs, Fujitsu, and Hitachi to find merger partners.

Siemens IPTV Home Equipment
May 2006

Siemens offers a line of home gateways that support VoIP and WiFi. Siemens has found that 802.11g WiFi is not sufficiently robust for IP TV video traffic. The company does expect that 802.11n will resolve these issues.

Siemens stated that both power line and polymer optical fiber (POF) will be popular methods for networking homes for IP TV. POF is a very thin fiber strand that can be deployed by the home owner. It is unobtrusive and can be easily hidden under rugs or other places. POF does not have the interference problems found with either wireless or power line systems.

Siemens also demonstrated its Tango customer equipment network element manager. Tango can manage both Siemens and non Siemens customer systems. It provides the ability to log events, gather data, and configure home devices. It does not have heuristic systems that provide intelligent filtering that would facilitate managing large populations of subscribers (several hundreds of thousands or millions).

As we reported previously, Siemens is introducing a line of MPEG-4 AVC IP TV set-top boxes. Its low end box will come as an HD/SD or an SD only. These two units are basically the same, except that the SD only unit has less memory to lower its cost. Siemens expects that the HD/SD unit will be widely used in Europe and North America and the SD only unit will be used in Latin America.

Siemens also offers a somewhat larger unit that may have a hard disk included with it. Both of these units support both SD and HD.

The final pair of units are hybrid devices that support both IP TV and DVB digital terrestrial services. A hard disk is available and both of these units support both SD and HD.

Siemens is still on schedule for a September volume delivery of these units; however, any further schedule slips from its chip suppliers will cause their set-top boxes to slip as well.

FastWeb IPTV Treading Water
May 2006

We met with FastWeb in Milan this month about a week after it announced its results for the first quarter 2006. It used this meeting to point out to the financial community that it is now a national service provider in Italy.

FastWeb described its geographic expansion which increased the number of central offices served from 304 in December 2004 to 800 today with the number of metro areas served growing from 14 to 130 at the same time. It now covers 45 percent of the households in Italy and about 70 percent of the enterprise fixed-line market in Italy.

FastWeb is now able to serve national enterprises, which makes it a significant factor in this market for the first time. Previously, it served local and regional business applications as well as consumers.

FastWeb won two large public networking applications in Italy based on its network expansion. The company stated that other large enterprises are starting to consider it to support their network deployments.

The company is continuing to aggressively go after the consumer market in Italy. It is using unbundled ADSL and ADSL-2+ as its primary technology for consumer applications.

FastWeb’s offers only SD video offerings at this time. It does not plan to introduce HD services in 2006. It expects that Italy will lag behind France and Germany in introducing HD services. Both of these companies are planning to introduce HD services in 2006.

FastWeb continues to increase its subscriber base, adding 80 thousand new subscribers in the first quarter of 2006. Its residential subscriber base is now about 675 thousand subscribers, with 160 thousand IP TV subscribers.

The number of IP TV subscribers has remained stable for the last couple of years. It had a successful promotion in 2003 based on the availability of football in its offering that generated a significant number of new subscriptions. Many of these new subscribers have cancelled their subscriptions and have been replaced by new subscribers. Increased satellite competition and new competition from digital terrestrial have also made it more difficult for FastWeb to acquire IP TV subscribers.

FastWeb’s overall customer spending continues a slow decline, primarily due to competitive pressures and the introduction of new services. FastWeb’s video customer spending is fairly stable with about a 3 percent decline in the first quarter.

FastWeb finds that there is less demand in the Italian market for higher speed data services. It is currently offering an upgrade from ADSL to ADSL-2+ for a one time charge of €80 and no increase in monthly fees. The demand for this upgrade has been modest.

FastWeb has no plans to upgrade its network beyond ADSL-2+ at this time. It expects that ADSL-2+ should support subscriber demands for HD services and higher speed data services. Telecom Italia has announced a plan to deploy VDSL, which may put some competitive pressure on FastWeb.

FastWeb’s first response to the Telecom Italia VDSL deployment will likely be to further promote its ADSL-2+ offering. This is a low cost approach that can provide an immediate result.

In the long run, it is likely that FastWeb will expand its FTTH deployment to counter VDSL. FTTH is technically superior to VDSL, which will give FastWeb a significant competitive advantage over Telecom Italia. FastWeb does not have the wiring cabinets located close to the subscriber that Telecom Italia has. These wiring cabinets provide the infrastructure for a fiber to the node VDSL deployment. A direct FTTH approach should be significantly less costly than trying to duplicate Telecom Italia’s fiber to the node VDSL approach.

The fact that FastWeb’s IP TV subscriber base has been flat for the last two years shows the difficulties that IP TV service providers are likely to experience as the competitive environment changes.

Deutsche Telekom Rollout
May 2006

We had two meetings with groups in Deutsche Telekom (DT) that are involved with its IP TV rollout. It had announced that it would deploy VDSL and IP TV in 10 cities in Germany in time to show the World Cup in HD in June of this year.

In May, it made the HD IP TV service available to several dozen friendly homes in time for the start of the World Cup. This is more of a technical trial than a market rollout. Current plans are to rollout the service commercially in these 10 cities in July.

While the VDSL rollout appears to be on schedule, all is not well with the Microsoft IPTV Edition Software that DT will use. We were told that it still does not operate reliably in the lab.

The public broadcasters in Germany, ARD and ZDF, are threatening to boycott the DT service. These broadcasters are protesting that Microsoft’s software is incompatible with some important European TV standards.

We also heard concerns that the Microsoft software does not provide sufficient opportunities for differentiation to permit DT to make a wholesale IP TV offering. There is some discussion that DT might deploy a second middleware platform for its wholesale customers.

In some good news for DT, the German Cabinet passed a bill that exempts DT’s VDSL network from unbundling, which will give DT a significant advantage over its broadband competitors and will give it a unique ability to provide HD IP TV services.

It does not appear that the DT IP TV network is ready for prime time yet. The technical issues with the Microsoft software clearly must be resolved. DT also has to resolve its content issues. It will clearly need all of the important broadcast channels from the start of the service.

The European Organization for Economic Cooperation and Development (OECD) issued a report Multiple Play: Pricing and Policy Trends. This report looks at the pricing for bundled service that include voice, data, and video services. It includes an analysis of 25 European countries plus the U.S., Canada, Australia, and Korea.

The report identifies Free in France as offering the least expensive triple play package with unlimited voice calling at $33 U.S. Its analysis stated that a similar package from Comcast in the U.S. would cost $150.

The report also stated that Softbank in Japan offers the least expensive triple play package with per minute voice charges at $29 per month. The price for a similar bundle from Telefonica in Spain is $96 per month.

FastWeb Enhances Service
April 2006

FastWeb the competitive IP TV carrier in Italy announced several enhancements to its service in April.

FastWeb uses ADSL-2+ to deliver a data service that supports broadband data speeds of 20 Mbps downstream and 1 Mbps upstream. Existing broadband subscribers can upgrade to the new higher performance for a one time charge of €80.

FastWeb also introduced a network PVR service that it calls REPLAYtv that provides access to the previous three days programming on the free channels that it broadcasts. The REPLAYtv is included at no extra cost in its On Tv video on demand service, which costs €8 per month.

FastWeb also announced recent agreements with Sony, Columbia, and Paramount for additional video on demand content. This supplements the content that it now offers from Universal, Dreamworks, Medusa, Buena Vista, Disney, 20th Century Fox, Mikado, Rai Cinema, and Instituto Luce.

AT&T's Position
April 2006

Jeff Weber the VP who runs the IP TV project at AT&T stated at NAB that it will add 20 more markets by the end of 2006. It now offers 200 channels with video on demand in San Antonio today. It will use MPEG-4 do deliver video content. AT&T also stated separately that its San Antonio market trial would start in June 2006.

AT&T plans to add HD and DVRs in 2006 along with new set-top boxes and upgrades to its Microsoft software. It will also offer interactive features such as voting and games.

AT&T had stated last year that its market rollout would begin early in 2006. These announcements appear to be about a six month slip in AT&T’s IP TV service rollout.

Will AT&T Back Off IPTV
April 2006

inkEquity Partners analystAnton Wahlman believes AT&T will scale back its Project Lightspeed deployment, because its 25-megabit-per-second speeds will not be sufficient to compete with cable.

He believes AT&T will put greater emphasis on its Homezone joint venture with EchoStar that combines satellites to deliver broadcast content and DSL to download movies to a hard disk on the set-top box.

Wahlman believes that AT&T will launch IP TV services in a handful of cities, but will only pass about one-half as many homes as originally planned. He expects that AT&T will switch from VDSL-2 at 25 megabits per second to possibly faster versions of VDSL2 running on shorter loops with potential for as much as 100 megabits per second.

While Wahlman makes a good point, since AT&T’s VDSL strategy will not compete with cable’s DOCSIS 3.0, we expect that problems such as instability in the Microsoft software and the availability of MPEG-4 SD and HD set-top boxes may be significant in 2006. We expect that AT&T may slow down the announced pace of fiber to the node deployments announced in December 2005. Installing 3 million homes passed in 2006, 6 million in 2007, and 9 million in 2009.

SBC to Acquire BellSouth
March 2006

SBC has agreed to acquire BellSouth for $67 billion. After the merger the two companies will operate under the AT&T name with AT&T’s CED Ed Whitacre serving as chairman and CEO. BellSouth’s CEO Duane Ackerman will serve as chairman and CEO of BellSouth operations for a transition period following the merger. The deal is expected to close within 12 months.

It is not clear how this will affect the companies IP TV plans. We expect that AT&T will move forward with its Project Lightspeed. We expect that BellSouth will adopt the Project Lightspeed architecture, which may not cause much delay in its IP TV plans, since AT&T was already lagging.

This will have the biggest effect on companies that were expecting to provide equipment to support BellSouth’s IP TV deployment. It is likely that this will have a negative affect on Tellabs’ FTTC system sales.

Tandberg Acquires SkyStream
March 2006

Tandberg completed its acquisition of SkyStream. This merger moves Tandberg from number 4 globally to number 2 after Tut, which has a commanding lead due the large number of its deployments in small U.S. Telcos. Tandberg is now number 1 in Asia, number 2 in Europe, and number 2 in North America. Harmonic is number 1 in Europe and Tut is number 1 in North America.

Alcatel and Lucent Merge
March 2006

Alcatel and Lucent have agreed to merge. The combined company will be number one globally in wireline and number two in mobile technologies.

The resulting company will be given a new name and will be 60 percent owned by Alcatel stockholders and 40 percent owned by Lucent stockholders. It will be headquartered in Paris.

This merger will give the resulting company the number commanding lead and the one position in the IP TV market. It will also be number one in Europe, number two in North America, and number five in Asia according to the numbers in our March 2006 Market Leader Report.

Achieving the number one position in IP TV is a good thing, but it is not nearly enough to justify a merger of this scale on its own. IP TV is one part of a full portfolio of wireline and wireline products and services.

Mergers Close
February 2006

The mergers between Cisco and Scientific Atlanta, Motorola and Kreatel, Ericsson and Marconi, and Calix and Optical Solutions closed this month.

The Motorola/Kreatel merger had the most effect and moved Motorola into the number one position in the IP TV set-top box market as measured in our latest Market Leader report. Kreatel’s strong position in Europe complements Motorola’s strong position in North America.

The Cisco/Scientific Atlanta merger combines Cisco’s strength in the aggregation and backbone networks with Scientific Atlanta’s strength in headends and set-top boxes. While Scientific Atlanta helps Cisco in the cable market today, it should improve its position in the IP TV market as well by giving it the ability to address a broader set of IP TV network issues.

The Ericsson acquisition brings some benefits in the IP TV market, but does not significantly improve Ericsson’s position in this market. It does gain significant optical networking capability from the merger.

The Calix/Optical Solutions merger improves Calix’s position in the U.S. small telco market.

As we have said before, we believe that this is the start. Read about Tandberg and Skystream and the Nortel/Huawei joint venture below. We believe that these M&A activities will continue through 2006 and 2007.

Who are the IPTV Leaders?
Feburary 2006

MRG’s new IPTV Market Leader report, now available, gives the position of about 60 different companies in four different regional markets and globally. These companies are grouped into six different product categories. MRG has added a new ranking system to thisreport for each of the 30 market sectors. The number one company in each global market and each product category are given in the table below:

NEC is number one in Access Systems due to its inclusion in the PCCW deployment in Hong Kong. ECI is number two globally and number one in Europe.

Tut remains the number one company globally and in North America in IPTV Video Headends due to its strong position in the U.S. independent telco market.

In Video-in-Demand systems, entone is the number one company globally and in Asia due to its deployment at PCCW. Alcatel is number two globally and number one in Europe.

Motorola is number one in Set-top Boxes globally as well as in North America and Europe due to its recent acquisition of Kreatel. Yuxing is number two globally and number one in Europe due to its inclusion PCCW’s network.

Thomson/Thales is number one globally in IPTV Middleware and in Europe, due to its inclusion in France Telecom’s network. Orca is number two globally and number one in Asia.

In IPTV Content Protection systems, Viaccess is number one globally and in Europe, due to its inclusion in France Telecom’s network. Widevine is number two globally and number one in Asia and North America.

This report is based on a database of 370 service providers globally that have some level of IP TV activity underway. More than 200 of these companies are small independent telcos in the U.S.

Tanberg TV to Acquire Skystream?
February 2006

Tandberg TV has signed an agreement to acquire Skystream. Both companies produce video headend equipment. Tandberg TV has been focusing on high end, high quality applications while Skystream has provided a more cost effective system. Tandberg stated that it was considering developing a system more like Skystream’s, but decided that acquisition was the better course of action.

Tandberg TV stated that it has focused on tier 1 carriers and that Skystream has focused on the tier 3 carriers in the U.S. This is consistent with the view of the two companies in our latest Market Leader report, but we have seen that Skystream does have a significant position in both Europe and Asia.

Looking at this merger from the perspective of this Market Leader report on a pro forma basis, the combination would retain the number two position that Skystream now occupies, still way behind Tut in terms of channels deployed. Skystream’s number one position in Asia would be strengthened significantly. The merger would put the combination into strong competition for the number one position with Harmonic in Europe.

While this merger clearly strengthens the position of both companies, it is not clear that it will be able to survive as a standalone entity over the long run. Video encoding is a specialized technology that will resist further combination, but the difficulties of integrating IP TV systems and the positioning for service provider business may generate significant pressures for further combination.

Motorola to Acquire Kreatel?
January 2006

Motorola has agreed to acquire the Swedish set-top box manufacturer Kreatel. Kreatel is included in significant IPTV deployments in Europe that include Telefonica in Spain, TeliaSonera in Sweden, and KPN in The Netherlands.

Motorola stated that it was particularly interested in the set-top box APIs that Kreatel has developed as well as its hybrid set-top boxes that support both IPTV and digital terrestrial services. Motorola also expects the Kreatel development center to become an important R&D resource for its IPTV products and strategies.

This acquisition is in line with our predictions that M&A activity in the IPTV market will increase in 2006. This acquisition brings important technologies to Motorola as well as much better access to the European market. We have been saying for some time that Motorola needs to expand to the global market.

This acquisition will help Kreatel to scale to the next level. The large companies are taking most of the business from the large service providers today. Kreatel as part of Motorola will be able to compete more effectively for this business.

EU Chooses DVB-H Mobile TV Standard December 2007

Mobile TV: Global Standards Review & Forecast for Infrastrucuture & Handsets - 2007 to 2011 December 2007

MRG's Top 10 IPTV Drivers for 2007 December 2007

German IPTV Market Heats Up November 2007

Bell Canada Postpones IPTV Service November 2007

Internet Video: Threat or Opportunity for IPTV Operators October 2007

Verizon vs. Cable Operators October 2007

Arris Acquires C-Cor for $730 Million September 2007

Avail Buys Kasenna's ViewNow Subsidiary September 2007

Alcatel-Lucent Buys Tamblin September 2007

Independent Hollywood Studios Consider Simultaneous Release August 2007

SecureMedia Acquired By Cavalier Telephone August 2007

iPhone Video Support July 2007

Chile Goes IPTV July 2007

Symmetricom Unveils QoS Probe July 2007

IMS Playing Increasing Role in Converged Services June 2007

SES Americom Unveils IP-Prime Turnkey IPTV Solution June 2007

Internet Video for IPTV Service Providers: A Preview June 2007

BSkyB Talking to Tiscali; Drops PVR Fees June 2007

Motorola to Acquire Modulus Video May 2007

Avail Media Gets Funding May 2007

Comcast Drops Microsoft from Cable Boxes May 2007

HD: A Must-Have for IPTV in North America April 2007

Packet Vision Looks to IPTV Advertising April 2007

Iceland's IPTV Market March 2007

Cablevision Loses Network DVR Lawsuit March 2007

Hawaii IPTV Service Launches February 2007

Ericsson and Arris Bid for Tandberg February 2007

Mergers and Acquisitions January 2007

Tiscali to Relaunch Homechoice as Tiscali TV January 2007

Time for Microsoft to Deliver December 2006

Alcatel/Lucent Merged December 2006

Hong Kong Broadband Flat November 2006

Alcatel/Lucent Merger Approved November 2006

AT&T's Slow Start October 2006

Verizon FiOS TV Booming October 2006

Google Acquires YouTube October 2006

Free's First Half Results September 2006

Shanghai Telecom IPTV Service September 2006

Market Leader Update August 2006

Verizon Under Siege August 2006

Free's Q2 Results August 2006

Cisco to Acquire Arroyo August 2006

Motorola to Acquire Broadbus July 2006

Sky Offers Free Broadband July 2006

AT&T Introduces IPTV June 2006

Ericsson Introduces IPTV June 2006

Siemens and Nokia to Merge June 2006

Siemens IPTV Home Equipment May 2006

FastWeb IPTV Treading Water May 2006

Deutsche Telekom Rollout May 2006

FastWeb Enhances Service April 2006

AT&T's Position April 2006

Will AT&T Back Off IPTV April 2006

SBC to Acquire BellSouth March 2006

Tandberg Acquires SkyStream March 2006

Alcatel and Lucent Merge March 2006

Mergers Close February 2006

Who are the IPTV Leaders? Feburary 2006

Tanberg TV to Acquire Skystream? February 2006

Motorola to Acquire Kreatel? January 2006

EU Chooses DVB-H Mobile TV Standard
December 2007

Mobile TV: Global Standards Review & Forecast for Infrastrucuture & Handsets - 2007 to 2011
December 2007

MRG's Top 10 IPTV Drivers for 2007
December 2007

German IPTV Market Heats Up
November 2007

Bell Canada Postpones IPTV Service
November 2007

Internet Video: Threat or Opportunity for IPTV Operators
October 2007

Verizon vs. Cable Operators
October 2007

Arris Acquires C-Cor for $730 Million
September 2007

Avail Buys Kasenna's ViewNow Subsidiary
September 2007

Alcatel-Lucent Buys Tamblin
September 2007

Independent Hollywood Studios Consider Simultaneous Release
August 2007

SecureMedia Acquired By Cavalier Telephone
August 2007

iPhone Video Support
July 2007

Chile Goes IPTV
July 2007

Symmetricom Unveils QoS Probe
July 2007

IMS Playing Increasing Role in Converged Services
June 2007

SES Americom Unveils IP-Prime Turnkey IPTV Solution
June 2007

Internet Video for IPTV Service Providers: A Preview
June 2007

BSkyB Talking to Tiscali; Drops PVR Fees
June 2007

Motorola to Acquire Modulus Video
May 2007

Avail Media Gets Funding
May 2007

Comcast Drops Microsoft from Cable Boxes
May 2007

HD: A Must-Have for IPTV in North America
April 2007

Packet Vision Looks to IPTV Advertising
April 2007

Iceland's IPTV Market
March 2007

Cablevision Loses Network DVR Lawsuit
March 2007

Hawaii IPTV Service Launches
February 2007

Ericsson and Arris Bid for Tandberg
February 2007

Mergers and Acquisitions
January 2007

Tiscali to Relaunch Homechoice as Tiscali TV
January 2007

Time for Microsoft to Deliver
December 2006

Alcatel/Lucent Merged
December 2006

Hong Kong Broadband Flat
November 2006

Alcatel/Lucent Merger Approved
November 2006

AT&T's Slow Start
October 2006

Verizon FiOS TV Booming
October 2006

Google Acquires YouTube
October 2006

Free's First Half Results
September 2006

Shanghai Telecom IPTV Service
September 2006

Market Leader Update
August 2006

Verizon Under Siege
August 2006

Free's Q2 Results
August 2006

Cisco to Acquire Arroyo
August 2006

Motorola to Acquire Broadbus
July 2006

Sky Offers Free Broadband
July 2006

AT&T Introduces IPTV
June 2006

Ericsson Introduces IPTV
June 2006

Siemens and Nokia to Merge
June 2006

Siemens IPTV Home Equipment
May 2006

FastWeb IPTV Treading Water
May 2006

Deutsche Telekom Rollout
May 2006

FastWeb Enhances Service
April 2006

AT&T's Position
April 2006

Will AT&T Back Off IPTV
April 2006

SBC to Acquire BellSouth
March 2006

Tandberg Acquires SkyStream
March 2006

Alcatel and Lucent Merge
March 2006

Mergers Close
February 2006

Who are the IPTV Leaders?
Feburary 2006

Tanberg TV to Acquire Skystream?
February 2006

Motorola to Acquire Kreatel?
January 2006