IPTV - To Be Or Not To Be?

SUMMARY

Overview:

The recent NXTcomm show in Chicago (2007) was brimming with IPTV equipment and demos. Perhaps most telling of all was the fact that many of the equipment vendors (notably Alcatel-Lucent) concentrated on IPTV applications as opposed to just showing their wares. Of course, there was a great deal of hardware to be seen, also. The availability of MPEG-4 set-top boxes was one piece of big news. Another major item of interest was the announcement that Verizon Business (old MCI) was accelerating its network buildup by adding optical cross-connects and going to a full deployment of ROADMs earlier than planned. The main driver for the network additions was the carriage of Verizon's FiOS video traffic. All of this activity should indicate that IPTV is here to stay. Then how can we have an IPTV report with the somewhat negative title of “IPTV - To Be or Not to Be?" The answer is in the details of the differences of how video is being implemented by the two major RBOCs. One (AT&T) is using a pure IPTV approach, while what Verizon is doing is hardly recognizable as IPTV. To date Verizon is obviously the most successful. This report will look very closely at future drivers for residential video development and how this difference is likely to be played out - IPTV - To Be or Not to Be?

The RBOCs are making great progress in becoming creditable players in video delivery. Verizon has just announced the connection of its 500,000th FiOS video customer. While this is a long way from the top-tier cable companies (with around 24,000,000 subscribers), it is still a remarkable accomplishment in about a year and a half. This half-million subscribers would put Verizon on the top ten list of cable companies! In addition, Verizon is adding FiOS video customers at the rate of slightly over 50,000 a month. By the end of 2007, they should be over 800,000 subscribers, which would move them to eighth or ninth on the top ten cable company list. AT&T is also in the process of expanding its U-verse high-speed offering, with about 30,000+ video subscribers presently (mid-2007), and is adding about 500 new video subscribers per day. In addition to these major RBOCs' activities in video, Qwest has made some beginnings in the field, and BellSouth (before its acquisition by AT&T) had very advanced in-house development work under way on a video offering of its own.

This progress is very impressive; however, there is more to the story. The two major constituents of this competition - Verizon and AT&T - have taken very different paths to delivering video. AT&T is using a "pure" IPTV approach, riding on an FTTN architecture that depends on copper for the last few thousand feet. Verizon in contrast uses an "rf overlay" - meaning a separate broadcast (on Verizon's fiber network) wavelength that carries digital TV signals - and an IPTV stream for VoD and various other functions. Verizon's delivery rides on an FTTP-based, passive optical network Are these just differences in approach to the same service, or is one approach inherently better? Can customer demand for video be satisfied by both approaches? Can we expect any changes in these approaches? What are the network implications for the delivery of this new traffic? We will use input gathered specifically for this report from the major players to help describe the RBOCs' positions.

Given the differences in the RBOCs' approach to video, and the major difference in the importance of IPTV in those approaches, we ask the question, “IPTV - To Be or Not to Be?" The answer is that it will be almost surely, but in what form? This and the above are some of the questions that this report will consider.

In addition, this report provides the following:

• Description of the current state of the video effort of the RBOCs;
• Extensive forecasts for traffic, customer video demand, RBOC video penetration, costs, and revenues from these services;
• By-carrier forecasts of video customers and network development;
• Forecasts for residential customer video demand in terms of bandwidth, and describes how the bandwidth will be used;
• The current deployment scenarios of the RBOCs;
• Forecasts for deployment scenarios for each of the RBOCs;
• Forecasts of RBOC IPTV subscribers, penetration rates, costs, and revenues from IPTV;
• Traffic analysis to forecast network impacts of the addition of the RBOC video;
• Market projections for vendors of the equipment and software;
• Details of the various options for deploying video - FTTX, broadcast video, and IPTV;
• Details of the RBOC PON;
• Details of the various RBOC access architectures, and how video fits into these architectures.

After so much testing, learning, false starts, and failures, the RBOCs are really committing to a massive effort to compete on a network basis in residential video delivery. For those who have been in the industry for a time, memories go back to 1985-87 and Cerritos, California; Orlando, Florida; and other early video trials. One wonders if enough has been learned to be successful in this very difficult business. The telcos tend to think that voice telephone service is a life-or-death matter. However, when “Desperate Housewives," or the Dallas Cowboys-Eagles game does not come on or is fuzzy, they will learn what is really important! As the RBOCs become major video deliverers, we will see how well they have learned the lessons of past failures in this effort.

IPTV is the heart of the RBOCs' plans to attack the video market. IPTV is not just a different way to deliver TV (it is, of course, also that), but it has the potential to be the basis of a completely new suite of services.

Some of these could include the following:

• Multiple, simultaneous high-quality TV streams, including high-definition TV;
• Click-to-purchase advertising;
• Mouse-based interfaces;
• Personalized advertising;
• Remote DVR programming
• Instant channel changing;
• Localized and individualized reports on weather, traffic, etc.;
• Customizable channel lineups;
• Video on demand;
• Multimedia interactive program guides;
• Event notifications and remote access to IPG (individualized program guide) and digital video-recording function;
• The ability to alert a customer of upcoming favorite shows, or Caller ID and instant messaging right on their TV screens;
• Tunerless picture-in-picture functionality;
• Photos shared from a networked computer and played back through the TV;
• HDTV;
• DVR (digital video recorder) functionality on multiple TV sets;
• Multimedia and interactive video;
• Sharing family videos;
• 3-D gaming;
• Setting camera angles for sporting events.

While some of these are not completely new, most are, and together they are a very impressive list. As noted, they could form the basis for a completely new video service.

The equipment vendors have looked at the potential size of an FTTP project, and they visualize a return to the go-go days of the late 1990s telecom market. At around $1,500 capital cost per installed fiber line, it is easy to see how a program that involves over 100 million lines could easily drive a return to profitability for many equipment vendors. The addition of IPTV to this equation has brought many more vendors into the picture. This combined program (FTTP/IPTV) now has the potential to offer a very broad base of equipment requirements and equipment vendor recovery.

We will start this report with a review of the various definitions in current use for IPTV. After establishing a firm base as to the main topic of our discussion, we will present a comprehensive review of the current RBOC plans. We have direct input for this section from all of the major players. We will then provide an analysis of the bandwidth requirements (based on video usage) for residential users, now and in 2010. The next topic will be our forecast for video services by each of the RBOCs. We will then combine the preceding chapters' material to review the impact on equipment and network requirements. Then we will provide a forecast and an analysis of the costs associated with the RBOCs' video efforts. We conclude the main section of the report with an exhaustive listing of vendors, with full contact information. The Appendixes cover a detailed discussion of the alternative approaches for last-mile architecture and for video delivery.

TABLE OF CONTENTS

Table of Contents

Table of Figures

The Lightwave Network Series of Reports

• General Reports on the Network
• General Market Reports
• Specific Systems Reports

Executive Summary

Introduction

IPTV - To Be or Not to Be?

What Is IPTV?

• Internet Television
• CLEC/Municipal/ILEC IPTV
• 'Big Telecom' IPTV
• Section Summary

Status RBOC Video Plans

Verizon Plan

• Verizon - Physical Description
• Delivery Architecture
• Video Architecture
• Verizon Services from IPTV
• Deployment Status

AT&T Plan

• AT&T - Physical Description
  • Delivery Architecture
  • Video Architecture
• AT&T - U-verse Services
• Deployment StatusBellSouth (AT&T) Plan
• BellSouth - Physical Description
• Deployment Status

Qwest Plan

• Qwest - Physical Description

Section Summary

• How Much Video Do We Want? A Forecast of User Requirements
  • A Prime Time Usage Scenario -2007
  • A Prime Time Usage Scenario -2010
• Section Summary

Forecast of RBOC Video Implementation

• Verizon
• AT&T
• BellSouth
• Qwest

RBOC IPTV Subscribers Summary

• Network Deploymentnt
• RBOC IPTV Subscribers
• Section Summary
• Forecast of Video Demand Impact on Equipment and Network Requirements

Last Mile Bandwidth Requirements

• Delivery ArchitecturesNetwork Impacts of Video Traffic
• Forecasts of Network Traffic
• Description of Network Approach to IPTV
• Section Summary

Cost and Analysis of RBOC IPTV Programs

• Video Costs
  • Long-haul Equipment and Specific Entities for Video
  • Software
  • Integration Services
  • Cutover Costs
• Summary of Video Annual Costs
• Section Summary

Forecast of RBOC IPTV Revenues

• Section Summary
• Vendors Listing
  • Summary of Vendors
    • Access Vendors
    • IPTV Vendors
    • Transmission and Switching Vendors
    • Component Vendors
• Detailed Listing of Vendors
  • ACTERNA (JDSU)
  • Adtran
  • Advanced Fibre Communications Inc. (AFCI) (Now Tellabs)
  • Alcatel - Lucent
  • Alloptic Inc
  • Amino Technologies plc
  • AOC Technologies
  • Avanex Corporation
  • Broadlight
  • Calix
  • Cisco
  • Corrigent
  • Entrisphere, Inc. (Ericsson)
  • Ericsson
  • Fiberxon (Luminent)
  • Finisar Corporation
  • FlexLight Networks
  • Fujitsu
  • Genone3 Technologies, Inc.
  • Hammerhead Systems, Inc.
  • HUMAX USA Inc.
  • iamba Networks
  • JDS Uniphase
  • Juniper
  • Kreatel Communications AB (Motorola)
  • LightComm Technology
  • Lucent (Alcatel)
  • Marconi (Ericsson)
  • Microsoft
  • Motorola
  • NeoPhotonics
  • Nortel
  • OCCAM
  • OFS
  • O-Net Communications Ltd
  • Oplink Communications, Inc.
  • Optiviva Inc.
  • Optical Solutions (Calix)
  • Osaki Electric Co., Ltd.
  • Paceon (Mitsubishi)
  • Quantum Bridge Communications (Motorola)
  • Riverstone
  • Salira Optical Network Systems
  • Scientific-Atlanta
  • Siemens
  • Tandberg, Ltd. (Ericsson)
  • Tellabs
  • Terawave
  • Tut Systems
  • Wave7 Optics
  • Worldwide Packets, Inc
  • Zhone Technologies

Appendix I

• Approaches for Access Architecture
• Fiber to the “X”
  • xDSL Versions
  • Fiber to the Neighborhood (FTTN)
  • Fiber to the Node (FTTN)
  • Fiber to the Curb (FTTC)
• Passive Optical Networks PON
• Fundamentals
  • Status of PON
  • Advantage and Disadvantages of PON
  • Types of PONs
    • BPON
    • EPON
    • GPON
• RBOC RFP PON

Approaches to Access Architecture

• Various Approaches for Fiber-based Access Architecture
• Fiber to the “X”
• xDSL Versions
• Design Details for Current Plans
  • Fiber to the Neighborhood (FTTN)
  • AT & T's Fiber to the Node (FTTN)
  • BellSouth's Fiber to the Curb (FTTC)
• The RFP - PONs Will Set Us Free
  • What Are PONs?
    • The PON Design
  • Status of PON
  • Advantage and Disadvantages of PON
  • Types of PONs
    • BPON
    • EPON
    • GPON
  • The PON in the First RFP
    • GPONs
  • Architectures to Meet the Needs

Appendix II.Approaches to Video Delivery

• Broadcast
• IPTV
• IPTV Architecture
• IPTV Global Architecture
  • Super Hub Office
  • Video Hub Office
  • Serving Offices
• IPTV Distribution and Access Architecture
• IPTV Channel Selection

Table of Figures

• Figure 1, Traffic Components of Internet Forecast
• Figure 2, File Sharing Components of Traffic - 2006 Data
• Figure 3, File Sharing Traffic Components - 2006
• Figure 4, File Sharing Components of Traffic 2010 Forecast
• Figure 5, Prime Tine Usage Scenario - 2007
• Figure 6, Prime Time Bandwidth Requirement - 2007
• Figure 7, DVR Penetration Forecast
• Figure 8, Prime Time Usage Scenario - 2010
• Figure 9, Prime Time Bandwidth Requirement - 2010
• Figure 10, Prime Time Bandwidth Requirement - 2010 - MPEG-4 Compression
• Figure 11, FiOS HH Passed Forecast
• Figure 12, Verizon FiOS Video Subscribers - Cumulative - Forecast
• Figure 13, AT&T hh Passed by U-verse Forecast
• Figure 14, AT&T U-verse Video Subscribers - Cumulative - Forecast
• Figure 15, Qwest IPTV Subscribers
• Figure 16, RBOCs' Video Customers by RBOC - Cumulative - Forecast
• Figure 17, Network Penetration by RBOC
• Figure 18, Penetration Rate of HHs Passed Vs. Total US Homes
• Figure 19, Penetration Rate of RBOC Video Services
• Figure 20, RBOC HH Passed Vs. Video Services
• Figure 21, Delivery technologies Compared to Requirements
• Figure 22, IPTV Network Hierarchy
• Figure 23, Network Traffic Requirements - RBOC Video - Forecast
• Figure 24, Long-haul and Network Office Entities Costs
• Figure 25, Software Costs
• Figure 26, Integration Costs
• Figure 27, Cutover Costs
• Figure 28, Video Implementation Costs - All Components
• Figure 30, RBOC IPTV Revenues
• Figure 31, Summary of Access Vendors
• Figure 32, Table of IPTV Software Vendors
• Figure 33, Transmission and Switching Vendors
• Figure 34, Component Vendors
• Figure 35, Fiber to the 'X' Varieties
• Figure 36, Chart of Various xDSL Technologies
• Figure 37, Fiber to the Neighborhood
• Figure 38, Fiber to the Node
• Figure 39, Fiber to the Curb
• Figure 40, PON Basic Arrangement
• Figure 41, RFP PON - Central Office Portion
• Figure 42, RFP PON - Outside Plant Portion
• Figure 43, RFP PON Service Assignments
• Figure 44, Fiber to the 'X' Varieties
• Figure 45, Chart of Various xDSL Technologies
• Figure 46, Fiber to the Neighborhood
• Figure 47, Fiber to the Node
• Figure 48, Fiber to the Curb
• Figure 49, PON Basic Arrangement
• Figure 50, RFP PON - Central Office Portion
• Figure 51, RFP PON - Outside Plant Portion
• Figure 52, RFP PON Service Assignments
• Figure 53, BPON/GPON Comparison
• Figure 54, Typical GPON
• Figure 55, Bandwidth Needs vs. Capabilities
• Figure 56, Broadcast TV on BPONs
• Figure 57, Broadcast TV
• Figure 58, IPTV General Architecture
• Figure 59, IPTV Global Architecture
• Figure 60, IPTV Access Architecture - xDSL
• Figure 61, FTTP Architecture for IPTV
• Figure 62, IPTV Hub Office Architecture
• Figure 63, IPTV Channel Selection