Brightcove + YouTube = Disruption

Brightcove's Brightcove Network, backed by AOL/Time Warner, Hearst and General Electric (NBC), is on the path to being a true game-changer in the broadcast media sector, say analysts at Mercator Capital. "It has become evident that IP is going to disrupt the broadcast sector in much the same way it has already reshaped telecom," they say. So how is Brightcove different from YouTube?

The Brightcove Network is a platform to allow professional creators of video content to bring their product to market in a commercially viable manner. It is a platform, a distribution channel and an ecommerce portal. YouTube’s content is essentially user-generated and not geared for a broadcast audience, whereas content running on the Brightcove Network is produced by professionals who are commercially driven and seeking an audience, says Mercator. "These are very different positions on the spectrum," Mercator says. At least for the moment, we'd say. YouTube's monetization model will be advertising. Brightcove's will be advertising and content sales. Mercator argues the two firms occupy different parts of the developing value chain, but we are not so sure, in at least one respect. YouTube ultimately will emerge as a distribution channel for professionally-created content.

"The underlying story here is that Brightcove is providing substantial validity to the Internet for being an important channel for video," says Mercator. "Brightcove is all about video content to be viewed on the Internet, and has little to do with television, as most people know it," Mercator says. "As such, Brightcove is not just expanding the pie, but they are potentially the foundation for an entirely new industry." We shall see. Aside from the "amateur" and "professional angles, there might be little fundamental difference between YouTube and Brightcove at the level of distribution. Google, of course, would not likely be found producing original content, so that is where the two ventures really are different.

Brightcove also might prove to be a vehicle for wider use of video-based advertising by companies priced out of the broadcasting or cable markets. More evidence of emerging "long tail" market segments, we'd say.

Adobe Acrobat Connects

Adobe Systems has announced the immediate availability of the Adobe Acrobat Connect product line for web conferencing. You might wonder why. The way Adobe sees things, documents are about collaboration. Users routinely create and share .pdf documents with others. So why not enable rich media communication about those documents? Why not try to turn the Adobe Reader client, present on most user machines, as a VoIP or conferencing client? After all, among the largest challenges for any IP communications provider is to get enough clients into the hands of users to create critical mass.

The Acrobat Connect products enable users to create personal web sites that serve as meeting rooms. A standard Web browser and the Adobe Flash Player software, installed on more than 97 percent of Internet-connected computers worldwide, completes the task. There's no software to download, because the client already exists on most PCs.

The Connect hosted service, which allows a user to moderate a web conference, can be used for up to 15 participants for $39 per month, or $395 per year per personal meeting room. Connect Professional, which starts at $15,000, supports up to 2,500 users at the same time plus interactive multimedia, integrated telephony, and VOIP (Voice over Internet Protocol). Meetings can be recorded for on-demand viewing, among other advanced features.

To be sure, web conferencing remains a niche business. IDC predicts that the conferencing-applications market will represent more than $1.1 billion in 2007. Two of the biggest players in the Web-conferencing market are WebEx, which has two thirds of the market share, and Microsoft, which purchased number two player PlaceWare.

But if you believe IP makes possible the emergence in newly visible ways of many "long tail" market segments, then web conferencing might in a genuine sense be seen as a current segment that will differentiate even further. And there is growing evidence of adoption by enterprise and small business customers.

In a survey, 41 percent of Citrix Online small and medium business web conferencing users say Web conferencing is more popular than meeting in person (41% vs. 36%).
Well over half of SMEs surveyed (56%) say they use Web conferencing to solve problems they could not solve before.

90 Percent Broadband by 2008

Cowen & Co. expects the dial-up Internet access market to have declined by 29 percent by the end of the year. Analysts also expect broadband share of U.S. Internet households to reach 72 percent by year-end. "We expect U.S. broadband penetration to reach 72 percent of total Internet households in 2006, 84 percent in 2007, and 90 percent in 2008," Cowen analysts say. "We believe dial-up access...will disappear within the next six to eight years," the analysts say. "We estimate that dial-up subscribers will decline to 20.6 million in 2006 and 12.4 million in 2007."

Cable companies reported 1.3 million net broadband additions in third-quarter 2006, up 20 percent from 1.1 million in the year-ago period. DSL service providers added 1.2 million residential subscribers in third-quarter 2006, down from 1.3 million in the year-ago period, assuming 10 percent of total DSL net additions are nonresidential.

AOL is a big reason for the decline. "We estimate that AOL's dial-up subscriber base will decline rapidly to 3.3 million at the end of 2007 from 9.6 million in the third quarter." AOL reported a decline of 1.9 million dial-up subscribers in the third quarter, which represents a 17 percent sequential decline in the subscriber base. Total AOL dial-up subscribers are down 35 percent year over year to 9.6 million from 14.7 million in third-quarter 2005.

The EarthLink premium dial-up subscriber base declined by 132,000 in the third quarter, compared with a 163,000 decline in the second quarter. PeoplePC, EarthLink's value dial-up asset, reported net additions of 51,000 in third-quarter 2006. United Online lost 131,000 subscribers in the third quarter.

Cowen & Co. also says U.S. VoIP subscribers increased 19 percent quarter over quarter to 6.9 million in third-quarter 2006, excluding Skype and similar nonsubscription services.

Metro Ethernet Market Appears Robust

Growth rates for metro Ethernet services are 40 percent and higher annually, says ANDA Networks Tony Tran, senior product manager. Some of that growth is coming at the expense of traditional T1 and DS3 services, and much of the growth rides on copper access rather than optical facilities.

Dedicated access services (T1, DS3 and other private line) represented about $16 billion in revenues for the largest incumbent telcos in 2005, says the Government Accounting Office. Some of that was DS3 and higher rate access, but more than $8 billion was comprised of T1 services.

And as is always the case, few actual business locations are directly served by optical access from any provider, much less multiple providers. In the 16 major metropolitan areas the Government Accounting Office examined, competitors to the incumbent telco are serving, on average, less than 6 percent of the buildings with demand for dedicated access in these areas. For buildings with higher levels of demand, facilities-based competition is more moderate, with 15 to 25 percent of buildings showing competitive alternatives.

"Obviously, fiber reaches only about 10 percent of all business sites," says ANDA Networks Tony Tran, senior product manager. "So reach is really the problem." The immediate problem is that many, if not most business customers require access bandwidth in excess of T1, with 6 Mbps being common, says Tran. Hence the growing popularity of Ethernet-over-copper access. By bonding multiple T1 pairs, service providers can emulate 10 to 100 Mbps access services, without ripping out the copper and without disturbing the SONET infrastructure already in place.

A Choice to Make

If, or perhaps just "when" SIP mobile devices get traction in the mobile market (Disruptive Analysis argues naked SIP device adoption will outpace IMS), mobile operators will face a choice. Do they "play nice" and allow third party entities to set up SIP sessions, or do mobile providers want to impair or block such sessions. The issue isn't "whether" they can do so. The issue is "will" they do so. Organizational DNA will scream "block," more so in the U.S. and Canadian markets than in Western Europe, we suspect. The current user agreement for Verizon Communications 3G service already bars its use for VoIP, for example. Ultimately, this strategy seems likely to fail.

And there are a number of scenarios that could produce an "open" result. The industry might find that enough revenue is captured from walled garden services that the value of a "naked SIP" feature, though it causes some revenue loss, is tolerable, and more than offset by the good will an open approach offers. Mobile providers might find that the financial results aren't so pleasing, but just one mobile provider of reasonable influence has to go "open" to put pressure on the others. Or, conceivably, if not likely, the market might evolve in ways that make open, third party offerings a mere annoyance, not a significant revenue challenge, and therefore not worth blocking. Regulatory barriers to such action might someday arise as well, as interconnection frameworks are applied to some SIP-based services.

And though not every potential or existing customer will even notice that a service is a walled garden, an increasing number will be aware that this is the case, and won't like it. This market segment provides just enough revenue at the margin to create pain if its business goes elsewhere. So in the end, third party SIP apps will function on IMS-based mobile devices, outside the walled garden.

Since Ericsson and Intel are collaborating on an extension of IMS to notebook PCs, there's another logical path for third party apps, even though IMS tends to be seen as a "closed" or "walled garden" approach (for business strategy reasons, not technological reasons). Still, there's arguably a higher barrier to service provider blocking for any features and services that are popularly seen as "computer" features, rather than "phone" features, in both the popular mind and regulatory bureaucracies. Still, there will be choices to make.

Why SIP Trunking is Hot

Companies can extend VoIP beyond the company private networks already in place, and reach off network customers, suppliers and business partners. Companies eliminate the need to buy and operate voice gateways and T1 connections, using less expensive IP connections. Ultimately, there are new applications taking advantage of SIP.

Why In-Home Networking Will Grow

People will buy more content on a download basis if they can port it to a TV for viewing. And because moving video content or voice around a network is quite a bit more complex than simple non-real-time data files, more value and revenue will be created in the system integrator and value-added distributor parts of the value chain. So traditional data networking, LAN specialists and high-end audio-video installers will wind up doing consumer home network installations. Up to a point, so will cable and telco installers.