PC to TV Will Be Big at CES

Porting Web video to TVs will be a big theme at this year's Consumer Electronics Show, it appears. Sling Media is epxected to introduce SlingCatcher, which uses the in-home Wi-Fi network. The SlingCatcher also will also be able to transmit programming on a Slingbox-connected TV to another TV set, either to one in the same house via a home network or to one in a remote location via the Internet. SlingCatcher will be available in mid-2007 for less than $200, according to Sling Media Chief Executive Blake Krikorian.

Together with other similar initiatives from Apple Computer and Microsoft, among others,this sort of capability will need to be put into place before we can gauge the actual extent of consumer receptivity to all sorts of "direct to consumer" video. So far, not that many people claim to have used or paid for legal fare. But most observers think technical impediments (not being able to easily view on a TV, in particular) keep most people from experimenting with the new formatpaid video content. All that is going to change, though, and innovations such as SlingCatcher are the necessary forerunners of such developments.

Of course, demand is half the equation. Equally important is the supply side. Television executives, for example, now are asking if future TV programming will be delivered over the Internet, bypassing today's traditional cable and satellite providers, and seem increasingly open to the idea. Chief among the obstacles is the lack of Internet connections to TV sets, bandwidth-limited video quality, lack of business models, and the challenge of navigating through thousands of video programs, otherwise known as "search and discovery."

About all we can surmise at this point is that once these obstacles are removed, there will be a potential alignment of demand and supply. The bad news for cable TV operators, broadcasters and telcos is that "over the top" delivery disintermediates today's channel partners. This is probably a five year preparation phase. After that, watch for a slugfest between over the top video and cable, telco, satellite and broadcast delivery methods.

When Dark Fiber Makes Sense

If an enterprise has requirements for four or more optical wavelengths, it makes more financial sense to lease dark fiber and light its own network, at least in Western Europe, say analysts at The Yankee Group. The savings for the dark fiber approach are 40 percent over leasing four wavelengths, Yankee Group says. The economics work for cross-border and national networks. Since such deals involved distance-sensitive pricing, however, route length and the type and number of wavelengths can affect the analysis. For four or more wavelengths, savings between 13 percent and 70 percent are potentially achievable by leasing fiber. Bigger savings occur when bandwidth has to be bumped up. The incremental cost of additional new wavelengths on a dark fiber infrastructure is only 10 percent to 15 percent of the cost of adding a new wavelength.

The Difference Between Bellheads and Netheads

The IEEE has given the effort to develop 100 Gbps Ethernet its official support. Some network equipment vendors had argued for 40Gbps, 80Gbps and 120Gbps speeds, in line with synchronous digital hierarchy. But Ethernet always has been designed around factors of 10, or an order of magnitude improvement, all the way from its first incarnation at 10 Mbps in the 1970s.

So here's the suggestive comparison. Netheads design around orders of magnitude of change, every time there's an upgrade. Bellheads tend to want increases to match the legacy base. There's nothing wrong with that. There simply are different assumptions about what "next version" of bandwidth growth should entail.

There are other parallels in life. Established businesses would be happy with incremental growth in the tens of percent. Venture capitalists won't bother with any innovation that promises anything less than an order of magnitude performance improvement over the existing state of the art.

Again, some endeavors in life are geared around incremental improvements while others are organized around at least an order of magnitude change. Not surprisingly, VC-backed efforts frequently are disruptive, specifically because that's what they aim to do. Established organizations frequently grow at 10s of percent rates, precisely because that's what they aim to do.

If Netheads and Bellheads tend to produce different results, it is at least in part because they aim to do different things. Bellheads aim for incremental change. Netheads, riding Moore's Law, aim for orders of magnitude change on a sustained basis. Which is why the global tension in the communications business isn't going away. There will be no possibility of easy stability. Not when some value chain participants live in a world of incremental change while others live in a world where an order of magnitude is the normal rate of change.

That isn't to say end users immediately see all those improvements. There are some physical constraints in the infrastructure world that make Moore's Law improvements in the access plant tough, if easier in the wide area network and relatively simple in the device arena.

CES Will See More Download Video Rollouts

The International Consumer Electronics Show is the first major U.S. trade show of the year that has direct implications for the communications and Internet apps industries. It is a logical place to launch a new "download-to-own" service or expanded Web video initiatives. We would expect some of that to happen. Sonic Solutions this week launched Qflix, a licensing and certification program approved by the studios, which will allow online retailers to sell movie downloads that can be burned onto DVDs.

CinemaNow currently sells a limited number of download-to-burn movies (using a different technology) and iTunes sells movies for viewing on iPods and PCs/laptops. Such services essentially use different distribution channels and are direct challenges to cable, satellite and upcoming telco video distributors of on-demand or pay-per-view fare, as well as to Netflix and Blockbuster Video. The key strategic change is the willingness of content owners to embrace the new channel. That's the single most important factor driving the new market.

It isn't clear yet how business models will shake out, but ad support already looks to be an important factor. In most media industries, advertising plays a significant role. Potential customers also indicate they prefer "free" ad-supported video as well, even though this preference coexists with a demonstrated to buy movie content in many forms (theatrical release, PPV, DVD, DVD rental).
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Declining ARPU Drives Thinking

Even in the robust mobility segment, growth is slowing. The decline in per minute pricing of voice calls is leading in turn to lower average revenue per unit, in North American and Europe, according to The Yankee Group. All of which makes the search for new services and revenues of all sorts mandatory, rather than optional, of course.

Nine Million VoIP Households

In-Stat says more than nine million households have at least one active VoIP user.
The top five facilities-based services used by households in the United States are Vonage (1.7 million households), Time Warner Digital Phone (1.6 million households), Comcast Digital Voice (1.3 million households), Cablevision/Optimum Voice (1.1 million households) and Cox Digital Phone (420,000 households.

The top five client-based VOIP service providers used by U.S. households are Skype (2.1 million households), MSN (1.1 million households), Yahoo Messenger with Voice (1 million households), Google Talk (658,000 households) and AOL Phoneline (266,000 households).

Price still remains the driver in the consumer market, though some marketwatchers are calling 2007 the "year of VoIP apps," at least in the enterprise space. That prediction probably will prove to be off the mark in the sense that all such "year of the..." proclamations are. In 2006 the International Consumer Electronics Show proclaimed last year "the year of the digital connected home". Guess what. So is this year.

WAN Ethernet Market to Hit $5 Billion in 2007

The global wide area Ethernet market will be something on the order of $5 billion in revenue in 2007, say Yankee Group researchers. The U.S. market for Ethernet revenue should grow at a blistering 50.3 percent cumulative annual growth rate between now and 2010, Yankee Group analysts predict.