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The December 14, 2003 Issue Provided by System Dynamics Inc.
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IP-TV -- Thomson Encourages Telcos to Move Fast

We have written about IP-TV--the carriage of television content over IP-based networks--for more than two years. Until recently, this has mostly been the province of start-up vendors and FTTH service providers. Now we are seeing a flurry of announcements of complete end-to-end IP-TV systems from major players and industry consortia.

In November, Thomson announced a new product line for large-scale deployment of IP-TV. The IP900 or Cobra platform supports advanced compression technologies, including MPEG-4 Part 10 (JVT) and Windows Media 9 (WM9) video. Thomson says these "advanced compression technologies make it possible for telephone companies to deliver high quality audio and video entertainment to large audiences of consumers through existing DSL networks." It announced that the new platform "lets consumers receive digital audio and video programming, surf the web and check email through one device using broadband IP networks such as DSL. It fully supports interactive applications including broadcast video, video on demand, online gaming, and messaging. The new decoder is compliant with middleware platforms from Alcatel, Minerva Networks, and" It said it had worked closely with Intel, Microsoft TV and Alcatel to develop the platform.

Following the announcement, we interviewed Keith Wehmeyer, General Manager of Thomson's IP Video Business. He told us that Thomson started working on IP video "in bus dev mode", introducing an MPEG-2-based product for European carriers and independent operating companies in North America doing "pioneering" work on IP-TV. Now interest in IP-TV has become strong enough that Thomson has now moved from "bus dev mode" to creating "a full-blown business unit" incorporating product development, market management and system integration.

He said that Cobra is a "flexible product supporting a variety of different business models." It is based on the same basic silicon platform as the earlier models, but as a result of "big cost reduction" is priced to support "six digit volumes" as telcos deploy IP-TV.

The new compression technologies represent the biggest change and the biggest opportunity for telcos. Keith said that the older technologies would need about 8 Mbps to carry two channels of MPEG-2 video plus best-efforts data; this would limit telcos to ADSL customers within 9,000 feet of a CO. The new compression technologies should be able to carry two video channels plus data in 4 Mbps; Keith says most telcos can reach about 12,000 feet at this speed, which Thomson calculates to be an increase of 60% in coverage.

Thomson worked closely with Intel to develop the software decoder; since it operates on an Intel Celeron processor in the box, it is flexible for future changes in compression technologies. Keith walked us through a product progression, starting from "a basic set-top box" to one incorporating a hard drive, optical drive and PVR capability: "a home theater in a box". Thomson demonstrated Cobra running these advanced technologies at speeds from 750 kbps to 2 Mbps at the recent TelcoTV conference.

Keith thinks Thomson would be a good partner for telcos that want to roll out IP-TV. Its Technicolor division is the leading processor and distributor of motion picture film and a leading producer of CDs and DVDs; its Grass Velley division provides digital video production equipment to many studios and TV broadcasters. Thomson could leverage its retail brands--RCA in the Americas and Thomson in Europe--to help telcos avoid "truck rolls" by distributing set-top boxes and sell video services through retailers.

Keith said that telcos planning to provide video services now have a choice. They can start building out advanced networks with new DSL and FTTP technologies and eventually get much higher speeds. Or they could get the advantage of market timing by investing in systems based on the new compression technologies and deploy video to most of their existing or potential DSL customers right away.

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