BBH Report Home Page
April 26, 2004 Provided by System Dynamics Inc.

Integrating the Missing Piece: 2Wire Does Video

In the first issue of this report, we wrote about 2Wire in an article called Big Aspirations From a Small Company (http://www.broadbandhomecentral.com/report/backissues/Report0004.html#link4). Four years have passed and 2Wire can point to a track record of having gone from a pioneer in residential gateways to having passed the one million mark of gateways sold. Along the way 2Wire responded to the emerging shape of the market by changing from their early vision of self-installs and embedded applications to the position of worldwide DSL broadband provider partner.

Now that they have established their position with telcos like SBC, BellSouth, Telmex and British Telecom, they have expanded their domain inside the home from data and voice and have added video. The move was sparked by their observation of the quandary of telephone companies (especially in the US) trying to compete with cable operators on the "triple play" of video, voice and data. With cable going after their residential voice market, the RBOCs needed a way to compete quickly in video, and most formed satellite partnerships for video services. But satellite alone does not provide the customer with services equivalent to cable's video-on-demand and interactive TV, which require robust upstream (from home to service provider) capabilities and personalized (as opposed to mass) distribution downstream.

The telcos' needs became 2Wire's opportunity: 2Wire is responding with the MediaPortal set-top platform and an enhanced Component Management System (CMS) for service management and provisioning. MediaPortal will allow telcos to integrate satellite TV, DSL and a range of entertainment services through one set-top box and back-end management system. This takes two separate systems, with capabilities from both DSL and DBS, and delivers an integrated experience for the customer. The MediaPortal will be available early next year and is currently in some early technical trials.

Part of the solution for doing this came from 2Wire's purchase last October of Sugar Media, whose founder and CEO Brian Sugar joined 2Wire as Vice President, Marketing. We met with Brian recently at 2Wire's headquarters in San Jose.

2Wire combined Sugar Media's digital media technology with 2Wire's assets to fill the RBOC gap for broadband-enabled video services. Brian described the MediaPortal box: "Through it, DSL subscribers can buy digital content or access streaming media services from the Internet via a set-top. It also makes digital content available to multiple devices over a home network."

According to Brian, the MediaPortal product contains four tuners and supports HD plus media distribution. A "thin client" MediaPoint supports additional TVs; up to three TVs with MediaPoints can be connected to a single MediaPortal.

2Wire's role with the MediaPortal is not just as a product provider, but also as a service integrator. In this role, they will have agreements with multiple services which provide streamed content, such as CinemaNow and Movielink (for movies) and Rhapsody (for music). 2Wire's telco customers will select which of these they would like and 2Wire will act as the service integrator, customizing the interface to the needs of the service provider and their end-user customers. In such a scenario, the telephone company would be taking another step toward a cable model, in which they are bundling more services, not just providing a conduit.

It is not clear to what extent big telephone companies will be willing to be dependent on a relatively-small company like 2Wire for key services they provide to their customers. However, 2Wire already does provide customer care via their Phoenix center so, in a sense, the carriers have demonstrated a level of trust in 2Wire. And 2Wire is continuing to grow, as seen from their Web site list of departments with open positions.

Over time, telcos will be able to use their own facilities to compete widely in video, using FTTH or using VDSL or ADSL2+ to deliver IP-TV. On the way there, MediaPortal seems like a clever tactic to bridge the video gap between their current DSL offerings and the cable companies' triple play. We'll look forward to watching the reality as MediaPortal comes to market and telephone companies adopt MediaPortal (or similar devices) and the market has a chance to vote with its dollars on the new video capabilities.

( www.2wire.com )