Evaluating Home Networking for IPTV Deployments

Parks Associates moderated a panel discussion yesterday at the TelcoTV conference titled "Home Networking: Evaluating Your Options." A quick straw poll of the audience revealed that an overwhelming number were service providers. It's good news to see the interest in home networking from the service provider community. Not only do we anticipate that home networks (now enabled via both residential gateways and stand-alone routers and adapters) will add value to broadband and voice services, but will allow the video services offered by numerous providers to be deployed quicker (bridging between the modem/RG and set-top boxes, for examples) and with more applications (whole-house DVR).

With representatives from Entone, MoCA, HomePlug, and HomePNA, we walked through an evaluation framework that service providers can use as they are comparing and contrasting their various home networking options. From the discussion, the key variables that emerge in evaluating these solutions are:
1. What is the guaranteed throughput that a home networking solution can offer?
2. How does a home networking solution address quality-of-service measures?
3. How does a home networking solution account for security, both inside (encryption) and outside (combatting leakage) of the home?
4. How does a home networking solution deal with interference?

Additional questions that came from the audience included:
1. How do the different home networking solutions support multicast?
2. How are home networking solutions providers working to bring down the total bill-of-materials costs (BOM)?

One audience member brought up a relatively new initiative from the ITU called G.HN. My understanding of this effort is to look at developing a single home networking standard that will work over multiple PHY media (twisted-pair, coax, and powerline). Market competition will certainly shake out the winners in this area, but a European-led effort for standardization is certainly one to watch.

From the rest of the TelcoTV show, one key takeaway I had is related to how the service providers may either embrace or compete with the over-the-top video services now available from many different providers. We saw some interesting demonstrations of middleware and encoder vendors offering ways in which service providers can actually bring the over-the-top video into their service mix to extend the value of their multi-channel television offerings. In a recent News.com article (http://news.com.com/Phone%2C+cable+companies+embracing+Web+2.0/2100-1033_3-6133451.html), my colleague Michael Cai commented on what is driving incumbent service providers to take a closer look at incorporating user-generated and over-the-top video content into their mainstream services

"The video market is becoming fragmented," he said. "And if the cable operators and phone companies don't pay attention to what their customers want to watch, they risk leaving money on the table because people will go other places to get it."

Cable Reticence in Home Networking

For telcos on a worldwide basis, I don’t think there’s any question that they see the value of things like home networks and residential gateways, especially in places like Europe. I think there’s a reason why France Telecom and British Telecom are being as aggressive as they are with deployments of Livebox and the BT Hub, respectively, as local loop unbundling is going to force them as service providers to truly differentiate with their services. There are some really interesting applications using the home network, such as fixed-to-mobile communications handoffs (even some femtocell work), and IPTV has really raised the stakes for carriers on a worldwide basis to examine “no-new-wires” bridges, adapters, and embedded solutions as ways in which to significantly reduce the install time.

Given this push by the telcos to roll out their differentiated services, you'd think that this might spur some heightened activity among cable operators to more actively develop and deploy home networking-related solutions. However, I'm not really sensing much activity in this direction. Although we had a couple of cable executives on a recent CONNECTIONS discussion panel regarding home networking, the typical comment we have heard from the MSOs is that they'll deploy home networking solutions in greater numbers once they see “the business case.” We have also heard from some chipset manufacturers (modem, set-top box space) that the operators are really struggling to figure out how to best implement solutions like whole-house DVR without taxing the processor capabilities of their current set-tops. I think that home networking is really going to be a critical element in providing customers with a truly valuable and differentiated service (look at Verizon’s Home Media DVR – the last public comment Verizon made was that it was deploying at about a 12% take rate among FiOS TV customers).

Among the cable operators, home networking may indeed be an insignificant concern, at least relative to what other issues they're facing. Certainly, questions about how best to optimize their networks (digital simulcast, channel bonding, switched digital video, etc.) and dealing with the FCC's "separated security" order for set-topx (CableCARD, et. al.) are definitely chief concerns. However, we're disappointed that what we're hearing from cable right now about home networking is a big yawn.

Notes from NXTComm June 18, 2007

Michael Cai and I will be at NXTComm in Chicago this week. You can catch us on some panels this week, including one I'm hosting tomorrow at the Telecommunications Magazine IP Video Village sessions. Michael will be moderating a panel on Thursday, June 21 titled Mobile WiMAX Devices - Cards, Handsets and More.

Today, I joined representatives from Calix, Motorola, Ruckus Wireless, Scientific-Atlanta (a Cisco Company), and TDS on an IEC panel titled In-Home Wiring and Home Entertainment Distribution. I thought it was interesting that the issue of customer support continues to be a recurring theme in these home networking sessions. Our own research - from the recently-released Digital Home Services: Carriers, Retailers, and the Consumer finds that broadband carrier support costs for home networking issues alone could reach $200 million annually by 2011 if carriers stay the current course and don't take steps to proactively address enhanced management, monitoring, and support requirements.

The good news is that the telecom industry (obviously profiled heavily at this show) has introduced several industry standards to address proactive monitoring and management. Chief among the standards are TR-069 and emerging working texts, including WT-111 and WT-135. The key theme from all the panelists today was increasing visibility for the service providers into what's actually happening inside the home network. To this end, they discussed such new needs as parameterized QoS (PQoS) and the ability to dynamically manage bandwidth, depending on the types of applications running into and through the home. Parameterized QoS is a model whereby bandwidth is reserved in an end-to-end fashion for high-throughput streams (such as HD video). We're starting to hear more about PQoS as implemented in the home network chipset, including last week's announcement from Entropic Communications (MoCA). One question that I'd like to ask the chipset vendors is whether a PQoS solution adds significant complexity (and therefore cost) to the final solution. I understand that there are varying views on the best way to implement quality-of-service for a broadband/IPTV network, including prioritized QoS.

The panelists are definitely open to the idea of including networked attached storage (NAS) devices as approved and manageable platforms on the home network. I was also struck with the notion that HomePNA3 is really making inroads into the service provider market (telcos, certainly). The panelists all expressed skepticism about powerline (at least as they know it today), and indicated that carriers may be more willing to support HomePNA because it may be lower cost and because it can be deployed over both coax and twisted-pair. However, Ruckus Wireless is being used by between 80-100 U.S. service providers (as indicated by Bob Payne, Ruckus' Vice President of Sales). Steve Mathesius at TDS indicated that the service provider has specifically chosen HomePNA as its network media of choice because cable service cannot run over it. Indeed, he said that TDS was implementing a "real showdown" with its cable competition and strongly locking customers in to its own service, using its choice of home networking as the key churn preventer. Now, that was an interesting perspective I hadn't heard before!

The panelists also said that they're not seeing powerline (HomePlug, UPA, HD-PLC) emerge as a required element in the home networking-related RFPs they're seeing from the service provider community, at least not in North America. We have suspected that the powerline solutions may be best aimed at markets such as Europe and Asia, where an in-home coax infrastructure is less likely to be found in as many households as here in North America. However, don't write off other home networking solutions in Europe. I learned that Swisscom is actually deploying a plastic optical fiber (POF) approach in some homes in Switzerland. The POF is thin and flexible enough to be threaded through the electrical conduits. It certainly is a good reminder that - in the home networking space - one cannot declare one technology over another as the true "winner." Service providers, CPE vendors, and consumers are all going to have different choices, based on such variables as the services being offered, the construction of a residential housing unit, and regulatory issues.

Finally, as we discussed the fact that the service providers are on the docket for a growing number of customer service support calls, Mathesius at TDS said that he doesn't mind that at all. In fact, he said that the support calls "keep TDS relevant." He believes that these calls can serve as the basis for an even stronger relationship with its customers, and even challenge Geek Squad in providing IT support services. I've got to tell you, this was the first time I'd actually heard a service provider embrace enhanced customer support, and it was an awfully refreshing comment!

Urban Myths and Truths for the European Cable Industry

I'm at the CTAM EuroSummit'10 in Budapest, and had the chance to talk about some urban legends and myths on a panel session titled “TV Retakes Center Stage.” My job was to discuss five urban myths and the truths as it relates to TV service and the cable operator’s role:

1. Urban Legend 1: “Online Video Cannibalizes Traditional TV Viewing” – not true according to our data, and the speaker from Liberty Global and Virgin Media had their own data that showed an increase in television viewing.
2. Urban Legend 2: “People simply won’t ‘cut the cord’” – not yet, anyway. However, I showed our data that indicates that consumers who are active in watching online video through connected devices or configurations (game consoles and PC-to-TV connections) are 3x more likely to be a cord-cutting threat. I then showed some numbers for expected worldwide penetration of connected CE devices, with a comment that the operators can choose to work with connected CE and take advantage of it or try to fight it (and probably lose). A speaker from Solon (a consultancy in Munich) indicates that 36% of the TVs sold in Germany in the first half of 2010 were Web-connectable. So, that’s very similar to what we’re seeing in the U.S. (where close to one-third we expect to be sold as Internet-capable). When we get to 2015, we'll see household penetration of connected TVs worldwide at more than 200 million, not to mention the tens of millions of households with connected Blu-ray players, game consoles, set-top boxes, and other IP-video-receiving devices.
3. Urban Legend 3: “Consumers don’t care about home networking” – I rephrased it to dispel the myth that consumers don’t see additional value in home networking to focus on video features such as whole-home DVR. After all, we already know that more than 250 million households (well over one-half of global households with broadband) have home networks in some way shape or form. Our data indicates a strong interest in whole-home DVR, and high percentages of consumers in Western Europe indicating willingness to pay a premium for such a feature. Verizon indicates that significantly higher than 25% of its FiOS TV customers are taking its Home Media DVR, paying a premium of $4 per month. So, there are in fact new revenue streams to be created from home networking, and I showed our estimate for the number of connected devices on global home networks growing to four billion by year-end 2014 – that’s an average of eight nodes per networked households, and it will include consumer electronics, mobile and portable devices, routers and femtocells, and nodes for home, health, safety, security, and energy monitoring. So, cable operators need to be considering more of a holistic approach to the connected home.
4. Urban Legend 4: “There’s no premium to be charged for TV Everywhere” – Not true – our data shows that 16% of consumers in U.S. broadband households are willing to consider paying up to $5 additionally per month, and it was noted earlier this week at the Connected Home World Summit conference that operators are deploying TV Everywhere at a €5-6 premium.
5. Urban Legend 5: “The connected TV causes little concern, because it’s all about video … and we do it best” – Not true – certainly, cable operators will have an advantage over many online video services because of the high quality video formats that they can deliver to the consumer. However, interest in connected TV applications is going to go beyond video, so cable operators need to consider features such as social networking, family calendaring, gaming, music, and other services that complement the television experience. They should also consider the ways in which they can leverage their networks, their billing relationships, and tools such as device discovery and management to ensure a high-quality entertainment experience across devices, even those beyond the set-top box. They can actually use dynamic provisioning and configuration tools to bring more devices into the video experience and use this to both reduce customer support calls and to build a more highly-valuable service.
   
   
   
   
   
   
   

Telco TV's Impact on Cable MSOs

There have been a couple of interesting news items in recent weeks about IPTV deployments and the encroachment that AT&T and Verizon in particular are having on the video business for cable operators.

IPTV Subscribers are Growing

First, the DSL Forum has announced the latest worldwide IPTV subscriber figures in an October 8 press release. Worldwide growth, according to Point-Topic data, was 176% between June 2006 and June 2007, and the total number of users sits at 8.2 million. Parks Associates' own count from year-end 2005 to year-end 2006 was a 229% growth rate, so the numbers are progressing nicely, despite a general slowing of growth in Asia, where PCCW in Hong Kong and Chunghwa Telecom in Taiwan have been the two dominant providers. With Korea Telecom's entry into the IPTV market with Mega TV, however, growth can be expected to be healthy. Furthermore, we predicted a total of around 10.9 million worldwide households with IPTV services at year-end 2007 (IPTV: From Quadruple Play to Multiplay), so it looks as though we're on track to reach that figure.

Where is Telco TV Impacting the Cable MSO Business?

In the U.S., all eyes are on the competitive dynamics that AT&T and Verizon are now bringing to the table. Specifically, we're interested in whether the entry of U-verse TV and FiOS TV are showing an appreciable impact to the businesses of the cable operators with whom the telcos are most directly competing. Comcast's Chief Operating Officer Steve Burke, for example, has publicly noted the threat that Verizon's FiOS service poses to the company. However, Cablevision may be at most risk. For example, Cablevision notes in a recent SEC filing that Verizon's FiOS service now passes an estimated 25% of households in its service areas. And, recent subscriber counts from the four largest public cable MSOS - Cablevision, Charter, Comcast, and Time Warner Cable - indicate that Cablevision is lagging well behind Comcast and Time Warner. Comparing Q2 2007 growth to Q2 2006 figures shows the following:

Cablevision Q2 2006: 6.8% / Q2 2007: 1.6%
Comcast Q2 2006: 4.1% / Q2 2007: 6.2%
Time Warner Cable Q2 2006: 3.0% / Q2 2007: 2.4%

Cable CAPEX on the Rise; Stocks on the Decline

Today, there was an interesting article on Fiber Today about Wall Street's reaction to Verizon's initial FTTH plans and their current view of cable stocks. Investors intitially punished Verizon for the large CAPEX it was putting into its network upgrades; the stock has now risen more than 40% since a low of $32 per share earlier this year. At the same time, cable stocks have declined. Both Cablevision and Comcast have experienced a 20% drop in their share prices. The Fiber Today article does a nice job of explaining the dynamics that are shaping these recent trends, including the risk posed by the telcos in taking cable customers and the acknowledgment by cable MSOs that CAPEX will be increasing as they seek to improve their capabilities to offer more interactive and high-definition video services and even more robust broadband. Comcast, for example, notes that CAPEX will increase about 24% in 2007, and Time Warner indicates a rise of 26%. After spending billions in the 1990s to upgrade their networks from analog to digital, it appears that the cable industry will be investing more heavily again in upgrades and improvements to their services. And, in the short term, investors may cast a wary eye at these expenditures.

TV Competition and Impact on the Digital Home
As broadband and television operators in particular seek to differentiate their basic packages and offer new connectivity-related services to their product mix, we expect that certain solutions - chief among them home networking and communications equipment, customer premise equipment (set-tops and residential gateways), and so-called "federated devices" (network storage appliances, etc.) will see strong growth in coming years as they become integral pieces of service offerings.

To account for the new services that broadband carriers and television operators will deploy, home networking and customer premises equipment will evolve beyond basic broadband and data sharing to include new voice applications (voice-over-Wi-Fi and/or mobile-to-fixed-line-handoff services) and distributed entertainment. We see opportunities for more advanced set-top boxes and other third-party storage devices (such as media server NAS devices) to fulfill a dual role of providing secure backup and distributing entertainment content in and outside of the home.

MoCA Technology Conference

I'm in Austin for the first-annual MoCA Technology Conference. It sure is nice to have my shortest flight of the year!

Verizon is here in full-force, with a keynote address from their CTO, Mark Wegleitner and panel participation from others who have been key to the FiOS deployments and the home network efforts. Wegleitner indicates that Verizon expects to see seven million FiOS broadband customers by year-end 2010 (35-40% take rate) and 3-4 million FiOS TV subscribers (20-25% take rate). It was interesting to hear him say that the next things to watch in TV services will include HD VoD and even 3D television. Also, Verizon sees significant upstream bandwidth requirements building, given the amount of self-generated content being created and to support applications such as gaming, network-hosted applications, and storage, medical monitoring, and remote home monitoring.

I still sense that the cable industry hasn't quite figured out what to do with home networking. Although I've heard telcos and satellite providers speak about how they're going to use home networking technology to support multi-room DVR, I don't sense the same enthusiasm from the cable MSOs. They're going to have to roll with it in order to stay on par with the offerings coming from their video competitors. The take rate for Verizon's Home Media DVR take rate is now slightly higher than the 12% that the company was reporting in September 2006, although I don't have any more specific information on this right now.

Also, I'm struck by a lack of talk from the cable MSOs about network management, monitoring, remote support, and troubleshooting. This, in my opinion, is where the telcos really "get it." As much abuse as Verizon took from the financial analysts and Wall Street for its CAPEX plans, the financial guys better start paying attention to how increasing customer support requirements are going to significantly elevate OPEX if the carriers don't do anything about it. Werner from Comcast said that the cable MSOs don't see digital home management features as pay-per-services (such as BT's Home IT Advisor service). Okay, that's fair, but I just don't hear much of anything coming from them about using CableHome or other protocols to reduce customer support costs. Dave Waks, one of my panelists on an analyst and press panel, questioned why the cable industry can't simply use TR-069 to more predominately promote remote management capabilities. The biggest holdup, he indicates, is that TR-069 comes from the DSL Forum and wasn't developed organically by the cable industry. I had an interesting lunch conversation on this subject and asked the naive question, "Wasn't CableHome supposed to solve remote management for the cable industry?" The short answer is yes, but the commentary from my lunch companions is that CableHome was overengineered and has not been widely accepted. What I was told is that the cable operators realize that there is a problem that still needs to be solved. And, as my source noted, "Acknowledging that there is a problem is always the first step in any 12-step recovery program."

It is also interesting to hear from some international representatives here about how network upgrades are going to progress internationally for both telcos and cablecos. European telcos such as France Telecom, Telefónica, Telecom Italia, Neuf Cegetel, and others are now interested in network upgrades (as referenced in our IPTV: From Quadruple Play to Multiplay) report. Also, players in China and Singapore are also considering GPON deployments.

Time Warner Cable Stepping up to Home Networking?

File this under "I'll believe it when I see it." Time Warner Cable's President and Chief Executive Officer Glenn Britt said yeterday at the Sanford C. Berstein & Co. Strategic Decisions Conference that we can expect to see cable operators offering wireless residential gateways (technically, Britt called them "wireless cable modems") that not only enable in the in-home networking features, but also allow for services like Web video to be streamed to TVs. I suppose then it would work very much the Freebox in France, where there's a wireless gateway and a media adapter to link the Web services and content to the TV.

Last July, I wrote about being disappointed in cable's efforts in home networking. Maybe it was just a matter of giving it some time. A couple of years ago, who would have thought that cable and telephone providers would be investing in P2P companies (Comcast investing in GridNetworks after also talking about collaborating with BitTorrent), launching their own broadband video sites (Comcast again), and offering subscription online video services (Verizon with Starz)? Well, we'll see how Time Warner's prediction pans out.

Memo to self - check on this in November 2009.

Tracking Multi-room DVR Deployments

I'm not the only one who's been wondering about whether the cable operators will deploy home networking, either with residential gateway deployments and/or multi-room DVR configurations. Just as I wrote about AT&T's deployment of its multi-room DVR offering, so too did the folks at HomePNA on their blog. Of course, HomePNA over coax is how AT&T's solution is being implemented, so there's no doubt that HomePNA would like to tout that.

There was an interesting note on their blog about Cablevision's plans to rollout its RS-DVR feature in 2009. An Associated Press report indicates that Cablevision will offer 160 GB of storage per home for this feature. One key benefit to deploying a network-based DVR is that it eliminates the need for the MSO to deploy more expensive set-top DVRs (the article puts their cost at $400). According to another article, Cablevision expects to save about $100 per subscriber that uses the RS-DVR, and officials there have noted that RS-DVR will become a de facto multi-room DVR, as the programming will be available "at every outlet."

Hmmm. We've been writing about multi-room DVR implementations for some time on this blog, but it looks like these solutions are about to take wildly divergent paths (in-home storage versus network-hosted storage), leveraging the strengths that both the telcos and the cable operators have (telcos deploying home networking; cable operators ramping up video-on-demand). What appeared to be a clean win for home networking chipset vendors - particularly those targeting cable providers - may wind up not being such a big market after all.

A New Trend in Digital Home Customer Care: Enhanced “User Diagnostics”

If you’ve followed our recent blogs, white papers (Business Models for the Digital Home, for example), and recent studies (Managing the Digital Home: Installation and Support Services), we’ve definitely tried to stay on-top of the area of customer care in the digital home space. In our research, we’ve been fortunate to have gotten to know so many companies with innovative solutions to help reduce some of the complexity and costs – both to consumers and to companies in the market – who approached us with a simple question: “When are you guys going to start writing about the challenges associated with the digital home and begin analyzing the opportunity for this space?” It’s definitely been a steep learning curve, but through years of often patient conversations with us (because we often feel like we have to ask the same question again and again to clarify the answer in our heads!), we’ve been excited at the pace of development.

Just in the last few weeks, we’ve had some really interesting briefings with a good number of companies who are implementing embedded solutions to help create more proactive diagnostics and quality measurement, as a way to address some common concerns in the broadband and triple-place space, in particular. We were recently briefed by an AT&T representative, who gave us some insight into the telco giant’s decision-making process when it came to selecting the HomePNA 3 solution as its twisted-pair and coax home networking solution of choice for its U-verse services. Critical to the final decision was the fact that Coppergate – the chipset provider – had already embedded tools onto the silicon that provide for remote real-time diagnostics and management. This turns out to be highly complementary to the TR-069-based remote management system (RMS) solution that AT&T is deploying using its residential gateway partner 2Wire. And, because the other home networking options didn’t offer this type of solution, we’re told that this made a significant difference in the final decision to AT&T.

Clearly, the broadband and television service providers have much riding on their deployments of added services and value-added features (bundled digital and IP voice, triple-play services, digital television, streaming Web content, etc.), but they are also on the hook for the customer support calls that are sure to flood into their call centers. Increasingly, many of these calls, we’re told, will be related to quality-of-service as much as those pertaining to more tangible problems, such as a service failure. For operators banking on delivering even more advanced services at the same level of reliability they were able to deploy with Plain Old Telephone Service (POTS), their need for even more granular data capture and quality measurement will be even more critical.

Texas Instruments, which has played a key role in the development of broadband solutions (cable and DSL) on a worldwide basis, is looking to its PIQUA solution (unveiled in January 2006) as a way to solve some of the thorniest quality-of-service issues. PIQUA is a DSP-based and embedded software solution designed to monitor and improve the quality of IP-based services, including voice, data, and video. The management tools provide real-time diagnostics, allowing customer service personnel to see such data as dropped-packets, line delays, and video image problems, even down to individual television sets in the home. In many cases, TI indicates that PIQUA can help the quality-of-service teams fix problems before the customer has to pick up the phone to make the complaint. And, in a world in which a 10% reduction of phone calls is considered a good success, this can be a critical tool. And, if the customer eventually does need to call customer support, PIQUA can offer a help desk agent a much more complete view of the performance of the carrier’s entire network – including the access and in-home portions.

Although cost savings as a result of reduced phone calls is one clear measure of success, increasing customer satisfaction will be an important measure for service providers going forward, as they seek of offer expanded services in an ever-competitive environment. For example, last year’s study – Managing the Digital Home: Installation and Support Services – finds that 64% of consumers who accepted a home networking solution from their broadband service provider said that the availability of customer support was a primary reason they chose the offering. The requirements for managing the customer support experience, therefore, are going to grow hand-in-hand with the advanced services being deployed by the operator.

While the requirements for enhancing service diagnostics and troubleshooting for operator-deployed digital lifestyle offerings may seem evident, are there other opportunities for extending the reach of customer care to some less-obvious areas, including the consumer electronics area? Like their counterparts in broadband and home networking, CE companies (and often their retail partners) are under great pressure to reduce customer support calls. And, while silicon-based and embedded diagnostics tools are well-positioned on the “IT” side of the industry to alleviate costs and improve service, the CE manufacturers face different variables and may require additional customer help tools.

For a broadband provider and home networking equipment manufacturer, a silicon-based approach makes sense, since these solutions do well at diagnosing hardware problems as well as low-level operating system and driver problems. Better yet, if these solutions can be designed to continue working even in the event of a software “hang” or parts of the hardware system conk out, even better. As long as there is some data flowing back to a customer support agent and some level of remote access, there’s at least a chance that the problem can be addressed.

On the other hand, silicon-based diagnostics and management tools are likely not going to be the only solution implemented for improving the customer service experience for consumer electronics products (both retail as well as service provider deployed). We’re told, for example, that, many of the customer support calls related to CE devices (DVRs, set-top boxes, televisions etc.)are actually related to device complexity and functionality, more than just mis-configured settings in the software stack or QoS issues related to an access network. Just this week, one vendor told us that they’re getting reports that 50% of customer support calls to Tier 1 OEMs and service providers are more related to “How do I use this feature,” than software, IP configuration, or driver issues. Furthermore, when products are being returned to retailers and/or the manufacturer because of “defects,” only 15% are being marked as a hardware failure.

We would therefore assert that solutions are needed that help increase customer understanding in configuration and allowing customer support agents to see how the device is being used. This would allow the agent to figure out what’s confusing the customer and then how to help them. A good solution, therefore, would be one able to integrate into the application and device code and augment silicon-based (“Hardware”) diagnostics and serve as a User Diagnostics tool.

A key realization for solutions providers in this space is that carriers and equipment vendors as well as other third-party players (remote IT support organizations, for example) need to understand the basic parameters of the digital home. At present, these entities are largely flying blind when it comes to knowing which devices are connected on a home network and how they are being used. With remote diagnostics capabilities and two-way reporting to a “knowledge database,” carriers can benefit from more timely information about the configuration and use of digital home products and provide more proactive service if their customers have problems with equipment or services.

Furthermore, the value of the knowledge database can be extended as consumers seek to add more devices to their digital home configurations. In addition to recommending fixes, the database can be used to generate recommendations for compatible software, hardware, or equipment. For example, the carrier may build internal case studies that would indicate that Wireless Bridge X works particularly well with Game Console Y, and could serve to recommend such a product when the customer is ready to link his or her game console to the broadband connection for online gaming.

Enhancing customer care is going to require major improvements to end-user hardware, software, networks, and the customer support systems by many different players – service providers, retailers, equipment vendors, and CE manufacturers. We’re certainly seeing a key trend that dictates much more automation in the way that problems are diagnosed and fixed. These are definitely going to be beneficial to the managers of customer support offices, who are charged with reducing call volumes and enhancing the level of customer care. At the same time that automated systems are being used on equipment and networks, however, we would argue that a level of detail needs to be given to enhancing the customer’s comfort with using digital home equipment. In this case, we anticipate that a little bit of education and extra TLC in helping reduce customer confusion can go a long way to building a really innovative (and dare we say – revenue-generating?) customer support solution.

FiOS TV Updated Interactive Media Guide

When we released our most-recent IPTV analysis (IPTV: From Quadruple Play to Multiplay), we dedicated much of the report to discussing what really is going to set an IPTV or a Telco TV offer far apart from competitors such as cable and satellite offerings. It's safe to say that many rollouts have - to date - underwhelmed the senses, as carriers on a worldwide basis are carefully ramping up services and are mostly playing a "me too" game. To be fair, transforming a telephone company to an entertainment provider is enormously challenging, and a "baby steps" approach is certainly appropriate, under the adage of "underpromising and overdelivering" on services. And, certainly, there are exceptions worldwide to the "me too" notion of IPTV, as certain providers have deliberately chosen IPTV solutions that offer them a great deal of flexibility to pursue applications in fixed-mobile and communications convergence, flexible programming, roadmaps to targeted advertising and other interactive television apps, etc.

I have been impressed to date with Verizon's vision for television services, too, and I was an eager early adopter of FiOS TV because of some of the features that excited me personally. I really believe that Verizon's got a real leg-up on the cable competition with features such as the Home Media DVR. From what we've been told, cable operators are still looking for a business model to support home networking efforts (and, according to some sources, really scratching their heads about how best to implement home networking on their set-top boxes, with concerns about processor requirements, et. al.). I'd argue that the 12% take rate for the Home Media DVR (a public figure given by Verizon officials in September 2006) at $19.95 a month - is proof that customers will pay for services that offer more in the way of customization and personalization of their viewing experiences, extending to home networking features that offer not only "any time" aspects, but get them closer to "anywhere" functionality.

Verizon has just announcing changes to its interactive media guide, and I was again impressed with the improvements to search, content organization, and graphics capabilities. The roadmap for future improvements - including support for Internet radio, videos, podcasts and games is also really interesting.

There are definitely some suggestions I have for Verizon as they look to future upgrades to the FiOS service, the different features, and the media guide. Specifically, I'd suggest:
- Allowing more control over DVR functionality from the client set-top boxes. I'd really like to know if programming and deletion, specifically, could be enabled from those secondary boxes.
- I'd love to see at least some basic tagging of DVR content occur. For example, what programs have I started but not yet finished? Maybe there is some color coding that could occur.
- Currently, the "Conflict" messages on the DVR aren't 100% useful. Many times, I'll find an overlap problem (one program starts at two minutes before the hour while another is still recording). It would be nice to have some more refined options for resolving the conflict prior to a "Cancel Recording" solution.
- Finally, the current remote is very limited in terms of what I consider to be non-intutive button location. After nearly a year with the service, I still struggle with finding the right way to jump channels, mute a program, and fast-forward or rewind a recorded or VoD program.

A North American Cable Home Networking Effort

We've been watching for any cable moves into the home networking space, and it appears that we have a North American first. Rogers Cable is about to deploy DOCSIS 3.0 N gateways.

Quick Highlights from CES

The question that we we hear most often after the Consumer Electronics Show (CES) is “What did you see that was interesting or ‘cool’?” It’s not an easy question to answer. The press coverage of the show lends itself to pictures and video of huge televisions, tiny mobile handsets, and strange-looking devices (robots, for example). For Parks Associates, however, it’s not necessarily what we see that provides the greatest insight; it’s what we hear during demonstrations and briefings with companies that clue us into some interesting developments. And, every year, we tend to hear much about incremental improvements to devices and services, including (but not limited to) home networks, mobile communications, broadband-related services, digital entertainment, television-related applications, gaming, home systems and controls, and consumer electronics.

I honestly didn't have time to take in the 108-inch television on display at the show, as I was typically running from one meeting to another. However, I had some really interesting meetings with about 40 different companies. Below are some quick highlights of some of the key takeways that I had from the show:

• Eventually (if not quite soon), the home network will need to support HDMI transmission, meaning uncompressed high-definition video. This is for both quality reasons as well as for protecting the content (uncompressed HD content doesn’t fall through the “analog hole.”
• Related to this point, I'm wondering how soon a "wireless for HDMI" solution will hit the market. There is certainly plenty of buzz surrounding companies such as AMIMON, TZero, and the WirelessHD Consortium.
• Ultra-wideband (UWB) commercial products are coming this year and next. Companies were showing different form factors and implementations of the wireless. They have all kinds of form factors (PCMCIA, etc.) for cable replacement and wireless USB applications.
• The powerline debates continue. My colleague Michael Cai hosted a panel on powerline networking, and it's clear that there is little love lost between HomePlug and the proprietary powerline networking solutions. DS2 has some customers who speak highly of the technology's capability. This year will be a critical one for HomePlug to get large volumes of its HomePlug AV solutions out to market.
• It was interesting to hear Scientific-Atlanta talk about using OpenCable’s Linux and Java tools to incorporate Flikr and YouTube applications into the “walled garden.” The operators may likely be the real beneficiary of OpenCable in this respect. Obviously, retail availability of set-tops via CableCARD (another OpenCable part) is going to happen, but I think the key will be helping STB developers more rapidly incorporate the emerging content, services, and applications that the wider Web is going to bring.
• Continued “behind the scenes” talk about how the home network/digital home is going to be managed, and who will be the primary beneficiary of improved broadband and home network management tools. I hosted a panel discussion titled "Business Models for Managing the Digital Home," and we had representatives from Enure, Motive, HiWired, Linksys-Cisco, and Network Streaming to discuss the important elements of digital home management. Another panel on which I spoke ("The State of Home Networking") included this topic as well. Other companies in the space that I saw at CES included Affinegy, Bsecure (demonstrating at the D-Link booth), Cisco (their recent acquisition of RG software vendor Ashley-Laurent), Jungo/NDS, Network Magic, Nexort, and Peak8. I anticipate that 2007 is going to be a significant year in seeing more agreements formed between these vendors and new customers, including broadband service providers, home network equipment vendors, and consumer electronics companies.

Cox: Managed Services Model with gateways?

Cox Communications is adding diagnostic capabilities into its data network that could lead to a managed services offering for some of its home networking customers.

In June, Cox started selling data gateways with DOCSIS 3.0 and 802.11n from Cisco and Netgear directly to its customers. While the nation's third-largest cable operator has a long history of selling home networking gear to its subscribers, the new gateways could lead to Cox dipping its toe into managed services for home networking.

"We're figuring out whether to move to more of a managed services model with the gateways," said Seth Hogan, Cox's vice president of strategy and product development . "We're putting some capabilities into our network that give us the ability to do some remote diagnostics and remote repair. We could offer customers the option for us to manage their home networks for some kind of recurring fee.

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This powerline networking stuff actually works!

We tried an experiment last night with some powerline networking equipment, and I was pleased with the results. I had two Ethernet-to-powerline bridges using the HomePlug 1.0 technology. To be honest with you, I hadn't really been able to find a good use for them. With an updated 802.11g wireless router (installed as part of our subscription to the Verizon FiOS broadband and TV service), our wireless coverage was considered "good enough" for Internet and e-mail applications.

However, I am about ready to consider a media adapter solution that can take the content (primarily recorded TV) from our Media Center system in the home office to our bedroom. We've said it for years, and our own use of the Media Center system proves it; recording TV on a PC makes very little sense until you can move that content to a television. So, knowing the vagaries associated with wireless coverage, I wanted to try the powerline nodes to see if we had a workable solution to provide a stronger and consistent signal in the bedroom.

I've got to say that the installation and the end-result were easy and pleasing. I mean, we hear terms such as "play-and-play" all the time in this space, but how many of us have experienced this kind of bliss? With the powerline nodes, setup was as easy as connecting an Ethernet cable from the router to one of the adapters and then plugging in the other adapter in the bedroom and connecting my laptop via Ethernet to it. That's it! Once I connected to the Internet, I ran a bandwidth test, and found a signal from between 1.4 and 2.2 Mbps (our FiOS service is 5 Mbps downstream on the main computer). Now, this was nowhere close to a scientific study, but the speed was decent, in my opinion.

Now, the true test came with streaming some video over the Internet. What we have right now is what I consider a "poor man's multimedia network." We've got the Orb Networks software installed on the Media Center, and I use it to log into the content from my laptop while on the road. So, we tried it last night to catch up on a couple of episodes of CSI. So, we're not talking about 1080p high-definition content, but it was very viewable on the laptop. Given the simplicity of set-up and the end result, I've got a very favorable outlook for where powerline can play a role in the home.

The market for powerline now is starting to bear out its usefulness in terms of ubiquity and performance. At last week's CONNECTIONS conference, we had representatives from the different powerline bodies (HomePlug, CEPCA, and UPA) in attendance, and we had an interesting panel discussion with several of the HomePlug members, including Intel, Texas Instruments, Arkados, Intellon, and Current Communications. The market right now is still in flux, and companies such as Panasonic and DS2, while outside of the HomePlug effort, are still making news with new partners. Panasonic representatives tell us that the HD-PLC technology has the largest volume in Japan, and DS2, which is part of the UPA, has announced large shipments of 200 Mbps powerline technology. However, given HomePlug's backing by a large contingent of companies and the volumes it it shipping (in a May 2 press release from CONNECTIONS, the organization announced that it had shipped nine million products), we view them as the leader at present.

The panel discussion itself wasn't billed as a "why HomePlug is a great technology" session, but I liked the holistic approach that each of the panelists was able to take on the overall subject of why powerline solutions are helping to create a digital home market on a global basis. Questions from the audience were largely directed to Tom Willie from Current Communications (clearly, broadband-over-powerline is a hot subject this year), and there was also an interesting question about the need to see more power strips with surge protection embracing HomePlug solutions. In addition to seeing powerline deployments for data, multimedia, communications, and entertainment networks, I thought that this was a valid point. After all, if the power strip is going to be the point where multiple electronic devices are going to be connected, then it cannot be the barrier for widespread adoption of powerline-based networking products.

I think that my own non-scientific experiment really pointed out the value of a solution like powerline in creating new markets for multimedia and entertainment applications. If the solution really is as easy as plug-and-play and provides decent performance to begin moving video and audio around the home, we are definitely looking at the beginning of solid growth for these solutions. Now, all we need to do is to ensure that all of these new powerline devices account for intuitive device discovery and easy home networking configuration! That'll be a different topic for a different post!

Top Ten Technology Trends for TV

A friend was recently telling me about listening to his morning radio show on the drive to work, and the DJs were discussing their memories of the early days of TVs (you know...the TV dark ages of the 1970s and 1980s). My friend cited people calling in talking about the needlenose pliers turning broken channel changers, the "vertical hold" button, some guy's dad who whittled a notch into a broomstick so he could change the channel from the couch, etc.

I remember not having a remote control for a TV until my first TV purchase as an adult in the early-1990s. My brothers and I were thrilled with having cable for the first time in the 1980s. We had one of those switching devices that had the numbers you had to punch down, and the unit came with perhaps 20 feet of cord. So, it acted like a remote control ... one could lie in repose on the sofa, with 20 feet of cord stretched back to the TV and barely move a muscle to change that channel. Good times.

Fast-forward to 2008, and the context for television has changed considerably. After shows like CES and the recently-completed Future of Television event that I attended on Monday and Tuesday, I'm struck with all of the potential that TV and video services have. Of course, I'm also struck with the potential failures that will take place if the technology know-how that is so adeptly exhibited by Silicon Valley doesn't match the business plans of the content owners in Los Angeles and New York. And, it will all come to a very ugly end if your average user in Cincinnati (which I understand has supplanted Peoria as the metropolitan litmus test for "average" U.S. consumer sentiment) is intimidated by the application, doesn't understand it, or can't get it to work.

I had the opportunity yesterday to moderate a panel at The Future of Television Conference titled New Television Technologies You Need to Know. In that discussion, we were able to define some of the key technology trends that are going to characterize what Parks Associates has come to call "The TV 2.0 Experience." If you forgive the complete lack of originality in the title, the overall theme that we're working under with our "TV 2.0"-related research is that big changes are coming to the TV screen, and we anticipate some significant opportunities for technology companies to supply solutions to media companies and deliver a much more rich and immersive video experience.

So what are the key elements of the TV 2.0 experience? We believe that next-generation television services will be built on a number of key features and experiences delivered not only to the TV screen, but also other viewing platforms (such as the mobile phone, the PC screen, the in-car LCD display, and other portable and mobile devices). The features and applications that define TV 2.0 are characterized by key industry megatrends, such as:

• The expansion of network capacity by incumbent operators, allowing them to increase quantity and quality of programming (providing more channels and increasing high-definition offerings);
• The move from multicast programming to unicast offerings (linear vs. on-demand);
• An erosion of strict linear program lineups to more personalized scheduling, enabled today by the DVR and tomorrow by the on-demand and “Catch Up” services that are now beginning to account for a significant amount of video consumption;
• The ability to blend communications and entertainment experiences, beginning with simple features such as Caller ID on the TV and moving to more advanced features such as consumer “telepresence” and video conferencing;
• Home networking that allows the set-top to act as more than just a TV signal decoder; it can now link to PCs and other devices to pull content as well as stream it;
• The move to combine traditional Web activities such as social networking and creating and sharing user-generated content and bring it in a higher-quality format to the TV screen;
• The ability to more efficiently deliver advertising and marketing to consumers based on more specific targeting, likely starting with general geographic targeting, then targeting based on their viewing habits, and moving to demographic-based targeting;
• An acknowledgement that the Internet is becoming a powerful and efficient tool for delivering higher-quality programming and content and figuring out how to blend that with the TV experience; and
• A move to bring TV content to other devices without the set-top box necessarily being involved.

In yesterday's New Television Technologies You Need to Know panel, my panelists (including Awshin Navin from BitTorrent, Anton Monk from MoCA, Perry Solomon from FAST Search, and Brad Auerbach from HP) were able to help me define some of the key technology areas that they see as most impacting the new generation of television services. The list that we developed during yesterday's discussion includes these areas:

1. Distribution (making it more efficient and cost-effective)
2. Seamless content experiences (three-screen)
3. Personalization (time/place-shifting, VoD, customization, ec.)
4. Social networking aspects (recommendations, chat, etc.)
5. Search (helping viewers locate and discover content)
6. Connected platforms (home networking)
7. Marketing/advertising (targeting, immersive, behavioral/demographic targeting, analytics/measurement)
8. Communications (features like Caller ID, video calling, chat, etc.)
9. Measurement (who’s watching what when and how, dynamically altering content lineups to reflect the democratization of the viewing experience)
10. User interfaces (electronic program guides, remotes)

We're going to be digging deeper into these issues with at least two studies this year, one targeting consumers and the other a focus on the industry. We'll look forward to sharing the results!

Value Chain Consolidation and Digital Lifestyle Opportunities

With NDS’ announcement on December 4, 2006, that it is acquiring Jungo, we’re continuing witness consolidation in the market to deliver complete end-to-end access/service provider solutions. Today’s announcement also reaffirms they key roles that both home connectivity and enhanced WAN and LAN management tools will play in the competition between and among a number of service providers in television, broadband, and communications services delivery.

Recently, we’ve already witnessed significant acquisition and investment news from such companies as Alcatel (the Lucent merger took effect on December 1, 2006); Cisco Systems (Arroyo, Ashley-Laurent, KiSS, and Scientific-Atlanta, plus a significant investment in Widevine) and Motorola (Broadbus, Kreatel, and Netopia were all added to the fold recently).

A recently-released report from Parks Associates – Digital Living Forecasts – details the market opportunities available to the service provider community in the provisioning of advanced home connectivity products and services. Our numbers indicate strong growth (at year-end 2010 for U.S. households) in access-related services, including:

- More than 80 million broadband households;
- Sixty-five million bundled services subscribers;
- Thirty million bundled VoIP subscribers;
- More than 6.5 million residential Telco TV subscribers; and
- Nearly $3 billion in cable VoD revenue.

As households with advanced digital services grow, we’ll see residential customer premise equipment (CPE) similarly scale. The same Digital Living Forecasts through 2010 show solid growth in these specific categories:

- Nearly 20 million households using whole-house DVR solutions;
- Sales of networked-attached storage devices to exceed three million units; and
- Connected entertainment households (with multimedia and/or entertainment networked solutions) will exceed 30 million households.

What sort of trends will we see going forward? Whereas 2005 and 2006 have been mainly about building the end-to-end network and infrastructure solutions, we’re anticipating that residual products and services (both stand-alone and incorporated into service provider bundles) will begin to leverage the infrastructure for a host of new services and product solutions. Some key examples of these add-on solutions include:

- Sales of portable multimedia players, which will extend the entertainment experience to on-the-go environments, will reach revenues of $1.6 billion;
- Mobile phone revenues, which will incorporate many additional services beyond voice, will reach $181 billion;
- Online gaming subscriptions, fees, and derivative revenues will reach $4.4 billion;
- Digital music services will exceed $3 billion in revenue; and
- Internet video services (subscriptions, fees, and advertising) will reach more than $7 billion in revenue.

What remains exciting about the digital lifestyle space is the continuing trend toward innovation, which will not be contained to the large and highly-integrated companies. Some very interesting areas of opportunity that we will watch closely in 2007 include:

- Building smarter content delivery networks that allow service and content providers to better scale their existing infrastructure to deploy an even richer user experience;
- Continued work on the WAN and LAN management side. As service providers’ products and applications reach farther inside the digital home, they will need to build smarter and more dynamic management and reporting systems to help them solve customer issues with connectivity and customer service more dynamically;
- More advanced customer premise equipment (including set-top boxes, residential gateways, and other equipment) that help manage services and support inside the home;
- Greater storage capacity for mobile and portable platforms;
- The release of more robust home networking solutions (both wired and wireless) that enable the in-home connectivity environment to receive and distribute very robust content, including HD, from the service provider;
- Trends in alternative broadband delivery networks. As ownership of the network may become an even more critical piece of owning the customer, we may see alternative players invest heavily in broadband solutions beyond cable, DSL, and fiber;
- Enhancements to software that improve on the user experience for creating and sharing their own content; and
- Dramatic improvements to user interfaces, both physical and graphic. Service providers, end-user equipment manufacturers, and other players will need to invest both time and money in developing next-generation interfaces and search technologies to help end-users better find and organize their digital content libraries.

Digital Home Tech Support Front and Center at CES

As much as the Consumer Electronics Show gets defined by the flashy announcements, the big keynotes, and the huge TVs (Panasonic's 150-inch monster), it's the behind-the-scenes stuff that is always intriguing to me. As we've followed the digital home tech support space over the last four years, I like watching the industry evolve and see how the major players such as service providers are coming around to the notion that delivering an enhanced level of customer support not only benefits them by reducing customer support costs, but paves the way for new service offerings that could include product and service recommendations.

Below, I'm highlighting a few of the announcements that caught my attention:

1. Cisco's purchase of WebEx last year has led to enhancements to its Linksys EasyLink Advisor (LELA) offerings. In addition to providing consumers a graphics-based map of their home networking configurations, a WebEx client allows for live technical support.
2. I was intrigued during a panel discussion at our CONNECTIONS™ Summit on Tuesday about how social networking tools can enhance the customer support experience. Rick Clancy, who is Senior Vice President of Corporate Communications for Sony Electronics, indicated that Sony's use of blogging tools has allowed the company to receive direct feedback from customers. He indicated during our panel How Social Media is Changing the Rules that it was quite likely to see more social networking tools implemented to enhance customer support.
3. Jungo Ltd. has another win for its OpenRG residential gateway middleware. Siemens Home and Office Communications announced that it would use the software in its Gigaset Gateways.
4. Thomson demonstrated its Advanced Cable Gateway that uses TR-069 for remote management.

NDS to Demonstrate its Über-gateway at the SCTE Show

There have been a number of announcements this year regarding cable operators' push toward deploying customer premise equipment that takes on the functionality of the residential gateway, set-top boxes, media server, and manager of remote user interfaces. So far, I've seen news from Liberty Global, and NDS is preparing to introduce its version at the SCTE Cable-Tec Expo next week.

Demonstrations will include:

• Secure end-to-end delivery of triple and quad play services from a single managed gateway device: featuring NDS’ Unified Gateway - an advanced media server that enables unified delivery of video, data and voice services in and outside of the home network from a single point-of-access. The Unified Gateway integrates residential gateway, home networking connectivity and optional DVR functions through a single home-based device. It helps MSOs to converge and launch new offerings with home network connectivity supporting a wide range of IP-enabled entertainment and communication devices.
• Unified end-user experiences across multiple devices: using NDS Snowflake - an advanced user interface (UI) that provides an integrated portal for broadcast, DVR, on-demand and over-the-top programming. Snowflake UI enables high performance and unified experiences for the end user, on a wide variety of connected-devices, such as TVs, set-top boxes, DVRs, PCs, and smartphones.

CES is over, so now what? Analyst predictions.

Huge TVs and digital photo frames. Smarter remotes and 3D games. Home controls, home networks and home monitoring. By now everyone knows the buzz from CES, but what's next?

Parks Associates analysts reveal the following consumer research data and forecasts:

• Consumers want videos & programs on demand more than anything when it comes to value-added TV features.
• Broadband video services pushing a movies-only format underperformed; movie rentals/downloads from the Internet were only $99 million in 2007.
• Consumers are buying more broadband video - 48% of broadband Internet users watch Web video on at least a monthly basis and 20% are downloading longer episodes.
• More people use iTunes to download videos longer than 10 minutes. Amazon.com's Unbox & BitTorrent services follow in second & third place.
• In 2008 and beyond, we'll see a greater emphasis placed on bringing broadband video to the television via media adapters, game consoles, and network-connected devices such as TVs, stand-alone set-tops, and DVD players. Broadband video revenues for content consumed at the television will total $1.5B by 2012.
• The connected home - More people want the ability to monitor webcams in their homes from any Internet-connected device, more so than to control a home's thermostat from an Internet-connected device or to control lights from an Internet-connected device.
• Mobile Internet will begin to see mass market adoption, and the form factors will diversify to include devices such as portable multimedia players (PMPs) and portable game consoles.
• There will be major investments in the cable MSO space. Switched digital and DOCSIS 3.0 will help to reclaim bandwidth and expand offerings.
• Place-shifting features (currently embodied through products such as Slingbox and Orb Networks) will move beyond after-market products with nearly 53M WW households using such features by 2012.
• Virtual worlds will ride the hype cycle, and we'll see a growing emphasis on these applications in corporate settings as a means to enhance collective collaboration.
• The 700 MHz auction will spur more innovation on the mobile phone handset and will reduce the influence of the mobile carriers.
• Home theater systems become the next "appliance" offered by home builders.
• Europe will be the decisive market for powerline networking.
• Tracking new payment methods (such as micro-transactions) for online consumers will be an interesting model to watch.
• The first major cracks will appear in the movie distribution widows, and video-on-demand services will be enhanced by the earlier availability of certain content.
• The in-car entertainment experience begins to reflect the living room.

For more information visit http://www.parksassociates.com/.

Here come the cable gateways - Thomson and Comcast

Maybe it's the summer of the cable residential gateway. Following the news that Rogers in Canada would be deploying residential gateways, Thomson and Comcast announced that Advanced Cable Gateways will be available beginning in Q3. Conceived as a home networking and communications hub, these platforms allow Comcast to provide state-of the art digital voice and data services to its customers – including using enhanced cordless telephone handsets to view email, manage voice mail, read news, weather, and sports, and to click-to-call from a universal address book powered by Plaxo, business directory, or call logs.