Telco TV deployments have been a boon to headend equipment manufacturers, particularly those supplying compression equipment, since not only are new headends built but channels are continually added requiring additional equipment.
Headend structures vary by region. In North America, large Regional Bell Operating Companies (RBOCs) are building redundant super headends to process all national channels that feed regional headends that add local content for each market. The Independent Operating Companies (IOCs) tend to either form consortiums that build one headend or they build their own with these bringing in all national and local content. The content aggregators are changing the headend dynamic as they build super headends to serve small telcos local headends. In Europe and Asia, each telco TV provider builds one headend though there is great variation on the number of channels each is able to process.
Today's headends are mainly set up to process video for retransmission. The opportunity for ad insertion has yet to be realized, but as subscriber numbers grow, telcos are expected to purchase equipment necessary for ad insertion. We also expect telcos to produce some content themselves in the future, particularly local content.
There has been consolidation among headend equipment suppliers. Earlier in 2006, Tandberg bought SkyStream in order to expand its product offering with a high-density headend system. This summer Cisco/Scientific Atlanta, Motorola, and Harmonic purchased Arroyo, Broadbus, and Entone respectively to add on-demand products to their portfolios. We expect the number of suppliers to continue to decline in 2007, owing to the exit of some suppliers and the acquisition of others.
In-Stat's report Telco TV Headends (IN0603165MBI) will be available in November. In addition to forecasting the number of new headends built and upgraded annually, it will provide revenues for broadcast content processing equipment, on demand processing equipment, middleware, and content protection.
- Michelle Abraham - Principal Analyst
, E-mail:mabraham@reedbusiness.com
Outside the PC and network equipment markets, the gaming space has really been the first market segment to embrace Wi-Fi.
More than 26 million handheld game devices with embedded Wi-Fi shipped out in 2005, with 28 million of these Nintendo DS and PlayStation Portable (PSP) devices expected to ship in 2006.
5 million game consoles with embedded Wi-Fi are expected to ship out in 2006, representing only the late-year releases of Sony's PlayStation 3 and Nintendo Wii gaming consoles.
Handheld Games and Wi-Fi
Nintendo DS
One of the main issues plaguing Wi-Fi integration into portable CE devices has revolved around the demonstration of Wi-Fi's value-add to a device. Certainly, Nintendo's Wi-Fi Connection service is one example of a vendor leveraging Wi-Fi to provide for an enhanced user experience. On August 28, 2006, Nintendo's Wi-Fi Connection (its online gaming portal for its DS/DS Lite users) logged over 70 million connections from over 2 million unique users, after the portal had been live for only nine months. The service centers around DS online play at certified partner hot-spots, where the user launches a game in Nintendo Wi-Fi Connection mode with no configuration or registration required. Those with home WLANs who wish to play DS online titles can do so with minimal set-up procedures. Those without Wi-Fi networks who wish to play DS online titles at home can purchase the Nintendo Wi-Fi USB Connector for approximately $35.
Sony PSP
While the DS is a more traditional game console, the PSP aims to be a portable multimedia convergence device that primarily plays games. The device includes audio and video playback and web browsing capability. As of October 2006 in the US, the PSP was available for a street price of $200, while the Nintendo DS was available for $130. Sony's online gaming push has not been as strong as Nintendo's, owing to Sony's focus on the PSP being more than a handheld gaming device. For example, Sony has not made announcements about agreements with hotspot providers for online gaming networks worldwide—Nintendo has. However, there are a number of titles available for online play, both from Sony and third-party publishers. In late 2005, Sony offered the capability of watching home video content on the PSP via Sony's LocationFree Base Station, which can stream live TV and other video content across a home network or across the Internet to remote devices, including the PSP.
Gaming Consoles and Wi-Fi
Xbox360
In late 2005, Microsoft began the newest cycle of gaming consoles with its launch of the XBox360. Microsoft's 802.11a/g USB gaming adapters are sold as an accessory to the XBox360 for $99 and feature the same styling as found in the XBox360 console. Although Microsoft is sometimes criticized for not having embedded Wi-Fi into the XBox360, the use of an external adapter provides it both flexibility as well as an opportunity to increase user spend per console. Microsoft can start offering an 802.11n adapter in the future at a higher price, touting increased performance compared to the embedded 802.11g of its competitors' consoles. With the Xbox360 able to serve as a Media Center Extender (MCX), Microsoft chose to enable this console with the highest performing technology; for its Wi-Fi MCX devices from Linksys and HP, Microsoft required that they support 802.11a/g for maximum performance.
Microsoft has been the most aggressive out of the three main game console vendors with its fee-based online gaming push. XBox Live was introduced as a pay-for service back in 2003, and with the introduction of the Xbox360, Microsoft has expanded its Xbox Live capabilities in an attempt to draw more XBox gamers to subscribe to XBox Live. For instance, gamers can download demos of new games and even movie trailers.
Additionally, gaming adapters and bridges are provided by a number of home networking vendors, including Buffalo, D-Link, Linksys, SMC and USRobotics. Many gamers have purchased these gaming adapters to allow their PlayStation 2, Xbox, and Xbox360 consoles to access their home WLANs for online gaming.
PlayStation 3
In November, both the Sony PlayStation 3 and Nintendo's Wii will roll out in the US. The Wii, along with the premium model of the PlayStation 3, will include embedded 802.11g. Sony will offer two versions of the PlayStation 3, a 60GB premium model and a 20GB core model, with embedded Wi-Fi offered only in the 60GB model. However, Sony expects that the great majority of PS3 consoles sold will be the high-end model.
With the PlayStation 3 gaming consoles offering robust processing capabilities, storage, an embedded Blu-ray player, and many other features that warrant that the device be networked, it is no surprise that embedded Wi-Fi is a natural addition. Sony will offer free online gaming, but will charge players for downloadable games and other media from the service.
Wii
Nintendo's Wii, on the other hand, will have an MSRP of $249.99. The Wii will not feature a hard disk drive, but will include 512MB of flash memory and a bay for an SD memory card that will allow players to expand the internal flash memory. The most talked-about feature of this console is its motion-sensitive controllers.
Nintendo plans to build on the success of its Wi-Fi Connection service, which currently serves its DS/DS Lite handheld game users. The embedded Wi-Fi in the Wii will allow for the Wii to communicate wirelessly with the Nintendo DS/DS Lite handheld games. The Wi-Fi will also enable what Nintendo calls the "sleepless" WiiConnect24, which will continually deliver new surprises or game updates to the console. WiiConnect24 is designed to communicate with the Internet constantly, even when the power is turned off. Wii will have downloadable access to some older Nintendo games, some Sega Genesis titles, games from the TurboGrafx console, and new games conceived by independent developers.
For more information on Wi-Fi in Gaming and in other CE Device Segments, check out In-Stat's recent report In-Depth Analysis: Consumer Electronics Devices Warming Up to Wi-Fi (http://www.instat.com/abstract.asp?id=167&SKU=IN0603244WS).
Making Half-Truths Whole: Why Speculation About 3G's Demise Won't Go Away
Political campaigns give us a chance to examine how we perceive the truth about issues and candidates. The popular and trade press tend to treat each newly-introduced technology as a brash, young political outsider running against a deeply entrenched elderly multi-term incumbent; ultimately, there is the expectation that there will be one winner and one loser (an assumption that In-Stat believes to be incorrect).
Like today's political campaigns, a number of half-truths support predictions that the political incumbent—in this case, third-generation wireless (3G)—will soon be voted out of office.
Let's make some of these half-truths into whole truths:
Consumers Don't Want 3G
Half-truth: There isn't a lot of demand for 3G and, as we have found in recent surveys of US consumers, there isn't even much awareness of 3G. Nearly 40% of respondents couldn't correctly say whether or not their mobile carrier offered 3G service.
The other half: Consumers are very enthusiastic about the applications that 3G enable. More important, those who already use 3G (and are technically savvy enough to know the term "3G " instead of "PowerVision " or "V Cast ") are extremely enthusiastic about it. After trying 3G, users want more services. Camera phone owners, on the other hand, are usually disappointed with the experience and have lower usage compared with what they expected before using 3G.
3G's Primary Application—Mobile Video—Has Flopped
Half-truth: Being able to deliver streaming video as well as video messaging and downloadable clips were mentioned repeatedly as the raisons d'etre for 3G. But on a worldwide basis, only a small percentage of consumers are regularly using mobile video, and it is not yet providing the revenue that vendors and carriers used to justify 3G capital expenditures.
The other half: While video has not been as jubilantly embraced as its developers would have hoped, there are a number of applications that provide greater interest and utility: In a recent In-Stat survey, over half the people said they were interested in connecting laptop computers to the Internet and in receiving detailed maps and navigation services. The fact that mobile video has not met expectations doesn't mean that no application ever will.
Better, Faster, Less Expensive Network Technologies Will Undermine 3G
Half-truth: WiMax, because of its less-expensive infrastructure and superior download speeds compared with 3G, is now the best choice for mobile carriers to replace their slow, expensive and obsolete 3G systems. If offered as an alternative, WiMax operators will capture the customers that 3G carriers are struggling to interest.
The other half: Although there has been some disappointment with speeds, coverage and mobile terminals (handsets) in the past, today 3G is deployed, is being perfected, and is working in the way it was designed. It is also taking its place alongside well-established mobile voice networks that continue to pay the bills for mobile carriers as 3G networks mature.
Looking at the Other Half: Why 3G Will Not Go Away
We would never suggest that many of the criticisms of 3G—half-truth, whole truth or something in between—are without merit; there is one single overarching understanding we should keep in mind: 3G is here and it will be here for a very long time.
Yes, 3G spectrum was very expensive, infrastructure was expensive and deployment was slower than anybody would have liked. But the companies that made investments in 3G are not at all known for abandoning infrastructure or destroying capital before it is fully amortized. In fact, those with this telco heritage are famous for holding onto equipment and wringing every last drop of value from it. That is one of the characteristics that made telecommunication companies the preferred stock for "widows and orphans " who relied on a steady stream of dividends.
We doubt that any mobile carrier will abandon its commitment to 3G because something better, cheaper or faster has come along, and we doubt that a pure data carrier offering Wi-Fi or WiMax will, in the near future (3-5 years), provide enough competition to threaten mobile carriers' data or voice services.
In-Stat believes that 3G will continue to serve mobile customers with both voice and data services for a long time to come.
