Market Studies

IPTV - To Be Or Not To Be?

Published: July 2007

Overview | TOC | TOF


The recent NXTcomm show in Chicago (2007) was brimming with IPTV equipment and demos. Perhaps most telling of all was the fact that many of the equipment vendors (notably Alcatel-Lucent) concentrated on IPTV applications as opposed to just showing their wares. Of course, there was a great deal of hardware to be seen, also. The availability of MPEG-4 set-top boxes was one piece of big news. Another major item of interest was the announcement that Verizon Business (old MCI) was accelerating its network buildup by adding optical cross-connects and going to a full deployment of ROADMs earlier than planned. The main driver for the network additions was the carriage of Verizon’s FiOS video traffic. All of this activity should indicate that IPTV is here to stay. Then how can we have an IPTV report with the somewhat negative title of “IPTV — To Be or Not to Be?” The answer is in the details of the differences of how video is being implemented by the two major RBOCs. One (AT&T) is using a pure IPTV approach, while what Verizon is doing is hardly recognizable as IPTV. To date Verizon is obviously the most successful. This report will look very closely at future drivers for residential video development and how this difference is likely to be played out — IPTV — To Be or Not to Be?

The RBOCs are making great progress in becoming creditable players in video delivery. Verizon has just announced the connection of its 500,000th FiOS video customer. While this is a long way from the top-tier cable companies (with around 24,000,000 subscribers), it is still a remarkable accomplishment in about a year and a half. This half-million subscribers would put Verizon on the top ten list of cable companies! In addition, Verizon is adding FiOS video customers at the rate of slightly over 50,000 a month. By the end of 2007, they should be over 800,000 subscribers, which would move them to eighth or ninth on the top ten cable company list. AT&T is also in the process of expanding its U-verse high-speed offering, with about 30,000+ video subscribers presently (mid-2007), and is adding about 500 new video subscribers per day. In addition to these major RBOCs’ activities in video, Qwest has made some beginnings in the field, and BellSouth (before its acquisition by AT&T) had very advanced in-house development work under way on a video offering of its own.

This progress is very impressive; however, there is more to the story. The two major constituents of this competition — Verizon and AT&T — have taken very different paths to delivering video. AT&T is using a "pure" IPTV approach, riding on an FTTN architecture that depends on copper for the last few thousand feet. Verizon in contrast uses an "rf overlay" — meaning a separate broadcast (on Verizon’s fiber network) wavelength that carries digital TV signals — and an IPTV stream for VoD and various other functions. Verizon’s delivery rides on an FTTP-based, passive optical network Are these just differences in approach to the same service, or is one approach inherently better? Can customer demand for video be satisfied by both approaches? Can we expect any changes in these approaches? What are the network implications for the delivery of this new traffic? We will use input gathered specifically for this report from the major players to help describe the RBOCs’ positions.

Given the differences in the RBOCs’ approach to video, and the major difference in the importance of IPTV in those approaches, we ask the question, “IPTV — To Be or Not to Be?” The answer is that it will be almost surely, but in what form? This and the above are some of the questions that this report will consider. In addition, this report provides the following:

  • Description of the current state of the video effort of the RBOCs;
  • Extensive forecasts for traffic, customer video demand, RBOC video penetration, costs, and revenues from these services;
  • By-carrier forecasts of video customers and network development;
  • Forecasts for residential customer video demand in terms of bandwidth, and describes how the bandwidth will be used;
  • The current deployment scenarios of the RBOCs;
  • Forecasts for deployment scenarios for each of the RBOCs;
  • Forecasts of RBOC IPTV subscribers, penetration rates, costs, and revenues from IPTV;
  • Traffic analysis to forecast network impacts of the addition of the RBOC video;
  • Market projections for vendors of the equipment and software;
  • Details of the various options for deploying video — FTTX, broadcast video, and IPTV;
  • Details of the RBOC PON;
  • Details of the various RBOC access architectures, and how video fits into these architectures.

After so much testing, learning, false starts, and failures, the RBOCs are really committing to a massive effort to compete on a network basis in residential video delivery. For those who have been in the industry for a time, memories go back to 1985-87 and Cerritos, California; Orlando, Florida; and other early video trials. One wonders if enough has been learned to be successful in this very difficult business. The telcos tend to think that voice telephone service is a life-or-death matter. However, when “Desperate Housewives,” or the Dallas Cowboys-Eagles game does not come on or is fuzzy, they will learn what is really important! As the RBOCs become major video deliverers, we will see how well they have learned the lessons of past failures in this effort.

IPTV is the heart of the RBOCs’ plans to attack the video market. IPTV is not just a different way to deliver TV (it is, of course, also that), but it has the potential to be the basis of a completely new suite of services. Some of these could include the following:

  • Multiple, simultaneous high-quality TV streams, including high-definition TV;
  • Click-to-purchase advertising;
  • Mouse-based interfaces;
  • Personalized advertising;
  • Remote DVR programming
  • Instant channel changing;
  • Localized and individualized reports on weather, traffic, etc.;
  • Customizable channel lineups;
  • Video on demand;
  • Multimedia interactive program guides;
  • Event notifications and remote access to IPG (individualized program guide) and digital video-recording function;
  • The ability to alert a customer of upcoming favorite shows, or Caller ID and instant messaging right on their TV screens;
  • Tunerless picture-in-picture functionality;
  • Photos shared from a networked computer and played back through the TV;
  • HDTV;
  • DVR (digital video recorder) functionality on multiple TV sets;
  • Multimedia and interactive video;
  • Sharing family videos;
  • 3-D gaming;
  • Setting camera angles for sporting events.

While some of these are not completely new, most are, and together they are a very impressive list. As noted, they could form the basis for a completely new video service.

The equipment vendors have looked at the potential size of an FTTP project, and they visualize a return to the go-go days of the late 1990s telecom market. At around $1,500 capital cost per installed fiber line, it is easy to see how a program that involves over 100 million lines could easily drive a return to profitability for many equipment vendors. The addition of IPTV to this equation has brought many more vendors into the picture. This combined program (FTTP/IPTV) now has the potential to offer a very broad base of equipment requirements and equipment vendor recovery.

We will start this report with a review of the various definitions in current use for IPTV. After establishing a firm base as to the main topic of our discussion, we will present a comprehensive review of the current RBOC plans. We have direct input for this section from all of the major players. We will then provide an analysis of the bandwidth requirements (based on video usage) for residential users, now and in 2010. The next topic will be our forecast for video services by each of the RBOCs. We will then combine the preceding chapters’ material to review the impact on equipment and network requirements. Then we will provide a forecast and an analysis of the costs associated with the RBOCs’ video efforts. We conclude the main section of the report with an exhaustive listing of vendors, with full contact information. The Appendixes cover a detailed discussion of the alternative approaches for last-mile architecture and for video delivery.

Table of Contents

Table of Contents

Table of Figures

The Lightwave Network Series of Reports

General Reports on the Network
General Market Reports
Specific Systems Reports

Executive Summary


IPTV – To Be or Not to Be?

What Is IPTV?

Internet Television
‘Big Telecom’ IPTV
Section Summary

Status RBOC Video Plans

Verizon Plan
Verizon - Physical Description
Delivery Architecture
Video Architecture

Verizon Services from IPTV
Deployment Status

AT&T Plan

AT&T – Physical Description

Delivery Architecture
Video Architecture

AT&T – U-verse Services
Deployment StatusBellSouth (AT&T) Plan
BellSouth – Physical Description
Deployment Status

Qwest Plan

Qwest – Physical Description

Section Summary

How Much Video Do We Want? A Forecast of User Requirements

A Prime Time Usage Scenario -2007
A Prime Time Usage Scenario -2010

Section Summary

Forecast of RBOC Video Implementation


RBOC IPTV Subscribers Summary

Network Deploymentnt
RBOC IPTV Subscribers

Section Summary

Forecast of Video Demand Impact on Equipment and Network Requirements

Last Mile Bandwidth Requirements

Delivery ArchitecturesNetwork Impacts of Video Traffic
Forecasts of Network Traffic
Description of Network Approach to IPTV

Section Summary

Cost and Analysis of RBOC IPTV Programs

Video Costs

Long-haul Equipment and Specific Entities for Video
Integration Services
Cutover Costs

Summary of Video Annual Costs

Section Summary

Forecast of RBOC IPTV Revenues

Section Summary

Vendors Listing

Summary of Vendors

Access Vendors
IPTV Vendors
Transmission and Switching Vendors
Component Vendors

Detailed Listing of Vendors

Advanced Fibre Communications Inc. (AFCI) (Now Tellabs)
Alcatel - Lucent
Alloptic Inc
Amino Technologies plc
AOC Technologies
Avanex Corporation
Entrisphere, Inc. (Ericsson)
Fiberxon (Luminent)
Finisar Corporation
FlexLight Networks
Genone3 Technologies, Inc.
Hammerhead Systems, Inc.
iamba Networks
JDS Uniphase
Kreatel Communications AB (Motorola)
LightComm Technology
Lucent (Alcatel)
Marconi (Ericsson)
O-Net Communications Ltd
Oplink Communications, Inc.
Optiviva Inc.
Optical Solutions (Calix)
Osaki Electric Co., Ltd.
Paceon (Mitsubishi)
Quantum Bridge Communications (Motorola)
Salira Optical Network Systems
Tandberg, Ltd. (Ericsson)
Tut Systems
Wave7 Optics
Worldwide Packets, Inc
Zhone Technologies

Appendix I

Approaches for Access Architecture

Fiber to the “X”

xDSL Versions
Fiber to the Neighborhood (FTTN)
Fiber to the Node (FTTN)
Fiber to the Curb (FTTC)

Passive Optical Networks PON


Status of PON
Advantage and Disadvantages of PON
Types of PONs



Approaches to Access Architecture

Various Approaches for Fiber-based Access Architecture

Fiber to the “X”

xDSL Versions

Design Details for Current Plans

Fiber to the Neighborhood (FTTN)
AT & T‘s Fiber to the Node (FTTN)
BellSouth’s Fiber to the Curb (FTTC)

The RFP – PONs Will Set Us Free

What Are PONs?

The PON Design

Status of PON
Advantage and Disadvantages of PON

Types of PONs


The PON in the First RFP


Architectures to Meet the Needs

Appendix II.Approaches to Video Delivery



IPTV Architecture

IPTV Global Architecture

Super Hub Office
Video Hub Office
Serving Offices

IPTV Distribution and Access Architecture
IPTV Channel Selection

Table of Figures

Figure 1, Traffic Components of Internet Forecast
Figure 2, File Sharing Components of Traffic - 2006 Data
Figure 3, File Sharing Traffic Components – 2006
Figure 4, File Sharing Components of Traffic 2010 Forecast
Figure 5, Prime Tine Usage Scenario - 2007
Figure 6, Prime Time Bandwidth Requirement - 2007
Figure 7, DVR Penetration Forecast
Figure 8, Prime Time Usage Scenario - 2010
Figure 9, Prime Time Bandwidth Requirement - 2010
Figure 10, Prime Time Bandwidth Requirement – 2010 – MPEG-4 Compression
Figure 11, FiOS HH Passed Forecast
Figure 12, Verizon FiOS Video Subscribers – Cumulative - Forecast
Figure 13, AT&T hh Passed by U-verse Forecast
Figure 14, AT&T U-verse Video Subscribers – Cumulative - Forecast
Figure 15, Qwest IPTV Subscribers
Figure 16, RBOCs' Video Customers by RBOC - Cumulative – Forecast
Figure 17, Network Penetration by RBOC
Figure 18, Penetration Rate of HHs Passed Vs. Total US Homes
Figure 19, Penetration Rate of RBOC Video Services
Figure 20, RBOC HH Passed Vs. Video Services
Figure 21, Delivery technologies Compared to Requirements
Figure 22, IPTV Network Hierarchy
Figure 23, Network Traffic Requirements - RBOC Video – Forecast
Figure 24, Long-haul and Network Office Entities Costs
Figure 25, Software Costs
Figure 26, Integration Costs
Figure 27, Cutover Costs
Figure 28, Video Implementation Costs - All Components
Figure 30, RBOC IPTV Revenues
Figure 31, Summary of Access Vendors
Figure 32, Table of IPTV Software Vendors
Figure 33, Transmission and Switching Vendors
Figure 34, Component Vendors
Figure 35, Fiber to the 'X' Varieties
Figure 36, Chart of Various xDSL Technologies
Figure 37, Fiber to the Neighborhood
Figure 38, Fiber to the Node
Figure 39, Fiber to the Curb
Figure 40, PON Basic Arrangement
Figure 41, RFP PON – Central Office Portion
Figure 42, RFP PON – Outside Plant Portion
Figure 43, RFP PON Service Assignments
Figure 44, Fiber to the 'X' Varieties
Figure 45, Chart of Various xDSL Technologies
Figure 46, Fiber to the Neighborhood
Figure 47, Fiber to the Node
Figure 48, Fiber to the Curb
Figure 49, PON Basic Arrangement
Figure 50, RFP PON – Central Office Portion
Figure 51, RFP PON – Outside Plant Portion
Figure 52, RFP PON Service Assignments
Figure 53, BPON/GPON Comparison
Figure 54, Typical GPON
Figure 55, Bandwidth Needs vs. Capabilities
Figure 56, Broadcast TV on BPONs
Figure 57, Broadcast TV
Figure 58, IPTV General Architecture
Figure 59, IPTV Global Architecture
Figure 60, IPTV Access Architecture - xDSL
Figure 61, FTTP Architecture for IPTV
Figure 62, IPTV Hub Office Architecture
Figure 63, IPTV Channel Selection