MoCA is driving home networking sales, says Infonetics

Multimedia over coax (MoCA) helped drive the global home networking device market to $4.9bn in the second half of 2012, up five per cent on a sequential basis, according to US firm Infonetics Research.

MoCA-enabled video gateways are identified as a key growth area for home networking device manufacturers, particularly those targeting North America.

Deployments of MoCA-enabled set-top boxes are also “slowly reaching a boil”, according to Jeff Heynen, directing analyst at Infonetics, with sales estimated to have risen 23 per cent in the second half of last year alone.

Meanwhile, revenue from shipments of broadband routers grew six per cent in the second half of last year on a sequential basis, thanks to shipments of higher-end 802.11ac and 802.11n WiFi routers in North America and EMEA (Europe, the Middle East, and Africa).

“We want direct relationships…” Jan Frykhammar, CFO, Ericsson

Ericsson’s first quarter profits fell year on year to SEK1.2bn (€139m) from SEK8.8bn for the same period in 2012, largely due to the boost given to 1Q12 numbers by the firm’s exit from the Sony Ericsson device JV. While the vendor recorded a two per cent uptick in sales to SEK52bn it was hit by currency fluctuations and a disappointing performance from its network rollout business.

Sales in the Networks and Global Services units were up three and four per cent respectively, hitting SEK28.1bn and SEK 21.5bn. But Support Solutions, behind which Ericsson has been putting considerable weight in the last year, saw sales drop by 19 per cent to SEK2.4bn.

Managed and Professional Services held steady but the Global Services unit was pulled down by  the Network Rollout unit, which saw operating income drop by 73 per cent to a loss of SEK1.1bn. Ericsson CFO Jan Fryhammar described this as “nothing dramatic” and due to unforseen delays in LTE deployments, particularly in Latin America where Ericsson had “some idling resources,” he said.

Frykhammar said that, while there were positives in the top line, and in the profitability of the Networks division, he was concerned by Ericsson’s cashflow. “I will never be happy when the cashflow is negative,” he told Telecoms.com. “We have a tendency towards a strong finish on our operating cashflow but this time it was negative SEK3bn. That’s something we will work hard to improve going forward.”

North America and North East Asia remain the most important regions for Ericsson, given the advanced state of LTE deployments. Frykhammar said that one of its key North American LTE projects (presumably Verizon) had now “peaked” but that he expected high activity levels in the market to continue, shifting to capacity rather than coverage as the year goes on.

In North East Asia Ericsson’s most important upcoming project is the deployment of TD-LTE by China Mobile, although that operator’s retreat from GSM investment impacted on Ericsson’s first quarter, Frykhammar said.

While Ericsson’s core business will remain the provision of equipment and services to the world’s telecoms operators long into the future, the firm is looking to other sectors as operators endure turbulent times. Frykahmmar pointed towards contracts with shipping giant Maersk and energy supplier Eon as examples of important diversification, as well as its growing business in the media segment.

But the firm wants direct relationships with customers and, in pursuing them, could find itself at times in competition with its core customer base. “We will expand into other customer bases,” said Fryhammar. “We want to do direct business, though; we don’t do indirect sales.”

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Over-excited chess metaphors aside, entering the cable sphere could prove to be a panacea for Vodafone. The operator has long complained about the line rental it has to pay to Deutsche Telekom, and has raised the possibility of transferring all of its DSL customers to LTE; KDG’s cable infrastructure would give Vodafone access to around 8.5 million unique subscribers (for TV and voice as well as broadband), and the possibility of attracting more of the 15 million homes that KDG’s infrastructure passes. Even better, Vodafone would gain access to the apartment blocks and housing associations with which KDG has signed exclusive deals, effectively giving it a captive audience.

The purchase would also serve as a pre-emptive move against Deutsche Telekom’s next-generation broadband plans; Vodafone currently provides around 3.3 million customers with DSL services via unbundled local loop, which would be blocked if the incumbent gets its way to use vectoring technology to increase the bandwidth of its VDSL services (or at least severely curtailed, going by Deutsche Telekom’s concessions to competitors). Buying up a ready-made cable infrastructure protects Vodafone against such moves, and gives it a faster broadband offering that it can sell at more aggressive prices.

Moreover, this doesn’t take into account the implications of expanding its TV footprint. In terms of subscribers Vodafone’s current IPTV offering lags behind Deutsche Telekom’s Entertain IPTV offering, which itself takes only a small share of the market compared to the cable players – but buying KDG would make it Germany’s largest TV provider in one fell swoop. It also has the neat perk of cutting off further expansion by Liberty Global, which already owns Unity Media and Kabel Baden-Württemberg and has itself been linked with the purchase of KDG.

The ability to offer multiple services, particularly TV services in the living room or, increasingly, on mobile devices, will become ever more crucial to operators’ ability to attract and retain customers. Buying up KDG would take Vodafone from a niche fixed player to allowing it to compete with Deutsche Telekom on almost equal terms in just about every area.

Ericsson is expanding its skillset

Swedish equipment manufacturer Ericsson has announced its intention to acquire the IT services capabilities of the Devoteam Telecom & Media operation in France.

The deal will see 400 France-based IT services professionals join Ericsson, including the company’s TV SmartVision operations, which is in line with Ericsson’s strategy of being a ‘one stop’ shop.

Devoteam’s main competences are in the areas of consulting and systems integration for operations and business support systems, service delivery platforms and applications, IP Multimedia Subsystems, IP and radio networks and TV.

“Acquiring activities of Devoteam adds unique expertise in complex, strategic and technical consulting engagements that will enable us to immediately enhance the value that we bring to our customers,” said Magnus Mandersson, Ericsson’s executive VP and head of business unit global services.

Ericsson’s strategy is focused on leveraging assets that it has acquired in recent years. Building on the acquisition of Telcordia in 2011, B/OSS has become a key strategic area for Ericsson to focus on as it is so closely tied to SDN (software defined network) evolution, according to CTO Ulf Uwaldsson.

Read more about Ericsson and NSN’s strategies

Ericsson has also recognised the challenge in integration of wifi technologies with those developed by the 3GPP. Building on another acquisition— BelAir networks in April of 2012—Ericsson is now tackling the issue with a wifi controller interface that talks to the 3GPP core, allowing operators to apply the same policy control and charging mechanisms. The company unveiled the first product to make use of this technology in October, with the launch of a stadium optimised wifi access point and controller.

And with Redback, which gave it strong assets in IP routing technology, the firm acquired the “glue” to hold broadcast, IT and telecoms services together in the broadcast services division of Technicolor.

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Boxee is working around rights issues

It’s becoming a cliché in TV land that content-rights restrictions, and not technology, are slowing the pace of industry development. At CES, Boxee and Dish demonstrated workarounds that have allowed them to offer two products frequently blocked by rights issues; namely cloud-based DVRs and out-of-home live TV viewing.

Network DVRs have kept many a media lawyer in business over the last decade, but Boxee’s Cloud DVR – different from a network DVR, the company is keen to point out – provides a nice workaround to this. When users chose to record a show using the Boxee DVR, the content is pulled down to the Boxee box, transcoded in the box and sent back up the user’s broadband network to be stored in the cloud. This avoids the issue that has stymied many a network DVR, namely that copies of the content are made and stored before they hit the consumer’s set-top box. Boxee contends that, because content reaches a user’s set-top box, its solution is perfectly legal.

Dish’s latest iteration of its Hopper whole-home DVR will cause similar legal pondering. In the US at least, TV Everywhere viewing has been for the most part tethered to the home due to licensing restrictions. This year, Dish has added a new version of the Hopper integrated with Echostar’s Sling technology which takes a user’s live and DVR content and transfers it to their iOS – and soon Android – devices, wherever they are, inside or outside the home.

The Boxee box

Some have said that the grounds on which these services sit, particularly the Hopper, are legally sketchy. But the bigger issue is that both companies have been forced into workarounds to launch services that consumers – paying consumers at that – want. And this is a problem for tech guys, content guys and consumers alike.

Samsung TV

Samsung’s CES 2013 press conference marked an important but subtle change in the rhetoric of the world’s largest TV panel manufacturer.

The Korean vendor promised a new world of possibilities in home entertainment this year, introducing a full line up of larger screen TVs, including its first 85-inch Ultra High Definition TV (UHD TV) and its flagship Smart TV, the F8000 LED TV.

The UHD TV offers four times the pixels available on existing 1080p resolution, to deliver greater detail with an audio experience to match through 120-watt array speakers built into the frame of the television.

While the F8000 LED TV is the first Samsung television to feature a quad-core processor and support for the high compression video codec, HEVC, which delivers double the video quality over the same bandwidth.

Each of Samsung’s newest televisions feature the company’s S-Recommendation with Voice Interaction technology which analyses a user’s viewing history and the popularity and release dates of TV programs and creates a personalised menu of on-air, on-demand and app content for each viewer. The interface is now capable of understanding full sentences and natural language, Samsung said.

Giles Cottle, Principal Analyst at Informa Telecoms & Media, said at the show that what Samsung and its peers have learnt is that it is not just content, but user experience, that will win the battle for the living room.

“Long gone are the days when adding the likes of Netflix et al to a Smart TV platform would get punters and pundits alike salivating – that low-hanging fruit is long gone. Hence the focus on the addition of HEVC -delivering consumers better video quality for the same bandwidth- and faster changing between apps and video content, ironically an area that TV operators have long touted with fast channel change. Expect the boundaries between the two to shrink further in the coming years.”

TV took a much lower profile at Sony’s press conference, with a focus on hardware not software.

The press announcement kicked off with an 84-inch 4K TV as well as smaller 55-inch and 65-inch 4K TVs at a “more accessible price range”.

But more interesting was the unveiling of the world’s first 4K video distribution service, which offers native 4K movies from Sony Pictures and other 4K content creators.

“Sony’s 56-inch, 4K OLED display got the first audible “ooh” of the day from the assembled crowd,” said Cottle from the show. “But Sony’s Smart TV strategy still appears muddled, but this cannot be helped by the fact that its forthcoming next generation PlayStation console has not launched yet, making the creation of a converged content platform across all of Sony’s multiple devices very difficult. Expect more focus on this area in 2014.”

The STB unit will be moving to a new home

Web giant Google has offloaded the Motorola Home business, which primarily makes set top boxes (STBs), to US firm Arris, in which it will also take an ownership stake.

Arris is to acquire the Motorola Home business from Google-owned Motorola Mobility, for $2.35bn in a cash-and-stock transaction. Under the terms of the agreement, Google will receive $2.05bn in cash and approximately $300m in newly issued Arris shares, representing an approximately 15.7 per cent ownership of the company.

The deal supports Arris’s next-generation consumer video products and services offering as well as expanding its patent portfolio and providing a license to a wide array of Motorola Mobility patents.

“This transformational combination of two complementary businesses will create a leading end-to-end provider of today’s video, data, and voice products and tomorrow’s next-generation IP-based broadband products,” said Bob Stanzione, chairman and CEO of Arris. “Ever-expanding consumer demand for bandwidth will continue to drive growth across cloud and network technologies we provide that enable innovative home entertainment products and services.

“It also adds expertise in video and a larger presence in the home to our core strengths in voice and data, ensuring we are even better positioned to capitalize on and manage the evolution toward multi-screen home entertainment.“

Together, Arris and Motorola Home will have a global presence with over 500 customers in 70 countries, more than tripling Arris pro forma combined revenue to approximately $4.7bn for the trailing four quarter period ended September 30, 2012.

US online video service Netflix has released the latest data for broadband connections in the US which carry its streams, and they make some interesting reading, including the revelation that Google Fiber is now the most consistently fast ISP in the country.

Writing on the Netflix blog, Ken Florance, Vice President of Content Delivery at Netflix, writes: “Broadly, cable shows better than DSL. AT&T U-verse, which is a hybrid fibre-DSL service, shows quite poorly compared to Verizon FiOS, which is pure fibre.”

Comcast is the country’s top-ranked cable operator, coming in at third place behind Google Fiber and Verizon, followed by Charter Communications, which has slipped two places.

“The average performance is well below the peak performance due to a variety of factors including home Wi-Fi, a variety of devices, and a variety of encodes,” added Florance.

“The relative ranking, however, should be an accurate indicator of relative bandwidth typically experienced across all users, homes, and applications.”

The Netflix exec adds that from now on, the company will be publishing monthly rankings of major ISPs based upon their actual performance across all Netflix streams.

Broadband providers of America – consider yourselves warned…

Netflix leaderboard for November 2012

Smart TVs will remain dumb

Over 220 million Smart TV sets will be sold worldwide in 2017, up from the 54 million that will be sold in 2012, according to Informa Telecoms & Media’s latest Smart-TV device forecasts.  Around 31 per cent of households worldwide will own at least one Smart TV in five years time, according to Informa, with household penetration much higher in North America (63 per cent) and Western Europe (64 per cent).

However, while Smart-TV connection rates are rising, they will continue to lag the connection rates of games consoles and media-streaming devices, such as Apple TV and Roku.

With their long lifecycles, TVs are simply not the right device to be the hub of the digital home. Instead, devices that are regularly replaced, including smartphones, tablets, set-top boxes, media streamers and games consoles, will be the key devices in the digital home experience. Smartphones in particular, with their short lifecycles and rapidly increasing processor power, will continue to define what ‘Smart’ means.

“Informa estimates that in 2017 more than half of the 800 million Smart TV sets by that time will only be used as dumb screens,” said Andrew Ladbrook, senior analyst at Informa Telecoms & Media. “Moreover, while any ‘Smart’ TV bought in 2011 or 2012 can be used for streaming online video services for a few years, they lack the processing power and the necessary hardware to perform those Smart-TV functions that will be standard in 2015. Simply put, any Smart TV purchased in 2012 will be effectively obsolete by 2015.”

The manufacturers’ short-term support for their Smart-TV products will also prove a hindrance. New services will continue to be launched solely on the latest Smart-TV models – HBO Go, Skype, Onlive, BBC’s Sport app – which means that users who bought last year’s device are excluded.

The fragmentation of platforms and standards continues to plague the Smart-TV market. Apps cannot be easily released across multiple devices, since each Smart-TV platform demands bespoke development. This situation benefits the current market leaders Samsung and LG as they attract the top services first due to their strong positions. And, while Informa believes that Google TV or Android will come to be the default Smart-TV OS for Smart TVs, that is still some years away.

“If TVs are going to be truly smart, they must do more than offer a wide variety of online video services,” Ladbrook said. “Instead they must add advanced functionality including voice control, motion control, advanced advertising, attractive user interfaces and two-way communications with other smart devices – so-called ‘second screens’ – allowing these devices to send video to the TV and also know what is being watched. Manufacturers should focus less on adding more content and more on improving how users can interact with that content.”

Global online video market will be worth $37bn in 2017

According to the latest forecasts from Informa Telecoms & Media, the global online-video market will be worth $37bn in 2017, driven by the popularity of services like Netflix and YouTube. This figure is made up of the three key video-revenue streams of advertising, subscriptions and transactions. Despite the market maturing, advertising will continue to be a larger revenue generator than subscriptions in 2017, as it is in 2012.

Online video remains a small, but growing, proportion of total TV and video revenues. Informa estimates that it will account for eight per cent of such revenues by 2017. By the end of the decade, if current growth rates continue, it will account for over ten per cent of revenues. However, its value in the market today is concentrated among only a few players.

Giles Cottle, principal analyst and author of “OTT Video Revenue Forecasts” at Informa Telecoms & Media said, “It’s clear that online video, today, is worth much more than the digital cents and dimes of yore, and is attracting real, and growing, revenues. But this value is concentrated around a select few players. We estimate that Apple, Google, Netflix and the global broadcasters (including Hulu), combined, account for about 70 per cent of all online video revenue today– so if you aren’t one of these players, then the chances are you aren’t making a great deal of money from online delivery today”.

As well as a growth in consumption, revenues will be driven by publishers and operators monetizing content on devices beyond the PC, such as tablets and connected TVs. From an advertising point of view, live online video content, which is not being monetised today by most providers, will also drive the market. And pay-TV operators will also have a key role to play.

“The big change to the OTT revenue mix will come when operators start to offer not just low-cost online services, like Sky’s Now TV, but stand-alone online versions of their services that come close, in terms of content availability and price, to their core Pay TV services today. Even very modest take-up of these services will completely distort the online video market,” said Cottle.

US dominance of the global market will wane over the next five years, but the US will still contribute over half of all revenues in 2017. The US accounts for approx 75 per cent of revenues today, but that will drop to less than 60 per cent in 2017 as Europe and Asia grow more quickly. Business-model wise, advertising will still be the largest revenue stream in 2017, as it is in 2012.