RESEARCH AND INVESTMENT BANKING FIRM Think Equity says it believes that American telco AT&T (the former SBC) will scale back its IPTV rollout for a number of reasons, the primary one being that providing a 25 Mbps service to consumers is simply not enough.
"We believe the so-called ‘Project Lightspeed’, substantially built on VDSL2, will see a scaling back in terms of homes passed over the next two to three years," says the Think Equity release. "The target had been 18 million homes in three years… We believe the fundamental reason AT&T is likely to do this, is that it will realize it will need a lot more bandwidth to be competitive with all-wired IPTV when competing against cable TV and satellite companies."
With Canadian telcos such as MTS, Bell and Telus talking about delivering a 30 Mbps IPTV service in their territories using the same or similar technology as AT&T – and with cable companies able to much more easily (through new technologies like switched video and channel bonding) get to 100 Mbps and beyond, one wonders if the Canadian telcos are re-thinking their own plans, too.
"Starting this quarter, we believe AT&T will roll out Lightspeed IPTV to a handful of cities, ultimately passing perhaps half as many homes as originally planned," continues the release.
"Then, we believe AT&T will switch gears from VDSL2 around 25 Mbps to something faster, possibly faster versions of VDSL2 running on shorter loops with potential for as much as 100 Mbps. We believe AT&T is also seeing the potential necessity to roll out GPON (Gigabit passive optical network) or GEPON (Gig-E PON) to single-family homes, particularly in affluent areas. We believe the current VDSL2 technology could be fine for most apartment buildings, especially on loops short enough where actual throughput could be a lot closer to 100 Mb/s than 25."
AT&T may blame the delay on any number of reasons, including slow upgrade cycle to VDSL2, Microsoft’s unstable software, lack of working HDTV, and probably the pending BellSouth merger, says the Think report.
"Either way, we believe the fundamental reason is that AT&T is likely realizing that 25 Mbps isn’t going to do the trick, but rather that it needs to plan for 100 Mbps or more to the home today, with a path to Gigabit Ethernet to every home in the next 5-10 years at the most.
"We don’t think 25 Mbps will be enough to be competitive with cable TV and satellite. Let’s take a fairly typical U.S. household with three TVs. Those three TVs will soon be HDTVs, as one of them may already be. Each TV will, in many cases, have a dual-tuner HDTV DVR. Each HDTV stream/broadcast today is 19.2 Mb/s, but (new compression technologies) promises to cut that by approximately half. So let’s say 10 Mb/s per HDTV stream/broadcast," continues the report.
"In a baseline scenario, we have three TVs multiplied by dual streams and 10 Mb/s. That’s 60 Mb/s just to be competitive with today’s cable TV and satellite in a small household. Let’s further assume, however, that this is a larger home, with 6 HDTVs and the DVRs become triple-tuner instead of dual-tuner. Then we are talking about 180 Mb/s, or beyond the capabilities of today’s VDSL2 even over short distances.
"Of course, we haven’t even talked about the demand for ‘regular’ Internet data, including Internet TV, or telephony, which is fortunately not very demanding. People may also want videoconferencing — in HDTV! — and security monitor cameras everywhere (also in HDTV!), plus things such as continuous data storage mirroring. All of these things add to the bandwidth budget. We believe it is the combination of all of these things that will soon make AT&T realize that its 25 Mbps plan is like going to war with pitchforks when the enemy has laser-guided robots," adds the research.
"Yes, there are a few households for whom 25 Mb/s will be enough. Late adopters of HDTV and multi-tuner DVRs come to mind, as do extremely small households, and lower income households. But for the rest of America, the commanding heights and even the regular Joes of the middle class, we firmly believe that 25 Mbps is not even close to being competitive in a switched TV world. Our prescription is that most apartments can be satisfied with 100 Mbps today, but that it is not a prudent starting point for the many single-family homes that are likely to consume even more, even in the near term."
