Analysis: Cisco Looks to Own Consumer IPTV

Cisco and SA ConvergeFor a long time, Cisco was only focused on high-end corporate sales. This started to change with its acquisition spree. Back In June 2003 it acquired Linksysin order to attack the home and small business markets.

Under the Cisco banner, Linksys have madefurther acquisitions, including Kiss Technologies whoproduce DVD and media streaming solutions (at the higher end of the consumermarket).

Now Cisco have acquired Scientific Atlanta (SA), a massive company, who make set-top-boxes (STBs)mainly for cable companies, but more recently in the IPTV space (i.e.they have an Ethernet connection and video out/SCART socket or equivalent).

IPTV the future of TV
It’s now widely agreed that the future of broadband is what’s known as triple-play (the combinationof Internet, voice and video). In the past, cable companies have held avirtual monopoly on this market as CATV (cable TV) was the only technology thatcould deliver the bandwidths needed. However with the advent of new DSL (DigitalSubscriber Lines) technologies such as ADSL2+, they too can be usedto deliver triple-plays.

Cisco and SA ConvergeDSL is much cheaper to install as it uses existing phone cabling, ratherthan CATV which requires digging up the road, installing fibre tothe street and co-axial cable to the home (this may not be true forgreenfield sites, but in countries with existing infrastructure likethe UK it is).

In Europe, IPTV is starting to take off in a big way, broadband pricesare plummeting as operators offer the basic services for very low cost,hoping customers will take premium services.

In the UK, Sky acquired Easynet (a local loop unbundler) and they aregoing to launch an IPTV service next year (possibly more).

Cisco has a lot of clever people working there and as has seen the market grow. Now they want theirpiece of the pie. Hence the SA purchase.

Core networks
It’s not like IPTV is new to Cisco. They’ve have had an IPTV solution for several years, but theirs was aimed atthe enterprise customer (i.e. big businesses).

Cisco’s core business is, and will continue to be, selling high-endnetwork equipment to the telecoms and cable companies, ISPs, etc. All of this high-end network equipment can be IPTV-enabled.

Cisco and SA ConvergeThough Cisco have bought Scientific Atlanta, who manufacture the consumerpiece of the puzzle, by expanding the consumer take-up of IPTV they arealso expanding the core network business. Don’t forget, running IPTV servicesrequires a lot of investment in network infrastructure i.e. moreCisco kit.

Cisco are coming close to becoming a fully horizontally integrated company. After the SA purchase, there’s only a few bits missing. The actual content creation, which we think it is highly unlikely to get into – it’s far too messy, involves troublesome humans and is an unknown to them.

The other is the content encoding/delivery part. Who knows, that maybe another acquisition on Cisco’s horizon?