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Firms Expect to Profit from ATTs Latest Move

The telecom giant promises to broaden the market for IPTVPRINCETON

When AT&T unveiled plans last week to quadruple installation of its television over the Internet service, local companies SES Americom and mPhase Technologies cheered. Princeton-based SES operates satellites that transmit the Internet Protocol Television (IPTV) system that AT&T uses, while mPhase in Little Falls sells software that manages content delivered via IPTV.

AT&T says it will ramp up the rate of broadband network installations for its IPTV service from 10,000 homes per week to 40,000 per week by the end of the year.

Also welcoming the plans is Leapstone Systems in Somerset, a developer of software for IPTV that Motorola Inc. acquired last year. “Leapstone is good at pooling content from TV, Web and mobile,” says Matt Milford, the company’s former chief technology officer who is now a technology fellow at Motorola.

IPTV delivers TV programming in packets of data rather than the broadcast signals that cable and standard satellite services use. IPTV programming moves over telephone lines, enabling phone companies to offer it.

The technology has been the subject of a flurry of additional activity this month:

• Apple Inc. said it was equipping its Apple TV set-top box to download movies from its iTunes service directly to television sets. While the news scares Blockbuster Inc. and other operators of video stores, it broadens the potential audience for IPTV.

• LG Electronics’ U.S. headquarters in Englewood Cliffs teamed up with Netflix, an online movie rental service, to announce plans for a set-top box to stream movies and other programming directly to TV sets. The LG device is expected in the second half of this year.

• Panasonic Consumer Electronics in Secaucus rolled out the first IPTV-ready flat-panel plasma televisions. Four models ranging in screen size from 46 to 65 inches will hit stores starting this spring.

High expectations are being heaped on IPTV. A 2007 report from the Silicon Valley consulting firm Frost & Sullivan estimates that revenue from IPTV service will grow from $423 million worldwide in 2006 to $12 billion by 2013. The report expects the number of IPTV customers to grow from 700,000 in 2005 to 38 million in 2013.

Jon Russo, SES Americom’s senior vice president of marketing and product development, says the company expects to sign up more telecom companies this year. “2008 is the year mass adoption happens,” says Russo. “As operators see more and more value in IPTV as an offer, you’ll see SES Americom in the middle of those deals.”

SES satellites stream regular TV programs in IPTV format for AT&T and other companies through a 285-channel service called IP-PRIME. AT&T started transmitting IPTV programs under the brand name U-Verse in 2006.

Amy Friedlander-Hoffman, senior vice president of programming for AT&T, announced the company’s plans to speed up its IPTV rollout at a conference in New York City last week. She said AT&T expects the number of U-Verse subscribers to grow from 126,000 as of last October to more than 1 million by the end of this year.

Martin Smiley, chief financial officer for mPhase, also expects more telecom companies to begin offering video service via IPTV this year. “We are trying to migrate forward with the telephone companies,” he says.

Smiley says mPhases software, called TV , enables clients to deliver targeted advertising spots to viewers of IPTV service based on age, location and other demographic information. The concept is similar to software that INVIDI Technology in Princeton offers to cable companies and satellite-service providers that offer standard-format TV fare [see NJBIZ Dec. 31, 2007]. “The two key features that will enable us to be enormously successful are the scalability of our IPTV solution coupled with our targeted advertising,” Smiley says.

He says publicly traded mPhase is seeking fresh investment funds to help it push ahead. “We’re a small company and would be looking for some money up front to defray the cost,” Smiley says. The company’s stock has been trading for about 5 cents a share.

Dan Dodson, an analyst with broadband consulting firm IBB Consulting in Princeton, says the market for IPTV service has a long way to go in the United States. “I don’t think you are going to see the Super Bowl delivered through an Apple TV this year or next year,” Dodson says.

He says regular TV programming is widely available in IPTV format in Europe and Hong Kong, where existing cable television service was minimal. With few incumbents to compete with, IPTV has been an easier sell overseas, he says.

Dodson expects IPTV to gain traction in this country as new set-top boxes with data ports to receive data streams are developed. “In the U.S. there’s well over 40 million set-top boxes already deployed,” he says. “Replacing them all is an expensive option.”

E-mail to jpruth@njbiz.com

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