Overcoming IPTV Challenges Opportunities

and Advantages Create Momentum To Overcome AdversityKen Lowe

VP Strategic MarketingSigma Designs, Inc.

3

US Video Market Potential

US Households & Subscribers– US Households: 116M– TV Households: 112M– PayTV Subscribers: 97M

* Data based on 2006/2007 census and estimates

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pay TV Free TV No TV

Income & Expenditures – Median HH Income: $ 48.2K – H/H Income >$100K: 19.2%– Avg PayTV Cost:

$60/mo

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TV Service Operator Mix

Cable Satellite Telco

Key Trends • Emergence/growth of telco (IPTV) services• Emergence/growth of triple-play services

5

Service Crossovers

0

5

10

15

20

25

30

Q204 Q205 Q206 Q207 Q208

Telco IPTV Subscribers (W/W)

6

Major Feature Trends

Trends Portend a Paradigm Shift

High Definition

Whole Home DVRWhole Home DVR Wider Media ChoicesWider Media Choices

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High Definition

• Enables expanded quality and capability

– Large screens with life-like image quality

– Multi-channel viewing, mosaic browsing, web portals

• Requires 5X more bandwidth per channel

Broadcast Forces a tradeoff of HD or quality against the number of channels

IPTV Enables an unlimited number of channels for the bandwidth of one.

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Whole Home DVR

• Matches program choices to viewer time windows

• Currently a US market phenomenon

• Requires multiple simultaneous channels

Broadcast Requires one tuner per simultaneous channel recorded (or viewed).

IPTV Can record as many channels as bandwidth allows.

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Wider Media Choices

• Video-On-Demand (VOD) – expanding home theatre concept with premium content.

• Over-the-top-Internet (ala YouTube) – expanding the Internet TV concept.

• Home Media Center (photos, music, video) – expanding TV as an access portal concept.

Broadcast Requires second mechanism with IP like capabilities.

IPTV Unifies access and display of all media types.

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CPE Evolution

High Definition Television

Media Processor SoC

Client Software

Hard Disk Memory

Video Decoding (H.264, VC-1, MPEG)Graphics Acceleration

Audio Decoding

Input & SecurityControl

Host CPU

DisplayOutput Control

IO Ports

Modems &

Tuners

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Network Evolution

Telco

•Voice Delivery•Low Speed•2-way

Phone Network

•Data/Packet Delivery •High Speed•2-way

IP Network

•Video Delivery•High Speed•1-way

Broadcast System

Cable

Satellite

Terrestrial

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Broadcast Advantages/Issues

• Bandwidth: currently sufficient for well over 100 channels with some SD and HD mix

• Infrastructure: currently passes > 100M homes

• Incumbancy: widespread usage & comfort

• Cable Issues:– Gracefully addressing trends (HD, DVR, Media Types) – Movement to DOCSIS 3.0 and Tru2way – new infrastructure

• Satellite Issues:– One-way medium … uncertain solutions for new media types and no

opportunity for triple play offerings.

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IPTV Advantages

• Channel Selection: – Enables unlimited number of channels– No trade-off with HD or QoS

• IP Protocol Advantages:– Instantaneous channel changing (tiered servers)– Enables all-IP services integration

• Simultaneous Channel Access w/o Cost:– Enables multiple channel viewing – Enables near limitless DVR recording

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IPTV Challenges

• Consumer education and demand development

• Innovative service offerings – multiview, etc.

• Cable adoption … broadcast to IP transition – Movement to DOCSIS 3.0 enables/accelerates IPTV– Increased investment (>$13B/yr currently)

• Telco coverage … more homes passed– AT&T now … Verizon poised …others needed– Large continuing infrastructure investments

• Telco bandwidth expansion– Need 5-8 Mbps per TV per room serviced for HD

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Conclusions

• Video Service is a Large Revenue Opportunity but Triple-play Service Will Be Larger

• IPTV Offers Many Advantages and the IP Network Phase is Just Beginning

• IPTV Will Eventually Become The Dominant TV Delivery Method … Shared By Telco and Cable

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Question & Answer

Q & A

Thank You