Motorola Makes Swedish IPTV Buy

By Ed Sutherland

Motorola today announced plans to buy Kreatel Communications AB, a
Swedish company that develops set-top boxes for Internet television (IPTV).

Although IPTV is not expected to challenge U.S. cable offerings for
several years, broadcasting television via the Internet is a growing
market, according to analysts.

While television delivered via the Internet in the U.S. won’t grow
substantially until 2008, today’s announcement “makes Motorola more
appealing” to telcos hoping to gain entry into the video market, Todd
Chanko, a JupiterResearch analyst, said. (JupiterResearch and internetnews.com are owned by Jupitermedia.)

Motorola shares control of the U.S. set-top box market with Scientific
Atlanta, which Cisco purchased in November for $6.9 billion.

Motorola and
Cisco account for 90 percent of worldwide set-top boxes shipped during
the first half of 2005, according to In-Stat. Kreatel Communications AB
has customers in Spain, Sweden and the Netherlands.

Realizing IPTV has yet to catch on in most of the world, the purchase of
the Swedish developer “is immensely attractive to green field video
networks around the world and provides a critical solution, as service
providers evolve their video networks for the future,” said Dan Moloney,
president of Motorola’s Connected Home Solutions, which is the division that produces set-top boxes.

“This is about Motorola being able to compete in the European market,”
said Chanko. While IPTV in the U.S. is still in its infancy, European
demand for Internet-based television is growing.

Set-top boxes from Kreatel use Linux, a nod toward a recent agreement by
cable operators to open up the equipment for third-party use. Access to
the boxes once was controlled by Motorola, Cisco and Microsoft.

Motorola’s purchase of Kreatel will be completed during the first
quarter of 2006.

IPTV is seen as a way for telephone companies to enter the video market, which is now controlled by cable and satellite. In the U.S., SBC, Comcast and Verizon are all involved in exploring
IPTV.

SBC began testing IPTV in San Antonio, Texas, in November, while
Verizon announced it would expand its IPTV service, which launched last year in
Keller, Texas.

And Comcast last year teamed up with Microsoft for an
experimental IPTV deployment in Seattle.

Microsoft has also determined it is important to get into IPTV, according
to Chanko.

The Vista operating system will power the Viiv media computers, which include IPTV services and compete with Motorola
and Cisco’s control of the set-top market. The software giant has deployed IPTV in Canada and India.

The hesitancy is “really about the labor involved with deployment,”
said Chanko. IPTV requires different hardware and software than
current set-top boxes used by cable or satellite providers.

“There is no inherent consumer demand for IPTV,” he added. IPTV
companies also need to become competitive in pricing.

The 2.7 million IPTV subscribers worldwide is dwarfed by 70 million
satellite and 12 million cable subscribers, according to Michelle
Abraham, an In-Stat analyst.

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