Nortel, Alcatel Eye the Next Big Thing: Video

Video and IPTV

If networking vendors are to be believed, the killer app of the next wave of Internet growth is video — and facing a harsh climate for sales in other areas, they’re scrambling to cash in on the trend in any way they can.

Alcatel-Lucent and Nortel Networks are two of the vendors competing for a slice of the pie in IPTV . Each is facing financial and organization changes as it works to cope with a slumping economy — and both see video as an opportunity to improve their fortunes.

“Video services are in a very privileged position, in the sense that people will give up a lot of things before they give up their TV,” Peter Ashton, Nortel’s (NYSE: NT) IPTV product marketing manager, told “IPTV is almost a recession-proof kind of business. We’re still seeing lots of demand and these are large-scale projects that take time to roll out, so we haven’t seen any impact from the current economic situation.”

That’s in contrast to Nortel’s overall business, however, which is being impacted by the economy and recently announced financial loses and job cuts.

The strength of IPTV may be one reason Nortel is pushing hard in the market, through efforts like a new partner program for its Nortel Video Services Platform (VSP) 9500. The VSP 9500 is a software platform that abstracts the IPTV application from the underlying hardware infrastructure. The idea is that it can enable an application developer to build an application without worrying what’s running underneath.

Ashton noted that Nortel provides a set of APIs , so even if things change on the underlying networking, the APIs will remain constant.

The new partner program is an effort to expand the usage of the VSP 9500 which until now had just been something that Nortel had been using. Ashton noted that the APIs had not previously been fully documented either, but now they are allowing third party developers to fully take advantage of the system.

Alcatel-Lucent (NYSE: ALU) is also aggressively going after the IPTV market. The company, which was formed as the result of a 2006 merger between Lucent and Alcatel, has been losing money since its formation and recently replaced its CEO and chairman.

Jim Guillet, senior director of marketing for Alcatel-Lucent’s combined video, Internet and voice offerings — dubbed Triple-Play — said that the IPTV market and video in general represent a different service to deliver than just simply Internet access.

According to his company, IPTV needs a full architectural view of an end-to-end network to deliver high levels of bandwidth with the high concurrency that the technology requires.

“It’s called prime time for a reason,” Guillet told “Lots of people are watching at the same time.”

At the core of Alcatel-Lucent’s approach to video delivery is a strategy it calls Triple Play Service Delivery Architecture 2.0 (TPSDA). Guillet explained that TPSDA combines new functionality in Alcatel-Lucent’s broadband access equipment, the broadband service aggregators and their broadband service routers.

Among the key elements is the 7750 Service Router, which was announced earlier this year. The 7750 is powered by Alcatel-Lucent’s 100-gigabit-per-second silicon chipset called the FP2.

Guillet noted that one of the things that TPSDA components offer is the ability to enable application optimization in the network itself. That’s an important factor for video delivery for a number of reasons. For instance, high-definition TV requires sophisticated coding and compression — the degree of which can make for a slow channel change unless addressed, Guillet said.

With the TPSDA 2.0 components, Alcatel-Lucent has embedded into the network the ability to cache and store video content, and do it much closer to the subscriber. As a result, he said the company can enable channel-changing that takes less than half a second.

[cob:Special_Report]Guillet also said the system can detect video errors in the video stream itself to make sure that they don’t show up on end users’ TV screens. And there are other potential benefits to service providers as well.

“It’s more than just big pipes. It’s the intelligence to create value with the bandwidth,” Guillet said. “One of the tie-ins is the ability to insert advertising.”

Both Nortel and Alcatel-Lucent see continued growth ahead in the market, although both acknowledge Cisco (NASDAQ: CSCO) as the main competitor to beat. And Cisco’s not standing still.

Earlier this week, the networking colossus rolled out a new, high-end video router, the ASR 9000. Cisco also announced a deal with the New York Yankees to wire the team’s new stadium for advanced video and wireless Internet capabilities.

A key part of that work also involves ensuring that high-definition video feeds are distributed to each of the baseball stadium’s 1,100 displays, which can be individually controlled by either viewers or the network’s operators, resulting in a high degree of interactivity.

Likewise, Alcatel-Lucent sees the future of video delivery involving further evolution in the way users consume content.

“The industry generally is looking at the taking notion of taking IPTV to the next step, which is that the service becomes increasingly more personalized and interactive,” Guillet said. “Video will also be visible not just on the home TV but across multiple screens. The infrastructure and intelligence to make that happen is very exciting.”

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