Historically cable, satellite, telephone, and wireless carriers have operated in what were relatively separate service spheres. That has changed – a lot!

•  Over the last several years, satellite companies providing digital video services were able to aggressively compete against cable companies by offering a larger choice of TV channels and often higher quality products.

•  Cable companies responded by not only introducing digital services themselves, but also by seeking new revenue sources by providing cable modem data services, and then voice services.

•  Telephone companies, who had seen their access lines in service decline in recent years due to the impact of cellular service replacing second or even primary access lines, now experienced an additional source of market erosion from cable companies offering voice, video and data services.

•  Telephone companies quickly realized that they had to respond with a similar voice video and data bundled offering – initially focusing on price as a differentiator.

•  Recently, satellite companies have announced plans to offer voice and data services to complement their digital video capabilities.

The voice, video, and data “triple play” service bundle is thus becoming the baseline offering of carriers to consumers; its becoming the table stakes to participate in this market.

• Network and Service Providers recognize the high cost of customer churn.
  
• Like Cox Communications, they know that when they can sell “triple play,” their customers are 48% less likely to cancel their service compared to single service offerings. ( America 's Network, August 1, 2004)
  
• It provides them with the opportunity for up-selling.

Meanwhile, cable companies, seeking additional revenue sources, have begun focusing on small and medium size business customers – a market traditionally addressed by telephone companies and resellers. Their first initiatives in the business market were based on their existing cable modem service. However, given the nature of business data and information technology requirements, cable companies have begun to implement point-to-point Ethernet services for businesses – services that require a network architecture very different from their current design.

Given the current nature of the information networking market, we believe that it is likely that almost all carriers will adopt one of two strategies for deeper fiber penetration.

•  One of those strategies relies on deploying optical fiber cables all the way to a subscriber's home or business – what's called Fiber-to-the-Premises. Advocates of this strategy note the ability of these networks to deliver the quantities of bandwidth required for competitive Triple Play services and the operational savings achieved by carriers when compared to operating copper wire-based networks. In addition, they point out that the costs to deploy these networks have declined significantly – from $7,500 per home in 1993, to $1,650 on average in 2004. Verizon's vice chairman, Larry Babbio has estimated that their costs are expected to fall to $890 per home by the end of 2006.

•  The other strategy relies on deploying optical fiber cables closer to the premises, but terminating them at an intervening node where traffic is then transferred to the existing copper wires already in the ground or on the poles. This Fiber-to-the-Node strategy avoids one of the more costly parts of an installation – the digging around rose beds and driveways of nervous subscribers. Advocates of this strategy note that through the use of new DSL and compression technologies, sufficient bandwidth could be available over copper wires for Triple Play services when distances between the node and the premises do not exceed several thousand feet.

As carriers weigh their options for network strategies in this more competitive market, they must also accommodate several emerging trends related to how subscribers view video. High Definition Television (HDTV) sets have recently achieved a price level that has ignited a surge of consumer demand. As such, there is an increased demand for video in HD format to be viewed on newly purchased HDTV sets. However, HD video consumes three to four times the bandwidth as does Standard Definition (SD) video. Consequently, for cable companies, there is less capacity for more channels, and for telephone companies implementing IPTV over certain FTTN network architectures, there may be inadequate bandwidth on the copper loop.

So how much bandwidth are we really talking about? To simplify the issue, consider how long it would take to download a 2 hour HD movie for later viewing:

• >26 days with 56kbps dial-up
• 11 days with ISDN
• 4 hours at “advertised cable modem rates” of 10Mbps (and closer to 23 hours at the more likely rates of 1.5Mbps)
• Between 1.5 and 2 hours for BPON systems
• 25 minutes at 100Mbps – the speed of Amedia's FTTP systems.

(Kind of puts things into perspective!)

The market demand for upstream bandwidth is also beginning to increase, and will likely continue to do so. File sharing, exchange of large sized digital photographs, and gaming applications are often touted as reasons. However, the availability of consumer targeted HD video cameras, currently selling for close to $1,000, holds the prospect of increasing that demand to a far larger extent than previously thought. The level of detail, the enhanced viewing experience, and the increased sense of presence enabled by the wider aspect ratio of HDTV all have the potential to make video conferencing a far more compelling option than did earlier more limited video conferencing technologies.

So, in just a few years, we have witnessed seismic changes in the world of information networking. Telephone companies are migrating from delivering a limited class of services over multiple networks to delivering a more comprehensive set of services over a consolidated Ethernet network. Cable companies have expanded the capabilities of their existing network to carry new breeds of services, while building new Ethernet networks to provide multiple services to business customers. Satellite companies are expanding the services that they can deliver to their subscribers using multiple networks.

The result of these changes is the evolution of new network architecture elements, such as Service Gateways, smaller remote access nodes (IPDSLAMs), and accordingly, new opportunities for companies such as Amedia Networks.