Toby Tunes in to IPTV ...

04/15/2005 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

There is no one more adept at uncovering emerging business and consumer trends – and more entertaining in discussing them – than Toby Smith. Here, he looks at Internet-based television, and highlights some of the potential winners of the upcoming IPTV Wave.

"Internet Protocol Television, or IPTV, is an emerging technology that will allow you to get limitless channels, video-on-demand, and even video-spouting Web sites. Telecom analysts predict that IPTV is the future of television. About 4.5 million homes in Europe are expected to have IPTV by 2008. US phone companies could have one million video customers by the end of next year and more than four million customers by the end of 2008. What IPTV means, ultimately, is that your television tuner will connect to your home hard drive, and you will create your own television and movie network.

"A few infrastructure plays will be winners here. Verizon (VZ NYSE) has announced fiber builds in 12 states and expects to have more than three million homes with fiber this year. Its capital investment alone could total some $20 billion by 2010, according to Bernstein Research. SBC Communications (SBC NYSE) has similar plans except that it will not put fiber to the home but rather to the neighborhood. It will still depend on higher-speed DSL to cover the ‘last mile’ to the house.

"Harmonic (HLIT NASDAQ) and its video offering will compete with satellite on package and price, and with cable on value, according to their execs. Westell (WSTL NASDAQ) with their cordless VOIP phones will also do well. Even Microsoft (MSFT NASDAQ) is an IPTV winner. They really have the early lead with the telcos and cable players because they will sell IPTV software to any player.

"The dark horse in the IPTV wars could be Apple (AAPL NASDAQ). Its Mac Mini is very easy to use and, in many ways, operates like a digitial video recorder on steroids (with a nice little PC thrown in for free). It is a small leap to bring the ‘MyPod’ to wirelessly run your home television network. I also think some of the suppliers much further down the chain—such as MRV Communications (MRVC NASDAQ) and Juniper Networks (JNPR NASDAQ), which supply equipment to the companies upon whose networks this content will travel—are getting attractive again. Stay tuned. The fun’s just getting started."

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