IPTV drives network demand

12 Jun 2007

With the number of IPTV subscribers worldwide forecast to almost double annually from just 3.9 million last year to 103 million in 2011, iSuppli expects the sector to generate $39.1 billion in revenue in five years, up 40-fold from $960.5 million in 2006.

Given this growth forecast, IPTV is set to have a transformative impact on the telecom industry. For one thing, it is set to be the key driver for traffic and more significantly, operators' capex for network upgrades, said Ericsson president and chief executive Carl-Henric Svanberg.

'It's traffic that drives network demand. And IPTV will drive traffic and generate more equipment needs as well as exciting opportunities in service and multimedia,' he said.

Ericsson expects fixed and mobile network traffic to increase tenfold by 2012, driven by the rapid rollout of fixed and mobile high-speed broadband.

With an eye toward the impact of video traffic on carrier networks, Ericsson, like many vendors, has been in acquisition mode over the last six months in order to restructure itself into one-stop shop that can sell the telcos everything they need to compete in the booming IPTV market.

After snapping up IP router vendor Redback Networks last December, the company acquired video encoding firm Tandberg and GPON partner Entrisphere in Q1, positioning itself to be a complete IPTV player.

Meanwhile, the company also created a new business division dedicated to multimedia in January, aimed at providing applications and services for both traditional carriers and new media companies to tap new business models.

While the recent acquisitions has put Ericsson in a stronger position to compete against companies like Alcatel-Lucent, Motorola and Nokia Siemens in the IPTV market, Ovum analyst Martin Garner reasons the Swedish giant still needs to round out its multimedia story through alliances or acquisitions. The multimedia sector requires diversified technologies, and to serve this area, 'Ericsson would probably need to make more acquisition,' he said.

Fierce competition

Moving forward, Garner says, Ericsson is set to face tough competition, especially from Alcatel-Lucent and Nokia Siemens Networks. During the last year or so, the company has been well positioned to capitalize from the complex integration of the two merges and take market share from its rivals.

Garner said Ericsson will still be able to enjoy these advantages in the near term, probably in the next 12 months as the two companies are still busy in dealing with post-merger issues. Nokia Siemens, for example, needs to work out the product approach the venture should take - whether it's going to back a lot of technologies as Siemens used to do or focus on a number of key technologies like GSM and W-CDMA only.

But once these issues have been resolved, he said, they will be fierce competitors, although not necessary in all areas. 'For Ericsson it won't be an easy ride,' he noted.

To begin with, the scale advantage that Ericsson now has will become relatively smaller, as the two merged groups come up to close the same size and similar geographic coverage as Ericsson.

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