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The importance of using these more modern codecs cannot be overestimated because they can halve the bandwidth required to run an IPTV service. There is not much to choose between these two codecs, because in principle they handle compression in similar ways. This is evidenced by the fact that the licensing authority, MPEG LA has had to agree that at least 12 companies have contributed essential patents required to make the VC1 codec work (a standard version of Microsoft’s codec that is being ratified by the Society of Motion Picture and Television Engineers). This means that virtually the same companies that will receive technology royalties from H.264 will also get the royalties that Microsoft had hoped to keep for itself.

This fact is only recently discovered and now Microsoft is arguing with the other 11 consumer electronics companies, thought to include Sony, Toshiba, Matsushita and Philips, over just how to license this technology. The wrong licensing terms and Microsoft will suddenly find that its own use of the codec in Windows Media Player, will suddenly mean that even Microsoft cannot afford to “give” the player away. The net result could mean that the standard is abandoned. “A market with only one new codec to worry about would make set tops easier to build,” agreed Reeder.

This affects ANT, because if more complex chips are needed in set tops this competes for the total budget of the set top. ANT’s software doesn’t handle any of this codec work but Reeder says that the browser is the toughest part of the programming within a set top.

“The other jobs are decoding, which is managed by a middleware client and the real time streaming protocol stack, which operates below the browser level and a media player of some sort. The browser is the glue that brings all of this together and it is the most complicated piece of software in the set top. We have 140 man years of development in our browser.”

But in another guise Microsoft is trying to muscle in on ANT’s market and threatens to take it out in one fell swoop.

Hidden interfaces

The approach to menuing and handling remote control commands used by Microsoft in its forthcoming IPTV will do away with the browser all together. Microsoft has been working with Alcatel, an existing licensee of ANT’s, towards IPTV. “The Microsoft approach is an entirely closed solution. They don’t use browser technology in their set top design, in direct contravention to how everybody else implements the technology. “In effect, Microsoft is building a set of integrated applications which are all proprietary and which talk to each other using .NET,” says Reeder This will mean that no external software can be written for it without Microsoft’s blessing, because all of the interfaces are hidden.

“This won’t work in IPTV, and Microsoft is a little behind the thinking here. The Telcos will not buy into a closed solution, and Alcatel is trying, with some success to soften Microsoft’s approach and embrace other people’s products. The way IPTV has built up is that it relies on open networking so that everything can be multi-sourced.

“We understand that Thomson now has two products lines that do exactly the same thing. One for $600 to $700 with the Microsoft software on it, and one for $100 to $150 that uses our technology.”

One of the biggest Telcos in the US, SBC Communications has already pledged itself to use the Microsoft IPTV software when it comes available, as it rolls out its ambitious “Project Lightspeed,” costing $4bn to $6bn in the US.

But the software is thought to be up to 18 months away from completion and although Microsoft already has a code base, it is not expected to be robust enough for production use for some time. SBC also has an interim IPTV set up using 2Wire set tops, and some analysts have suggested that it will never deliver the Microsoft version because this interim step will prove too popular.

“When operators build services they want to see what their service is going to look like on the screen and so they develop the look and feel using our browsers, and then they know it’s available on virtually any set top they later want to buy,” said Reeder. At the moment ANT’s biggest clients are coming from the Far East with Chunghwa Telecom’s IPTV pilots in Taiwan, and others in China, each expected to absorb as many as 500,000 units during 2005. “The Chinese operators are expecting to soon be installing IPTV in the low 10 millions, and that’s what we are really excited about,” says Reeder.

Even that number, as IPTV grows exponentially, will only make ANT something like a $50m revenue company, but with a cost base of just 42 staff, there’s plenty of margin in the business for it and its value could be considerably higher.

Copyright © 2005, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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