COVER STORY

uromedia: With cable having been joined by satellite, DTT and IPTV as digital delivery platforms, what markets are STB vendors addressing? ADB: Cable, satellite, terrestrial, IP, hybrid. SD, HD, advanced video coding, DOCSIS, tru2way Amino: Seven IPTV STBs. Coship: Complete range of Cable, Satellite, DTT, IPTV and Hybrid set-top-boxes. EchoStar: Complete range. Entone: DTT Module available in all products; IPTV STB. Entone Hydra is the only deployed IPTV video gateway. FTA: Satellite, Cable and Terrestrial STBs for SD and HD broadcasts with or without CI and CAS (Conax) support. Humax: Cable, Satellite, DTT, IPTV and Hybrid set-top-boxes. Motorola: Complete range. DTT is available as a hybrid DTT/IPTV. Netgem: Dual hybrid STB: DVB-T & IP or DVB-C & IP; Triple mode DVB-T and IP and DVB-C STB; Dedicated IP or pure DTT STBs on request. Pace: Complete range, covering all delivery mechanisms - cable, satellite, terrestrial and IP. Pirelli Broadband Systems: IPTV-only and Hybrid IPTV+DTT. Siemens: IPTV STBs and Hybrid DVB/IPTV STBs with flavours of DVB-T and DVB-C. A DVB-S hybrid STB is planned for the future. Telergy: Most are pure IP STBs, but hybrid versions for two most popular STBs T401 and T501. Initially, available with a DVB-T tuner, but Satellite to follow. Strong: Cable, a wide range of Satellite and DTT, IPTV, and Hybrid STBs. Telsey: IPTV;Hybrid STB: IP/DVB-T, IP/DVB-C. Thomson: Complete ranges for all types of delivery networks. cable STB (e.g. UPC, NET Brazil, StarHub, etc..); satellite STB (DirecTV, BSkyB etc); DTT STB (Top Up TV, etc..); IPTV STBs (France-Telecom, Falcon, etc..); Hybrid STBs (TV Cabo, Premiere, Austar, etc)

With a range of platforms competing for viewers and subscribers, there are increased opportunities for STB manufacturers and their component suppliers to address several markets. Euromedia spoke to major industry players to get a picture of where the sector is at, and where it is headed.

Coship: Yes, up to 250G. Entone: Yes, up to 1 Terabyte. Products offer external HDD for whole-home DVR capabilities. EchoStar: Highest capacity DVR is 500Gb. FTA: Yes; some products are dual tuner SD PVRs with embedded 250GB HDD (IDL7000 series) and some are PVR-ready over external USB drive. Humax: Offers PVR capabilities as part of range; storage varies from 160 GB to 320GB. Motorola: Yes. 80GB to 250GB. With cable, external eSata >500GB. Netgem: PVR is an option available across product range. Current HDD capacities are 4GB, 40GB, 80GB, 160GB, 250GB. Pace: PVRs deployed for all platforms. Storage capacity ranges depending on whether they are SD or HD PVRs. An SD PVR is typically 160GB and an HD PVR is typically 320GB. We are currently looking at 500GB and above. Pirelli: PVR capability is available in the range, main product is 160GB; higher capacities such as 250GB are available on request. Siemens: Yes, standard storage capacity of 160 GB is available. Larger storage capacity can be available upon request. Strong: PVR receivers with a storage capacity of 160GB and above e.g. SRT 5261 PDR Digital Terrestrial receiver, SRT 6365 PDR and SRT 6300 W Digital Satellite receivers for multi-room TV entertainment. Telergy: Yes, Some are dual tuner SD PVRs with embedded 250GB HDD and some are PVR-ready over external USB drive. Telsey: Yes. Standard configuration: 160GB. Thomson: Storage capacity up to 500 GB, built-in 25 or 35 HD.

SET-TOP BOX SURVEY

Euromedia: With storage becoming an important factor in set-top box choice, both for the operator and viewer, who is providing it, and whats available? ADB: Yes, up to 500GB. Amino: The AmiNET530 has a 160GB hard disc.

Euromedia: With HD content more widely available, are all STBs HDready? Are both MPEG-2 and MPEG-4 variants on offer? ADB: All platforms have HD capability but some customers/markets still require SD/MPEG-2. Amino: STBs support MPEG-2 SD and MPEG-4HD. Coship: No; MPEG-2 and MPEG-4. EchoStar: We offer a range of SD and HD set-top boxes, and support both MPEG-2 and MPEG-4. Entone: Products support both MPEG-2 and MPEG-4 (H.264/AVC) compression formats. FTA: Some products are MPEG-2 SD and some (the new ones) are

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COVER STORY
MPEG-2/MPEG-4.AVC SD+HD. Humax: Not all STBs are HD.We offer both SD and HD options, so MPEG-4 and MPEG-2. Strictly speaking for a STB, it is not HD ready, but is either an HD product or SD. Mototola: All support HD and are MPEG-2 or MPEG-2/MPEG-4 configurable. Netgem: All STBs manufactured and sold for the past two years are HD ready and MPEG-2 and MPEG-4. Pace: We develop both SD and HD STBs according to the requirements of the market and operator customer. Many STBs still support only SD MPEG-2 as this is all that is required, however, all HD receivers are fully MPEG-2 and MPEG-4 compliant. The choice of functionality and whether HD is supported is a function either of the operator or whether HD signals are available as free to air broadcast. Pirelli: All are HD capable, with both MPEG2 and H.264 support. Siemens: Yes, all STBs are HD ready and support MPEG-2 and MPEG-4 decoding. Strong: SRT 7335CI, SRT8300CI and SRT8345CI are HD Satellite, Terrestrial and Hybrid STBs. HD receivers support MPEG-2, MPEG-4 and H.264. Telergy: T301 and T401 STBs are SD only. All others are HD-ready and support HD for MPEG-. MPEG-4 and WMV. Telsey: Yes: MPEG-2 and MPEG-4 are both offered. Thomson: All IPTV STBs are MPEG-4 ready. On other networks (cable, satellite, terrestrial), the HD availability is dependent of the selected platform. DirecTV, Premiere in Germany, J-COM in Japan and a variety of other major operators and also retail business. Motorola: Cannot report on our regional sales nor identify customers without their permission. Announced customers include all major, medium, small cable operators in North America, installations in every worldwide region. IPTV includes AT&T, Telia Sonera, USEN, SingTel, plus others in every worldwide region. Netgem: Presence is mainly focused in France; IPTV solution supplier of numerous operators now merged into one single group SFR. Has provided on this market a total of 1m DTT/IP STBs over the past three years. Pace: We supply customers across the world, using a broad range of technologies and functionalities. Some of the key markets and customers include: Americas e.g. DirecTV, Comcast, Net Brazil, Sky Latin America; Europe e.g. BSkyB, Sky Italia, Viasat, Canal, +UPC, BT; Asia e.g. Foxtel, Astro; Africa e.g. MultiChoice Siemens: 1. Hybrid IPTV+DTT STB: Telecom Italia (Italy); 2. IPTVonly: Arcor (Germany); 3. IPTV PVR: Arcor (Germany). Our regional focus is hand-in-hand with our partners, through our deployments it can be seen that our strongest sales region is Europe, with a focal point in the new East European market. Strongest product is our IPTV STB 7710 and DVB-T hybrid STB. Strong: Our major customers are end-consumers in France, Scandinavia, Italy and Spain, Germany and Austria as well as broadcasters throughout East and West Europe Telergy: Customers based in Europe and North America and currently there is a 50/50 split in sales volume between those areas. For product, this year there has been considerable growth in sales on STBs that support H.264. Some customers want to have our T501 or T601, which have HD support, while others are content to stay with SD only and have taken T401. Telsey: Europe is currently the strongest region in terms of sales with IP TV and Hybrid STB. Major customers are Tiscali, both in Italy and UK, for hybrid STB with embedded PVR; FastWeb and Telecom Italia for IPTV STB. Thomson: America with fewer customers but bigger volumes. The EMEA region with numerous mid-size operators. We also market our solutions in Europe, for instance with the Elisa group in Scandinavia, to which we provide triple mode STB DVB-C / DVB-T / IP STBs.

Euromedia: In terms of customers, which regions do the companies identify as the strongest in terms of sales and for which products? Who are the major customers? ADB: Europe strongest region cable, IP. Customers include Telenet, HOT, Telefnica, Grundig. Amino: The strongest growth area is Eastern Europe. Coship: Europe, Asia, America. Customer info not disclosed. EchoStar: Globally we have supplied over 50m set-top boxes. Our strongest region is the USA, where we provide the set-top boxes for the Dish network. In Europe our largest customer is Polesat and in Latin America, its Telefnica. Entone: North America. Some of the major North American customers include Consolidated Communications, Graybar, Hargray, Hickory Telephone, Hometown Cable, INS, Pioneer Telephone, and Valley Telephone. FTA: Our products ship under the Inverto name as well as OEM brand names such as Philips, Grundig and others. Our strongest market is Germany, but also the Netherlands, Nordic, Austrian, Swiss and central European markets. Humax: We have strengths across the globe, but we are strong in the US with

Euromedia: Are PC-to-TV set-top boxes part of your product thinking? When are these likely to be ready to market? ADB: No. We deal with Telcos who provide TV over IP to STB not PC. Amino: DLNA is a key technology we are in the process of implementing to enable our product to interact with a PC and other devices. Coship: No. EchoStar: The group manufactures

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and supplies mobile video devices (Archos) and place shifting devices (Slingbox), so PC/TV convergence is absolutely at the heart of our future plans. Entone: Yes. Launching in Q4 2008 with availability in Q1 2009. FTA: Our current Scena 3 and Scena 5 products allow the user to copy content from PC to USB stick/drive and playback on the STB Humax: We offer products that are capable of connecting to the PC for backing up content and downloading MP3 and JPEG files. Motorola: No PC-to-TV. IPTV STBs are being used in over-the-top environment with direct movie downloads, VOD, streaming via broadband connection to IP set top and HDMI to TV. Netgem: Home networking capabilities has been part or our product marketing for years. OpenTV: Product roadmap includes support for PC-link the ability to access PC content from a traditional pay-TV STB. Solutions already include those features enabling the end user to retrieve his media whether from USB devices or from any PC connected to his LAN, thus transforming the STB into an HD Mediacenter. Pace: Most of our latest products support IP inputs via Ethernet, and could be connected to PCs or other devices. However, a wide range

of issues need to be resolved including security, interoperability and whether proprietary or standardised protocols will be supported. Pirelli: Yes, they are going to be available in our range in 1H109. Siemens: The available products can support UPnP DLNA media player application to connect to the PC or media servers. Strong: We are already developing a solution to offer web content on TV scheduled to be launched in 2009. Telergy: Currently we can stream content with VLC, Winsend, or similar PC based program to our products. Provided the PC is capable of playing the content, then the content can be played back through the STB. We provide support for VOD over HTTP and RTSP. DLNA is also available. We also provide a NAS solution that can be used in a home environment, with content stored on this that all STBs can access and play. Selected STBs also offer support for codecs such as DivX and avi. Telsey: Yes, in 2H08. Thomson: Yes, this is part of our thinking, however our focus is on pay-TV operators whereas this product category primarily targets the retail market.

COVER STORY
Euromedia: In terms of Conditional Access, what provision is made for Common Interface and the upgrading of vanilla boxes for pay-TV? ADB: No provision currently. Tru2way STBs have separable CA through CableCARD standard. Amino: Boxes available with CA r eadercards. Most CA software can be added to our other boxes without additional hardware changes. We have identified a specific CA company that requires an additional chip set to provide embedded key codes. EchoStar: We presently see little customer demand for Common Interface. We work with a number of CA vendors to ensure that we can provide our customers with CA ready set-top boxes for pay-TV. Entone: Products have a secure on-board processor that can be securely updated via the network. A smart card slot is also available. FTA: Most of our boxes come with two CI slots. Some of our STBs incorporate Conax CAS. Boxes do not allow updating into pay-TV form. Humax: Products have both integrated CA and also CI. It is possible to download the CA solution after deployment in order to change, or add a CA. We also test our CI with most known CAs in order to make sure they will be compatible. Motorola: Selected cable and IP models are offered with SmartCard support. IPTV supports downloadable third-party security solutions. Netgem: We do not propose the standardised CI based solution. Hardware platform includes a smartcard reader and the embedded software can be managed and upgraded. Our solution is thus flexible, and evolutionary: we are able to launch a free to air offer, and then enrich the service with pay-TV, as demonstrated in several projects. Pace: The majority of our customers are pay-TV operators. We also develop products for retail which include CI slots. Pirelli: We are currently engaged with a variety of IPTV commercial platforms that comprise both Smart Card-based and smart card-less CAs and therefore adapt the product to a custom proprietary implementation each time. Siemens: For IPTV, smartcardless systems are widely deployed and supported by our STB with native HW decryption. Hybrid STBs include a smart card reader for CA. Our STBs are integrated with an e2e system including the specific CA solution. For DVB-S, CI modules are planned to cover the broad range of CA systems on air. Strong: Currently closely watching developments and commercial movements regarding CI+ and CI 2.0 and as soon as the specs for these innovations are finished and market needs recognisable, we will have such a product ready.
Telergy: Our STBs have not had slots for CI or Smart Card, as we felt this can easily be cracked by card-sharing over the Internet and of course it adds to the cost of the product and overall solution. We have preferred to use software based solutions and work with companies such as SecureMedia and Verimatrix. We also support WMDRM10 to offer protection on MMS systems that can also be enhanced with our proprietary protection mechanism, based on MAC address, IP address and STB specific serial number. We have several scenarios for additional security if this is required. Telsey: We dont offer CI currently. Thomson: Since our focus is on pay-TV operators, very few of our STB models are equipped with a DVB-CI reader, but most of them include provisions for an upgradeable conditional access system (with built-in smart-card reader and unique ID).

Euromedia: What levels of interactivity are supported? Is this just basic voting, or full, browser-based? ADB: Many different levels on a market by market basis, from basic interactivity through to high level browser-based interactivity. Amino: The majority of Middleware is browser based. All interactivity is based around that. Coship: All. EchoStar: We support any sort of interactivity thats made possible by a particular middleware system. Entone: Full browser-based interactivity. FTA: At the moment, we do not have a back channel, hence only little interactivity is supported such as MEHG-5 in our UM boxes: How long do they watch TV? What do they watch? Did they watch the complete movie? Humax: This varies across the products, IP products support full browser functionality. Other products have been deployed with Ethernet capability in order to add services at a later stage, these could include voting etc. Motorola: IP STBs support browser-based interactivity; all STBs support two-way operation via third-party EPG and set-top return features. Netgem: Our STB proprietary browser allows full interactivity between users actions on remote control on the one hand, and any dedicated pages hosted by the service operator on the other hand. This includes voting application, media sharing, gaming almost any interactive application can be conceived and implemented on the STB. Pace: Interactivity ranges from simple applications such as Teletext

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on Freeview STBs, up to interactive gaming and betting on more sophisticated middleware platforms. Browser based products are also available supporting both walled garden and open Internet access. Pirelli: These are service middleware dependent. Siemens: Currently our STB is deployed in various Nokia Siemens Networks solutions, where the middleware defines the features supported. In the specific case of Nokia Siemens, our STB does support interactivity from VoD to voting and commerce. Strong: Interactive mph receivers have Ethernet connector for voting and interactive games, an embedded smart card reader is built-in for future services, e.g. e-government, e-banking. Telergy: Our browser based UI can support any type of voting, it would treat voting as just another application. It comes down to the actual specification that is needed and then implementation of this. Areas such as automatic monitoring of user behaviour is possible. Telsey: As we offer IP or hybrid boxes full interactivity is supported through the IP channel. Thomson: We are supporting interactivity the like of: gaming, gambling, voting, Home-Shopping, VOD, e-mail and chat through the return channel Supported services depend a lot on the actual middleware implemented. FTA: Not for the moment.Should be possible through software upgrades. Humax: Those with Ethernet connection will be able to do this, but service would need

Euromedia: With targeted advertising becoming increasingly important for operators, do your products support data capture? ADB: Yes, some capture of viewing data is possible. Amino: Recently acquired by Amino, AssetHouse provides a digital product management system, thats designed to help IPTV providers profit from on demand. Data is captured to enable targeted advertising at niche markets and advertising-led services that deliver new opportunities for advertisers. Coship: Yes. EchoStar: We believe that our technology for the capture of targeted advertising and other user response data is the most advanced on the market today. We have worked with a number of organisations to ensure that this data is exactly what is needed by major brands and advertisers.

operator support. Motorola: Cable and IP set-tops support data capture. Netgem: We can gather usage statistics from the STBs. The system collects data about the users behaviour, stores the data, computes statistics and can also display near real-time certified data in the EPG. For marketing purposes, the usage statistics can also be used in a data warehouse to further analyse the users behaviour, and target specific marketing campaigns. Pace: Support for data capture is a combination of available memory, return channel capability and adherence to data privacy legislation, which can vary significantly from country to country. The decision on whether products support data capture depends on the operator and his contractual relationship with the subscriber. Pirelli: Yes, depending on the related middleware approach. Siemens: As today our STB is partnered with end-2-end solutions, the middleware is the defining factor. Our STB has been employed in targeted advertising with existing partners. Strong: We are developing receivers offering these features. Telergy: Yes. We can monitor and capture data. Telsey: Yes. Thomson: Customer profiling Worldwide sales of digital TV set-top boxes broke through the can be supported on request, 100m barrier for the first time in 2007, according to research from although its implementation and the Strategy Analytics Connected Home Devices service. The the use of logged data are bound report - Digital TV Set-Top Boxes: Global Market Forecast - found by law in several countries. that sales reached 102.4m units last year, an annual increase Reporting to the operator can be of 12%. supported by remote manageIPTVs market share rose to 5.9%, compared to 3.6% in 2006. ment tools (TR69 or SNMP). Cables share also rose, to 36.2%, while satellite and terrestrial shares declined. For 2008 the report has predicted a surge in Euromedia: What are your demand for digital terrestrial set-top boxes, driven by the impendgeneral observations and ing switch-off of analogue broadcasting in the US. By 2012 annual predictions for the STB global sales of all digital TV set-top boxes will reach nearly 200m market? Do you think a units. We expect the Asia-Pacific region to overtake North retail market will develop? America and Europe in 2008, accounting for a third of this years ADB: There already is a retail 129 million sales, commented Peter King, director, connected market for some regions/techhome devices. Sales of digital terrestrial TV boxes in Europe nologies e.g. Italy and have now plateaued, as consumers begin to transition to integratScandinavia. ed digital TV sets, but this pattern is unlikely to prevent overall Amino: The purchasing bias market growth across all platforms. towards the HD ready/flat screen The set-top box remains the key gateway to advanced digital television and also increased HD television services around the world, added David Mercer, content will see also the use of principal analyst. Added value services such as high definition HDMI increase. We have TV, digital video recording and Internet video are all set to drive addressed this with the further growth in this strategically important sector. AmiNET130M, a 100% Digital STB which sees the removal of

Digital TV STB sales Break 100m barrier

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redundant analogue connectors. With a single HDMI connector this addresses the HD ready market and also allows content providers greater security. Coship: H.264 HD, DVB-S2, interactive boxes. EchoStar: Advances in the networked home will mean that some consumers will have more reason to choose a solution at retail that exactly meets their needs. We will see exciting developments in retail, particularly in high-end set-tops, however I expect the retail model will take time to develop. Entone: We are currently working with a major customer for selfinstall, but see no demand for retail. Humax: The retail market is growing very strongly at the moment as the features and content on free to view services improve. For example HD is now becoming available on FTA platforms, so driving retail sales. Multimedia over Coax Alliance: Tru2Way is interesting and is established to ultimately foster a retail market. If it develops, MoCA has always maintained a roadmap to retail. STBs with MoCA can easily accommodate a retail environment. Nagravision: SmarDTV proposes different types of solutions to STB/iDTV manufacturers to help them to develop the retail market. SmarDTV believes strongly that Pay-TV on consumer electronic devices in the retail market can be enabled using removable security. The adoption of operator endorsed removable security is a major factor in developing the retail STB/iDTV market. OpenTV: High-end operators are moving to all boxes being HD PVR, even if the service is not initially purchased by the consumer, but they are still ordering SD PVRs and HD zappers today. We expect the majority of SD PVRs to support MPEG-4 by 2009, so that planned VOD (traditional, push or pull) services can be MPEG-4. New entrant operators are looking seriously at going MPEG-4 from launch to reduce bandwidth requirements. DTT remains a strong retail market. The focus on VOD in European cable will limit the expansion of true retail models in that market. Some markets that are traditionally seen as retail may move to non-retail due to VOD. Pace: This is an exciting time for the set-top box industry. With different technologies converging together and a wide variety of content becoming available from a number of sources, there is real potential here to develop new technologies and services for the industry. And the retail market is already huge just look at the success of Freeview! Pirelli: Retail market for IPTV will not develop before 2015 due to non-existence of open standards convergence. Strong: Many operators are already asking suppliers of receivers to offer their dedicated receivers in the retail market as well, so they dont have to take the risk of stocking and supplying the receivers by their own. The retail market for IPTV may not develop in the way that for instance Freeview has; however Internet TV, which is quick-to-market and with relatively low investment and that can run on an existing infrastructure, may develop into a retail proposition. Thomson: We believe the provider STB market is there for long time, if not forever, especially for pay-TV operators, since STBs are a tool that enables delivery of pay-TV content and services to end consumers in this regard, this tool must be constantly improved to provide the best that technology permits at all times. The STB market will also be fuelled in the coming years by the analogue switch over, especially for terrestrial and cable networks. A retail market nonetheless already exists and will also remain, supporting the free-to-air content delivery.

et-top boxes are increasingly becoming more advanced to accommodate services such as HD, DVR, and HD DVR. Much of this transition is spurred on by operators exploring new revenue opportunities which, in turn, compels the industry to design digital set-tops with more 2-way functionality, enhanced programme guides, larger HDDs, and greater processing power. The push to offer HD services is also having a major impact on the transition to more advanced boxes. Early HD services were employing MPEG-2 compression technology, as many advanced operator-

STB market to evolve

Mark Meza, market analyst, connected home research group at IMS Research, shares his thoughts on the STB market.
deployed set-tops began with legacy MPEG-2 codecs. Bandwidth constraints for offering copious amounts of HD have been resolved with MPEG-4 AVC codecs. The move toward MPEG-4 AVC is widely seen as the driver for HD from an operator standpoint. I see several trends developing that will define the next stage of evolution of the global digital set-top box market: Note: these apply to developed digital TV markets. Streaming HD content to the STB from other CE devices; portable and inhome devices Streaming HD content to other rooms in the house New HDMI specs (example: v1.3) Wireless HDMI STBs capable of decoding linear 1080p broadcasts (however, we feel that 1080p broadcasts are three to four years away) HDMI devices supporting

HDCP DCAS (downloadable conditional access system); will push STBs further into the retail market HD connectivity applications such as DisplayPort and WHDI may compete with HDMI DOCSIS 3.0 for a ubiquitous platform of digital video reception Larger HDDs (> 1 TB); using single-platter HDDs The set-top box as we know it now will evolve into a full scale media server BASIC STBs. We have forecasted a significant spike in

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basic digital STBs for 2008 and the first part of 2009 due to the ASO (analogue switchover) in the US. We estimate that between 20m and 24m D/A (digital to analogue) STBs (which are considered basic digital STBs) will ship during this time period. However, we expect basic digital STBs to begin to decline slowly overall beginning in mid- to late 2009. This segment will be sustained primarily by digitisation of cable on a global scale, and new DTT launches worldwide. We expect advanced digital STBs (HD, DVR, and HD DVR) to be the largest segment through 2013 and beyond. Most major operators in each segment are utilising marketing promos to push their respective HD packages with free truck rolls, free installation, and very competitive pricing even if to only seed advanced STBs (MPEG-4 AVC) in the customers home regardless if the customer actually subscribes to an HD package. The hope is that customers will eventually switch to HD, and have little or no switching costs to do so, and low impact on the service provider, as customers will already have the equipment to receive HD programmes. For these reasons and more, we believe that advanced STBs will account for around 45% of the total STBs shipped in 2013. Mid-range STBs are expected to decline sharply beginning in 2010. High-end products are faring better than our early predictions. We believe that HD DVRs will be the largest sub-segment of advanced STBs; some 24% of total STB shipments in 2013. CONSOLIDATION. We have already witnessed operators moving to acquire their own design organisations, such as BSkyBs acquisition of Amstrad, Cyfrowy Polskas acquisition a smaller STB maker, EchoStars continuing business segment of being a 8m+ STB maker for Canada, US and European operators. Aside from operator acquisitions, we can also expect consolidation of STB makers themselves recent examples have been Pace Micros acquisition of Philips STB division, Motorolas acquisition of IP-STB specialist Kreatel, etc We see the big players (Motorola, Cisco, Thomson, etc) retaining the largest shares of the advanced STB industry, because mainly of expertise and the ability of produce high volumes of advanced boxes. Asian box makers will continue to move up by capturing the low end of the market (basic digital STBs). I doubt they will knock off the big boys anytime soon, but they are definitely putting out volumes that have increased their global share of the market. We expect this to continue. MARKET OVERVIEW. Americas We see digital cable making a strong surge in the US and Canada due to DOCSIS 3.0 and SDV (switched digital video) technologies helping the cable industry regain its balance against the onslaught of HD from DTH satellite and telcos being given the green light by the FCC to compete toe-to-toe with them. In other words, we do not expect the cable industry to roll over and die, (currently, we do not consider Verizon FiOS as true IPTV; we consider it cable on steroids). In the US, we see the cable industry moving towards an all IP network by 2013. The DTH segment will have to find a way to competitively offer multi-play services eventually. Cable still has the upper hand in the multi-play space, but they have been relaEurope In Europe we see FTA and payDTH satellite being the top segments along with FTA DTT. We also believe that IPTV has a strong position in Europe (France, Spain, Italy, etc) but do not expect IPTV to challenge DTH or DTT anytime soon. Digitisation of the major cable TV markets in Europe has been extremely slow (see Germany). Also, the battle for Bundesliga and other football broadcast rights keeps this industry on the wobble, and can cause severe drops or large surges in subscribership; a high degree of churn, in other words. With the exception of the UK and maybe France, HD has been a hard sell to Europeans, with Euro1080 and other organisations still not able to get significant traction for promoting HD. The reasons: a strong offertively slow to react to the HD race and the ability of telcos to out-price their multi-play packages. IPTV has been slow to catch on in the US. Only recently has IPTV begun to gain some significant forward momentum, and it is virtually non-existent in South America. In South America, many cable operators are only able to offer 480p, or near-HD. While the DirecTV consolidation has increased subscribership across the board, they have yet to roll out advanced services (HD and HD DVR mainly). Some are still trialling HD, and have yet to organise a massive STB swap out campaign to replace older MPEG-2 boxes with MPEG-4 AVC. Some of the larger regional telcos in SA are favouring strategic partnerships with cable operators over DTH operators, and trialling WiMAX technologies to extend cable footprints. We see this as a disadvantage for Sky Mexico, Sky Brasil, DirecTV LA, etc ing of FTA DTT and DTH, and analogue PAL which is a good quality analogue signal (significantly better than NTSC), and the high cost of HD equipment in the retail market. Because if this, the value proposition for digital and even HD is weakened greatly. European cable operators have had some success with VOD services delivered through a separate broadband pipe. In general, digital TV trends in Western Europe will begin in Eastern Europe with a five to six year differential. We feel that the Russian Federation is a huge market that is poised to explode with pay- and FTA DTH and to a lesser extent, IPTV. Asia-Pacific Most Asian countries have been slow to develop digital TV and HD. With the exception of Japan, South Korea, Hong Kong, and Singapore, advanced services are scarce. The major constraints we see are a lack of regulatory framework to guide the advancement of digital TV as well as competition (see linear IPTV broadcasts in South Korea), the lack of disposable income justified for pay-TV services, and rampant piracy which leads to an unattractive proposition to induce the foreign infusion of capital, and cultural policies that inhibit the growth of advertising that operators can use to increase operating revenues. Obviously, the global digital TV industry has its collective eyes on China. We believe that India is the sleeper market here, as this market has been pro-active about establishing CAS mandates and opening the market through revised regulations to promote competition. Overall, we see FTA DTH and digital cable as the two largest TV segments in Asia-Pacific.

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