Microsoft Virtualizes Mediaroom, Changing the Game in Supporting Wider Deployment Scenarios

| May 28, 2009 | Digital Media Infrastructure | Competitive Intelligence Report

| Analyst: Yoav Schreiber

Current Perspective: Very Positive
Vendor Importance: Very High
Market Impact: Very High

Event Summary

May 27, 2009 – Microsoft launched Microsoft Mediaroom with virtualization, making Mediaroom the first IPTV platform to offer virtualization support. Mediaroom with virtualization can deliver up to a six-fold reduction in the number of physical servers required to support a full-featured IPTV service, significantly reducing hardware and management costs and speeding time to market for Mediaroom customers by up to three weeks. Microsoft also announced that Reservation Telephone Cooperative in North Dakota will be the first customer to deploy Mediaroom with virtualization.

Analytical Summary

• Current Perspective: Very positive on Microsoft’s launch of Mediaroom with virtualization, because in supporting environments where multiple virtual Mediaroom servers share the same physical server, Microsoft has broadened the deployment flexibility for Mediaroom to encompass scenarios such as smaller operators who have a potentially lower barrier to entry, larger operators looking to more cost-effectively expand their services into regions with lower subscriber density, as well middleware migration efforts that gain smoother transitions. More importantly, Mediaroom with virtualization demonstrates Microsoft’s continued efforts to improve Mediaroom’s overall scalability and total cost of ownership (TCO) equation. Having already delivered a roughly ten-fold throughput improvement to its live video servers, Microsoft has now enabled a roughly six-fold reduction in the physical servers required for management of the Mediaroom platform. However, Microsoft will need to further envangelize the market to drive adoption of its virtualized Mediaroom offering, given that network operations within telco environments remain apprehensive adopting Microsoft’s Windows platform in general, and server virtualization in particular for mission critical applications, such as IPTV.

• Vendor Importance: Very high to Microsoft, which needed to improve its perception in the industry that its Mediaroom platform delivers competitive and cost effective scalability. Although marquee Mediaroom customers, such as AT&T’s U-verse, may care less about overall server footprint, virtualization technology will enable Microsoft to expand its current customer base, as well as deliver high-value enhancements to existing customers. For Microsoft, which is leveraging its investment in virtualization technology for its Windows Server-based Hyper-V solution, Mediaroom with virtualization delivers a unique value proposition in the IPTV market that will not easily be replicated by rivals.

• Market Impact: Very high on the digital media infrastructure (DMI) market, since Mediaroom with virtualization will require Microsoft’s direct competitors to respond directly with their own new IPTV middleware initiatives. Since the benefits of virtualization extend from TCO improvements to facilitating middleware migrations, rivals will need to muster the resources to offer an equivalent proposition, although in the short term they can counter Microsoft by insisting that Mediaroom needed virtualization to improve its own lagging TCO and scalability metrics.

CLIENTS ONLY

Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Digital Media Infrastructure | More information

Recommended Competitor Action

• Rival IPTV solution vendors with middleware assets such as Alcatel-Lucent, Ericsson and Nokia Siemens Networks (NSN) need to respond aggressively to Microsoft’s Mediaroom with virtualization proposition as it represents a competitive threat on multiple levels, including the targeting of smaller telco operators and IPTV middleware migration opportunities. Rivals can also emphasize the virtues of their open platforms for IPTV middleware and participation in the Open IPTV Forum to remind operators of the downside in selecting Microsoft’s single-vendor and closed IPTV architecture. In addition, they can point to their experienced professional services organizations that can improve IPTV deployment time-to-market and efficiency metrics.

• Rival IPTV middleware vendors need to consider the benefits of offering a virtualized environment for their own solutions. They should leverage existing relationships with server systems vendors to optimize their platforms for virtual environments, as well as reach out to companies such as Cisco that can offer both virtualization and video expertise.

• Alcatel-Lucent, as Microsoft’s primary Mediaroom reseller and systems integration partner, should consider creating a swat team focused on the lower end of the market in North America that can deliver a scaled-down version of Alcatel-Lucent’s integration capabilities to match Microsoft’s Mediaroom with virtualization solution. Given that 180Squared has been selected as the systems integration partner for the first Mediaroom with virtualization deployment at Reservation Telephone Cooperative, Alcatel-Lucent should look to include Mediaroom systems integration services into its U.S. broadband stimulus support efforts. Otherwise, it risks ceding the market opportunity to 180Squared that can boast of its end-to-end Mediaroom integration expertise, and deep familiarity with Mediaroom architecture.

• Cisco and Motorola should (re)evaluate the market need for offering their own IPTV middleware platform, especially as Microsoft looks to be able to grow the addressable market and gain wider share with its virtualization offering. For Cisco, which is already leveraging the network for its virtualized environments, possesses networking hardware expertise, and has already entered into the blade server market, dipping into the IPTV service delivery platform virtualization market should be a natural follow-on. Further, both Cisco and Motorola could advance their activities in supporting lower end operators by delivering a virtualized IPTV middleware platform.

• Hosted/managed IPTV service providers targeting smaller operators such as Avail Media/TVN Entertainment, EchoStar, and Falcon/IP Complete need to consider the architectural challenges and benefits of virtualizing their middleware environments. Having solved some of the cost/complexity challenges in supporting a video headend by offering a managed IPTV service delivery and content aggregation service, these companies should consider the advantages in solving the cost/complexity challenges for managing the service delivery platforms and the overall subscriber experience. Please see Avail Merges with TVN, But Is the Combination Greater than the Sum of the Parts?, May 19, 2009.

Recommended Competitor Action

• Large U.S. telcos such as CenturyTel/Embarq, Frontier and Qwest should evaluate Microsoft’s Mediaroom with virtualization proposition, given that all of them have dispersed geographic footprints with lower subscriber density service areas that could benefit from the improved economics for deploying Mediaroom. They need to juxtapose managing their own IPTV service with alternatives such as continuing DBS contracts or contracting for emerging white-label/hosted IPTV/video content services options.

• CenturyTel, which gains roughly 8 million access lines through the acquisition of Embarq should evaluate the opportunity to leverage virtualization for extending Mediaroom deeper into its footprint. Frontier, which gains roughly 5 million rural Verizon subscribers, including about 70,000 FiOS TV customers, should evaluate Mediaroom with virtualization as a potential solution to offer its own branded video service, given that it is already committed to maintaining the FiOS service to its acquired subscribers. Similarly, Qwest, which has an expanding FTTN footprint should consider the merits of an IPTV solution to increase its overall ARPU, by evaluating the Mediaroom with virtualization proposition.

• Smaller telco operators with low subscriber density footprints that have advanced DSL or fiber access networks (or plan to take advantage of the U.S. broadband stimulus program) need to evaluate the improved Microsoft Mediaroom proposition that offers a compelling IPTV experience with lower upfront and ongoing costs. They should also juxtapose the Mediaroom offering from turnkey managed IPTV service providers such as Avail Media/TVN Entertainment, in considering the overall costs to acquire, manage and support video headend and content assets. For Mediaroom deployments, they should juxtapose 180Squared and Alcatel-Lucent as potential systems integrators with end-to-end Mediaroom integration experience.

• Current Microsoft Mediaroom customers need to consider the time-to-market advantages being touted by Microsoft as part of the Mediaroom with virtualization proposition. In particular, as telco operators look to drive service innovation further and enhance their offerings with new functionality, they should look into hybrid deployments of dedicated and virtual Mediaroom servers to accelerate transitions from market trials and test beds to commercial deployments.

• Operators of first generation and homegrown IPTV middleware platforms looking to enhance their subscriber experiences beyond their initial capabilities should approach Microsoft and consider testing the Mediaroom with virtualization solution. While Mediaroom with virtualization can certainly smooth middleware migrations, it can also offer operators cost effective trial platforms that, if successful, can be smoothly transitioned to commercial deployments.

CLIENTS ONLY

Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Digital Media Infrastructure | More information

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