What Cisco's SA acquisition means for IPTV

The IPTV market has been abuzz--even more than usual--following Cisco's $6.9 billion acquisition of Scientific-Atlanta late last week. The deal gives Cisco a 40 percent market share in the set-top box market, automatic reach into the 50 million homes that subscribe to SA's service, and a major foothold in the IPTV market. What does this mean for the IPTV market? Here's a quick run-down:

  • It validates the marketplace. Cisco sees service-provider video as a $4 billion to $5 billion market right now, growing at 22 percent a year to $9.9 billion in 2009.
  • It affirms vendors' belief that carriers want end-to-end solutions right now, while the market is still young. So-called "best-of-breed" piecemeal offerings are only best for a mature market. Microsoft and Alcatel are close to an end-to-end solution but still need partners to flesh it out. The Cisco/SA deal will catalyze that process.
  • It advances convergence. "This completes a large part of our quadruple play of data, voice, video and mobility services," said John Chambers, Cisco Systems president and CEO. "Video may be the most critical element in a bundle of services in terms of customer stickiness." Cisco had long been focused on the enterprise until its 2003 Linksys acquisition. The SA deal builds on Cisco's presence in the home with STB's. A major STB developer and a major WiFi router developer under the same roof: Convergence is imminent.
  • Everyone agrees the deal gives Alcatel something to chew on. Cisco is Alcatel's biggest rival, and its entrance into the IPTV space is a reaction to Alcatel's IPTV success. For an excellent analysis, check out this Light Reading article.
  • Josh Bernoff of Forrester Research says Scientific-Atlanta will benefit greatly from the deal. Cisco can help the company sell more back-end infrastructure gear and push them into retail markets. "This may accelerate the IP transition in cable," he said. "But I have two rules for the cable industry: first, cable goes slow. And even if you know rule one, they go slower than you think. But Cisco has been know to innovate and show a market what is possible, and that has given them pretty incredible growth and marketshare. And with cable moving in the direction of IP it will be a lot easier for Cisco to get into a cable system if it's Scientific-Atlanta that is telling the MSO what they need." See this article in Broadcasting & Cable for more.
  • Finally, analysts say the next round of acquisitions to look for will be in the VOD provider category. Vendors like Cisco and Alcatel will pursue VOD providers to build out their end-to-end solutions.

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