Apple TV: Worth Watching?

Last week, to much fanfare, Apple released Apple TV; but if it weren't from the company that changed digital music with the iPod and which more recently shook things up with news of the iPhone, most people would likely never have heard of the product. The reason: there are already numerous other systems which actually do what most people think that Apple TV does. It may be the sexiest, but it is not the first device to try and bridge the cavernous divide between the computer and the television, nor many argue is it the best. However, as Douglas Shapiro, analyst at Bank of America points out, “It isn’t the first attempt at solving the ‘last 10 foot problem’ of connecting the PC to the TV but in light of Apple’s track record with music it is likely to be regarded as the most credible.”

What the $299 Apple TV does is create a way for downloaded digital content to move from the computer to the TV screen. More specifically, the device receives digital content from the iTunes application on a designated PC or Mac over a wireless network for display on widescreen TV sets. In this case, as in so many, the devil is in the details. Apple TV does not work on any TV and all content must be a part of the iTunes system. It bears mentioning that the unit only works with widescreen televisions but this is probably not as large an issue as some sources make it out to be; a relatively high percent of the target market are probably set up with one already. As for the fact that all content must belong to the iTunes ecosystem, this is a real issue. On the music side of things iTunes, Apple's online digital content store, works quite well. There are issues to be had with how its DRM technology makes it difficult to transfer music off the iPod, but since virtually any song one can buy online is available via iTunes consumers have yet to feel real constraints. This is far from the case with the iTunes video catalog.

According to Bloomberg there are over 4 million songs available on iTunes; the catalog for movies is about 400 and for television shows about 350. Regardless, Jonathan Hoopes, an analyst with ThinkEquity Partners sees Apple TV as an agent of change, "Just as the iPod/iTunes combination has changed the way people consume music, we think Apple TV will become an iPod for the home it its own right." Hoopes may be right but there are those arguing that in trying to be just that, an iPod for video in the home, Apple TV reveals its weakness. Writing for BusinessWeek, Stephen H. Wildstrom notes, "The best thing about Apple TV is that it tries to do for video what the iPod has done for music. The worst thing about Apple TV is that it tries to do for video what the iPod has done for music. The reason for this paradox: Apple's laudable effort to simplify video downloads by running everything through iTunes leaves too much good content out in the cold." Therefore, "Unless iTunes becomes a universal source for video, as it is for music, Apple TV's simplicity and convenience will require unreasonable trade-offs." While Chief Executive Officer Steve Jobs hailed the device as the "DVD player for the 21st Century" plenty of people are saying the shelves need a little more stocking.

By mandating its users employ iTunes, Apple TV is not only limiting what is available, but is going against the trend of offering more, rather than fewer options. According to a report released last week by media research company Nielsen, the average U.S. home now receives 104 television channels; that is eight more than last year. Furthermore, there is an ever-expanding amount of video content available for viewing in streaming format; all this, including content from YouTube does not fit the Apple TV/iTunes model. As David Pogue, says in his New York Times piece, "Apple TV offers a gracious, delightful experience — but requires fidelity to Apple’s walled garden."

Still, some analysts believe sales will not disappoint. Bloomberg refers to Citigroup analyst Richard Gardner, "Apple TV sales may top $500 million this year and reach $1 billion in 2008." Bloomberg also refers to Gene Munster of Piper Jaffray in reporting, "Apple may sell 2 million devices this year, winning support from among the 110 million customers of the iTunes software that powers the box." As Munster points out, the iTunes user base is a key component. Microsoft already has its Media Center software embedded in some Windows operating systems, but there are only an estimated 12 million users; that gives Apple quite a leg up. Furthermore, analysts point out that many users of iTunes will stick with what they know; an iTunes extension such as Apple TV is the likely choice.

Though some are making noise that Apple TV could be Apple's big flop, or the opposite, the next thing in digital media, the truth is that Apple has just stepped into a rapidly changing ecosystem. In making this step the company does bring its association with success in the digital music arena and the name Apple; if for no other reasons Apple TV is worth watching.

A more complete version of this posting, with journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the PCs & Peripherals section of Northern Light's Software, Computers, & Services Market Intelligence Center.

And in the following articles:

Apple TV – Is There a Niche?
PhysOrg.com, March 23, 2007
The question is whether Apple will rise to the top, or be swamped by the existing solutions. Can it carve out a niche? Unsurprisingly, vendors of existing products don't think so. In fact, Jeff Binder, senior director of Motorola's Connected Home Solutions, said the Apple TV unit might very well turn out to be what he characterized as a "dud."

Apple TV Has Landed
New York Times, March 22, 2007
After many delays, Apple TV finally went on sale yesterday for $300, but there are plenty of companies trying to solve what you might call the “last 50 feet” problem. A couple of prominent examples: In addition to its game-playing features, Microsoft’s Xbox 360 ($400) performs a similar PC-to-TV bridging function; in fact, it even has its own online movie store. Netgear’s week-old EVA8000 ($350) also joins PC and TV, but adds an Internet connection for viewing YouTube videos and listening to Internet radio.

Apple May Court Studios to Help Sell TV Set-Top Boxes
Bloomberg, March 21, 2007
Apple Inc., maker of the iPod music and video player, may need to become an even bigger booster of digital film and television shows to win broad market adoption of the TV set-top box it released today. The $299 Apple TV sends movies and TV shows over a wireless connection from computers to widescreen sets.

Apple TV's Blurry Future
BusinessWeek Online, March 21, 2007
The best thing about Apple TV is that it tries to do for video what the iPod has done for music. The worst thing about Apple TV is that it tries to do for video what the iPod has done for music. The reason for this paradox: Apple's laudable effort to simplify video downloads by running everything through iTunes leaves too much good content out in the cold.

Apple Aiming to Tempt Traditional TV Viewers
Financial Times, March 21, 2007
Millions of video clips are available for viewing free on the internet, through video sharing sites such as YouTube or MySpace and hundreds of other websites. Yet the appetite for watching traditional television does not appear to be waning. Nielsen, the media research company, released a study this week showing that the average U.S. home now receives a record 104 television channels, eight more than a year ago.

Apple Makes Biggest Move Yet into Living Rooms
Reuters, March 21, 2007
The small silver box with a white Apple logo costs $299 and can store up to 50 hours of video, 9,000 songs, 25,000 photos or a combination thereof. It is available this week at Apple's online store, retail stores, and also from resellers.

BPL: Stayin' Alive?

Broadband over Power Line (BPL), an emerging technology that utilizes existing power lines to transport data at broadband speeds, is in the process of redefining itself. Though this action may be seen as a way to meet the needs of an evolving market, it is also necessary for the technology's survival. BPL has had a difficult time breaking into a space that pits it against the large telecom and cable companies whose names are known.
Last November IDC Research released a follow-up report to its July 2005 report, "Broadband over Power Line: Impact for Utility Companies." The recent report, "TXU Puts BPL in Spotlight, Possibly for BPL's Swan Song" begins, "With Google Inc., Goldman Sachs Group Inc., and the Hearst Corp. jumping on board as investors, the BPL industry seems like it should be taking off. Yet, especially after many failed standalone consumer broadband pilots, most North American utilities are still reluctant to adopt BPL." More recent articles indicate that the tide may be changing. In its article, "Broadband over Powerline Use Expected to Grow," PC World refers to an analyst from Parks Associates in Dallas who estimates, "that there are today no more than 150,000 BPL users in the U.S.;" that figure is expected to, "rise to 2.5 million by 2011, especially in rural areas unserved by cable or DSL." Ralph Vogel, spokesmen for Utility.net, a Los Angeles-based BPL integrator is optimistic about BPL as well. Quoted in the same PC World article he says, "We are at an inflection point in the industry . . . Its position is similar to that of DSL in the late 1990s: people have heard of it, and while we were previously not quite there yet with the technology, we are now."
One reason for the new interest in BPL is the FCC's clarification of their position on the technology. Access Intelligence reports that the FCC is, "essentially giving the industry carte blanche to forge full steam ahead, with only some minor caveats to help ensure that access BPL does not emit RF radiation that would interfere with other legal spectrum uses." This may be a bit of an overstatement; the American Radio Relay League (ARRL) reports numerous trial deployments have been shut down and the status of many more is pending. Regardless, the FCC's clarification and its relaxed legislation have made BPL more palatable. However, the sole reason for the change of heart does not lie with the FCC, much of it may be due to a new tact being taken by the industry.
BPL vendors initially proposed the technology as an alternative to DSL and cable Internet access. Confronted head-on with the inability to crack that market, for reasons which include low churn rates of major DSL/cable providers and lack of name recognition, BPL proponents repositioned the technology as, "an enabler of the intelligent grid." Consumer broadband has now taken a back seat to remote meter reading, transformer monitoring, and the real-time relay of grid data. According to PC World an average of 500,000 Americans a day lose power for at least two hours; this adds up to a loss of $180 billion for the utility companies. Clark Gellings, vice president of the Electric Power Research Institute, a nonprofit research consortium in Palo Alto, Calif. estimates that a smart grid could cut those losses by 80 percent. Furthermore, electric meters that automatically report usage would eliminate the need for meter readers and allow for additional features. In its new incarnation, BPL is attempting to place itself as the solution for utility companies. While the repositioning may have been necessary for BPL's survival, it is at the same time risky; the intelligent grid does not depend on BPL. In the new arena BPL is still up against the same competition, fiber optics and wireless technologies, when it comes to the real-time transmission of remote sensors to the control room. However, it is with this new face that BPL is making strides, most recently and notably in Texas.
IDC reported that TXU Electric Delivery had undertaken a $150 million partnership with Current Communications to "install a BPL network for more than 2 million Dallas, Fort Worth customers;" the rollout was anticipated over the next 10 years. These numbers have been updated since the IDC report was published. According to PC World, the TXU deployment "is likely to be the next big BPL installation, as it has committed $450 million to install 3 million smart meters, explained spokeswoman Carol Peters." Peters said further that, "We expect the vast majority of our system to be operating over BPL by 2011." While the network will provide customers the option of broadband Internet access, in keeping with the technology's new alignment, its focus is "intelligent grid applications." As IDC puts it, "Although this high-profile partnership provides a tremendous opportunity to prove BPL benefits, if the project fails, it could have a devastating impact on BPL's prospects with already wary utility companies." It should be pointed out here that while North American utility companies may be wary, this feeling is not necessarily shared by those of other countries.
Korea Electric Power Corp. announced its plans to deploy 16 million smart meters by 2010 while it replaces older analog models. While in France, SIPPEREC plans a deployment which will reach 1.5 million homes in suburban Paris. IDC which reports those numbers, poses two reasons for slower adoption in North America: regulatory hurdles and infrastructure investment. While regulatory hurdles imposed by the FCC have been largely overcome, their existence acted as an impediment in the earlier days, and put North America behind other countries. Furthermore, in countries where BPL has been more actively adopted there is less of an investment required for the supporting infrastructure. The United States has a lower transformer to customer ratio and with equipment needed at each transformer, "U.S. utilities have to install more infrastructure to serve fewer customers." One subset of the market where this does not apply is the multidwelling unit (MDU), namely hotels and apartments.
"In MDUs, BPL provides building owners and property managers with a way to provide in-building Internet access that costs less and takes less time to install than competing technologies, particularly for existing buildings. Also, customers can install BPL in a building regardless of the communication technology connecting the building with the Internet." IDC lists Sandman Hotels, Inns and Suites which uses BPL at all 31 of its hotels, and the 253 unit Maryland luxury apartment building the Whitney as MDUs where BPL has been successfully deployed. Interestingly, both these examples are instances of Telkonet deployments.
According to Access Intelligence Telkonet's customer base, "now totals about 300 hotels with a combined total of 30,000 rooms plus about 20,000 apartments in complexes around the Americas." While the company is the niche leader it is looking to expand in other directions, and with some government assistance it might just make it. Access Intelligence says the, "U.S. Department of Homeland Security has decided to use Telkonet widgetry as its broadband network in airports all over the United States." The company may also be hedging its bets; it will be unveiling the prototype of a "custom product for remote monitoring and management of utility substation equipment;" this for GE Energy.
Though the results of the TXU/Current Communications deployment are much anticipated and may very well predict whether or not BPL can make a stand, the market is not standing idle. Still in its evolutionary stages the BPL market continues to play host to new companies trying to turn the challenges of a nascent technology into opportunities. As newcomers such as PowerGrid Communications and BPL Global try to gain traction a few have established themselves as leaders of the pack. Ambient Corp. and Current Communications have emerged as the major players; both benefit from strong investment, FCC certified technologies, and experience deploying BPL technology. Both companies have big names in their corners: on the Internet side of things, Ambient has Earthlink while Current has Google; as far as partnerships in the power industry Ambient is working with ConEdison and Current with TXU Electric Delivery. Names such as these being involved may be another reason BPL is still on the map.
The verdict is still out in the trial of BPL, and its future is anything but certain. As some of the titles of recent research suggest, the world may be preparing to "Flip the BPL Switch," or it may soon witness "BPL's Swan Song."

A more complete version of this posting, with journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Online Access section of Northern Light's Internet & Information Services Market Intelligence Center.

And in the following articles:

IEEE Moves to Promote Broadband-over-Powerline by Developing Standard
InformationWeek, March 14, 2007
The much-delayed rollout of broadband-over-powerline technology has received a boost from the IEEE, which announced that a working group has developed requirements for a baseline BPL standard. In its announcement Tuesday, the IEEE P1901 Working Group said it has developed more than 400 requirements for the standard and issued a June 4 deadline in calling for proposals for technical systems that meet the requirements.

IEEE Progressing on Broadband-over-Powerline Standard
TMCNet, March 13, 2007
An IEEE working group has developed over 400 requirements for the baseline BPL standard and has issued a call for proposals to obtain technical solutions for systems meeting these requirements. Proposals are due by June 4. The standard, IEEE P1901, “Standard for Broadband over Power Line Networks: Medium Access Control and Physical Layer Specifications”, will outline the requirements to send high-speed digital data over the power lines between substations and homes and offices. It also will provide for digital voice, data and video signals to be carried over and accessed from electrical lines within structures.

BPL - Broadband over Power Line Growth to Explode
Broadbandfocus.com, March 8, 2007
“We are at an inflection point in the industry,” agreed Ralph Vogel, spokesmen for Utility.net, a Los Angeles-based BPL integrator. “Its position is similar to that of DSL in the late 1990s: people have heard of it, and while we were previously not quite there yet with the technology, we are now.”

Bill Would Allow Broadband over Power Lines
Arkansas Business, March 6, 2007
The state Senate is considering legislation that would allow electric utility companies to deploy broadband networks over power lines, a development that could potentially offer Arkansans access to the Internet through the same home wiring that powers their living room lamp. House Bill 1589 would allow Arkansas electric utility companies to implement broadband over power line (BPL) technology.

Broadband over Powerline Use Expected to Grow
PC World, March 2, 2007
Some call it "the third wire" and others call it "broadband over powerline" (BPL). But for Tim Barhorst, a technology consultant in Cincinnati, it's his Internet connection. "It seems equivalent to standard cable service and a little faster than standard DSL," he noted. "But the speed is not asynchronous, meaning you get the same speed upstream and downstream."