Bai, the divisional director for broadcast and television in China's Ministry of Information Industry (MII), is one of a number of Asian government leaders who are embracing the technology.

IPTV represents "a good opportunity to enhance the Chinese government's goal to integrate three different networks — telephone, Internet and cable," Bai said in a recent interview with EE Times.

Although U.S. telecommunications companies like Verizon, SBC and others have recently announced big investments in their networks to move fiber closer to the home, IPTV's brightest future appears to be in Asia — with special attention to China — and in Europe, where digital subscriber line (DSL) technology has vastly outstripped the region's largely antiquated cable networks.

China's high hopes for IPTV as a vehicle to push the government's "convergence" agenda extend so far that the government is changing its laws to allow the rebroadcast of TV content over IPTV. Bai, while declining to comment on the specifics, acknowledged that such a fundamental overhaul in broadcast regulations is already in progress.

In Europe, France Telecom, which launched its own IPTV service in late 2003, told EE Times that the company's IPTV service, called MaLigne TV, is accessible in more than 10 million households in France.

Noting that France Telecom ordered more than 100,000 IP set-top boxes last year, Claude Rousselot, director of terminal projects at France Telecom, said that there's a "potential of 1 million in terms of firm subscriptions in France."

Besides France Telecom, many of the European PTTs, including Belgacom, Deutsche Telekom (video-on-demand only), KPN, Swisscom, Telefonica and Telenor, have also been testing and deploying IPTV, said Michelle Abraham, senior analyst at In-Stat/MDR.

According to In-Stat/MDR, the IP set-top market reached more than 1 million units for the first time last year. The research firm projects that the market will grow to more than 8 million in 2008.

Set-top variety
The mass deployment of IPTV in Europe and Asia faces some unique challenges, however. The very nature of IP-based TV is straining set-top-box architecture. Unlike today's set-tops for satellite or cable, IP set-tops promise many more variations. Some set-tops sport a DSL modem; others don't. Some are designed as more of a home gateway box integrated with a voice-over-Internet Protocol (VoIP) processor. And some offer a single video stream, while others are built to decode multiple streams.

"China expects a great diversity in set-tops," said Bai of the MII, "ranging from simple analog-to-digital converter boxes, which allow DTV reception, to set-tops featuring voice-over-IP, video telephony and IPTV viewing."

Even more significant is the growing demand for programmable solutions. Although it's not necessary for IP set-tops to handle the variety of audio/video codecs used on the Internet — unless those boxes are also meant to offer Web-browsing applications — service providers are already asking for their set-tops to be field-upgradable.

Taiwan's Chunghwa Telecom, which rolled out MPEG-2-based IPTV, is planning to upgrade to an H.264-based infrastructure, according to Scot Robertson, product line manager for media node products at Analog Devices Inc. Acer, ADI's customer, provides Chunghwa Telecom with IP set-top solutions based on the U.S. company's Blackfin DSP.

Similarly, France Telecom, which deploys an MPEG-2-based system, is asking for solutions for MPEG-4/H.264. France Telecom's Rousselot noted that the company needs standard-definition and high-definition solutions based on H.264 "at a competitive price as soon as possible."

The usual suspects among set-top IC suppliers, including Broadcom and STMicroelectronics — which have practically owned the cable and satellite set-top businesses in the United States — will continue to be active in the emerging IP set-top market. But other DSP companies, such as ADI, Equator Technologies, Philips Semiconductors and Texas Instruments, are hoping for a level playing field on the IP set-top market.

Jeremiah Golston, CTO of DSP streaming media at TI, said that IPTV's multiformat requirement "plays into our strength." He said that the convergence of streaming video, VoIP and video telephony in an IP set-top begs for a flexible solution, including the need for decode/encode capabilities, for example.

Meanwhile, Analog Devices, which has already established a strong presence in the broadband router market with its Fusiv technology, hopes to advance its foray into the IP set-top market by integrating that technology into its Blackfin digital signal processor in a system-on-chip (SoC).

Thomson is also determined to become a key player in the IP set-top market, with five platforms in the works.

Some are based on Intel's X86 architecture running on Windows CE, while others use an SoC running on Wind River Systems' VxWorks operating system. The company is preparing versions for a third-quarter launch that will support high definition and others that will add H.264 capability.

The Chinese IP set-top market presents "an extremely difficult path" for Thomson, however, admitted Keith Wehmeyer, general manager of IP decoders there.

Asian telecom operators tend to write their own user interfaces, he said. They seek original design manufacturers to supply set-tops, in which IC suppliers — not set-top vendors like Thomson — play the key role in providing a reference design. "It's not even an addressable market," Wehmeyer said.

While the current excitement about the IPTV market also extends to the United States, some industry observers believe that the window of opportunity for U.S. telcos may have already closed.

North American agenda
"The LECs [local-exchange carriers] still have the wrong management and wrong culture to be cost-competitive," said Stuart Lipoff, partner at IP Action Partners, a consultancy based in Newton, Mass. "They should have beaten cable with DSL to the home but were slow to act, and still market it poorly. I think they will fail with video as well. It is not a technical issue."

If they want to stay in the game, U.S. telcos have a lot to do.

"They must build out their fiber in the outside plant to increase the broadband to the home. They don't need fiber all the way to the home but need to get within a half mile or so," said Lipoff.

In addition, North American carriers must offer better data rates. Today, they typically offer 750 kbits per second to 1 Mbit/s on DSL lines. While the U.S. rate of 1 Mbit/s is fine for supporting at least four standard-definition video programs when using H.264, it may pose significant challenges for carriers offering multiple high-definition programs.