Liberty Global: Wi-Fi is the Delivery Network of the Future

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Arris and Pace, the UK company it is in the process of taking over, are typecast as a set-top box (STB) companies, but the emphasis for the merged entity will be as much on extracting STB functionality into the cloud and distributing video around the home over Wi-Fi.

"The marketplace for our business is crying out for sweating the asset," said Steve McCaffery, SVP EMEA & APAC of Arris at the company's Video Leadership Forum in Dublin earlier this week. "The refresh rate on a STB can be as short as two years. Anything we can do to elongate the life of these products in the market is significant. Virtualising some of the functionality that is draining the life out of these STBs will always get a good hearing from our clients."

One of those clients is Liberty Global, for whom Arris is developing a next-gen STB due to market this fall.

"The UI will talk to the cloud and it will feature very strong Wi-Fi connectivity, because Wi-Fi is going to be the delivery network of content in the house," said Bob Greene, MD of Online Entertainment, Liberty Global.

"The cable industry is asking itself about the millennials," Greene said. "There is an underlying assumption that when they grow up and have money and kids they will choose cable TV. But our question is what if they don't?

"That's where our thinking is. We have to look to our legacy STBs and what customers have that service, we also have to look to our customers with our current advanced set top box Horizon, and we also have to look to the future."

Liberty's Horizon boxes are made by Samsung, but its latest STB features Arris technology in a much smaller form factor and will be UHD-capable.

"How do we get the person who lives and breathes broadband, the people who are growing up with alternatives?" posed Greene. "This is the first generation that has had the choice. The cable industry has to address it. We have to get better at talking to those consumers rather than talking at them. It's [going to be] a huge business in terms of how we develop those relationships."

It is two years since Arris paid $2.35 billion for Motorola Home, the maker of set-tops and network gear. In April last year it added SeaWell for $5.7m and integrated its adaptive bit rate (ABR) streaming technologies.

This April it joint ventured with Charter Communications to acquire ActiveVideo for $135 million. Arris owns 65% of the JV and will be the sales channel for ActiveVideo's CloudTV platform. Most recently, in a transaction still ongoing and subject to antitrust rulings, it bid £1.55bn ($2.1 billion) for Pace—a firm that beefed up its own cloud capability by purchasing U.S. equipment maker Aurora Networks in a deal worth $310 million in 2013.

According to Bob Stanzione, Arris chairman and CEO, the merger will be better enable the firm to compete against larger rivals such as Cisco, at a time when the STB industry is coming under pressure from more people watching television on the internet and mobile devices.

"We need to virtualise the cloud infrastructure, virtualise the networking, and virtualise the device ecosystem," said McCaffery, identifying network DVR as a typical solution. Arris will use ActiveVideo's technology to move more functionality from the box into the cloud.

The merged Arris/Pace company would control the largest share of the traditional pay-TV set-top market. Arris execs know that its approach to product design has to change if it is to match the needs of service providers like Comcast and Time Warner Cable (which Arris serves with TV networking equipment) and AT&T and DirecTV (which are Pace customers).

“We're moving away from a push model toward a pull model driven by the consumer,” asserted Stefan DeBeule, Arris' director of solutions architecture. He described what he called the "new live," a short window up to a week after release in which content was in highest demand.

The latest episodes from Game of Thrones, for example, were simulcast in 173 countries yet still attracted 2.2 million illegal downloads in the first 12 hours.

"People want content relevant in that time, they want what is discussed on social media, and they want it not necessarily at primetime but still in a very short amount of time following release," he said.

This 'new live' is not only the case for TV, but in the online world. "The lifecycle of a YouTube video is six days," he said.

The primacy of the channel brand or content aggregator remains key. "People watch only 17 channels on average from the whole channel bundle they have," said DeBeule. "People are only using an average of six players to stream online video. And on mobile the average is two. There's still a lot of value in the brand aggregator to bring content together and make it easy for consumers to discover."

Race for Quality

The push toward quality of video to the home—meaning 4K, High Dynamic Range, Wide Colour Gamut, and up to 100 frames a second for sports—will have a huge impact on bandwidth.

So much so that, if rumours are to be believed, Apple has decided to sideline 4K for its latest version of Apple TV because of the expense of shooting, storing, encoding, and deliver video in 4K compared to HD.

"Service providers looking to build a converged HTTP IP video platform face three main challenges," said McCaffery. “The rise of time-shifted viewing requires a four times increase in network capacity to deliver video. Then they have to deliver at ever higher quality. And then they need content which is individualised by being adapted to device capability and customised by targeted advertising.

"A pay-TV provider should build a fit-for-purposes IP video and broadband platform end-to-end to deliver multiscreen and 'new live' video all the way to the home in a far more efficient way."

The company said it is working on infrastructure to deliver in home Wi-Fi with Gigabit speeds within 5 years.

"It's an aspiration but we think this will allow service providers to build future services," said Arris CTO Charles Cheevers. "The Wi-Fi should at least drive UHD at 30-50Mbps."

The architecture will be distributed and feature multiple access points as "the only way" to achieve gigabit speeds to all corners of a house. It will include a wireless HDMI to TV box.

Automating Temporal Metadata

Arris also said it was developing a means to use temporal metadata to create new customers through analysis of audio, video and closed captions. The trial system is in test at unnamed customers.

"Currently this metadata is almost exclusively derived manually," said Andy Aftelak, VP of Advanced Research at Arris. "NBC would have teams of students marking up an NFL game, for example. It is hugely tedious and not very scalable. One of the keys to creating higher value services is the automatic creation of metadata. You can improve discovery by making it more natural and you can offer actionable advertising at particular points in time."

Binging is a Solo Activity

At the VLF event, the company shared early headlines from its most recent survey of viewing habits. The sixth Consumer Entertainment Index surveyed 19,000 people in 19 countries details of which for the U.S., UK and Spain were revealed.

Findings suggested that binge viewing is largely a solo activity (for 58% of people), akin to reading a book, although the device of choice for binge views varied considerably among DVD, DVR, downloaded free catchup services, and other mechanisms.

"There is an opportunity for service providers to merchandise content if they understand how best to approach these subscribers," said Sandy Howe, SVP marketing.

Arris’ survey found that the TV is still the default device for viewing, and people are looking for bigger TVs, with U.S. homes having bigger TVs than those in the UK and Spain. The most popular size across all three markets was 102-114 cm.

Laptops are the most popular devices for streaming, with desktops still popular in Spain, according to Arris. Tablets were more popular than desktops in the UK. Smart TVs are still not so widely used, but are more popular in the UK than the other two markets.

Arris research also indicated that Wi-Fi is now viewed as a utility, valued by consumers just like electricity. Homes typically have 12 devices connected to Wi-Fi yet 50% of people said they couldn't get good Wi-Fi coverage in some parts of their home.

"People view it as a utility, but networks are often overloaded," said Howe.

The living room is still the main room for watching TV, with the bedroom also growing in popularity, and the dining room still highly popular in Spain. Relatively few consumers watch TV out of the home, according to Arris, with some 30% currently watching TV on mobile devices outside the home. Mobile viewing is particularly popular in Spain relative to the UK and U.S. People are resistant to TV on the go because of factors including screen size, data plans, Wi-Fi connectivity, and time taken to download content, according to Arris.

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