Switched Digital Video Is Staging a Comeback

by: Zacks Investment Research

Switched Digital Video [SDV] technology is likely to boom in the near future as more and more large cable MSOs in the U.S. are gradually moving towards overall services convergence. SDV technology distributes digital video content through cable network in a cost-effective manner so that additional uses can be made using the free bandwidth. It can also be helpful for IP video services and more targeted advertising.

Industry sources have predicted that SDV deployment may cross 65 million homes in the U.S. at the end of 2010, compared to just 35 million at the end of 2009. This figure may exceed 90 million by the end of 2012.

Cable MSOs are opting to deliver IP-based and cross-platform video services, and support more targeted advertising. Deployment of SDV will free up bandwidth that can be used to offer high-definition TV channels [HDTV], HD video-on-demand programs, and DOCSIS 3.0.

The SDV platform can also be utilized by cable MSOs for other applications like IPTV and the upcoming 3DTV services. Using the SDV technology, cable operators can deliver both real-time and on-demand video services to IPTV set-top boxes, personal computer and mobile handsets. Switching may offer a better alternative for 3DTV content offerings since this may target a smaller customer base at least in the initial stages and broadcasting those contents will not properly utilize the bandwidth.

Time Warner Cable Inc.(TWC - Analyst Report), the second largest cable TV operator in the U.S., is the pioneer in deploying large scale SDV technology. Cablevision Systems Corp. (CVC - Snapshot Report) also started implementing the SDV technology. Comcast Corp. (CMCSA - Analyst Report), the largest cable MSO in the U.S., will start deploying SDV in a few markets from end 2010 and more aggressively from mid-2011.

We believe the deployment of SDV will highly benefit BigBand Networks Inc. (BBND - Snapshot Report), a pioneer in SDV platform development. The company is the major suppler to Time Warner Cable. Cisco System Inc. (CSCO - Analyst Report) and Motorola Inc. (MOT - Analyst Report) may also benefit in a big way as these two companies supplied core SDV platforms to Comcast in its earlier trial runs. Arris Group Inc. (ARRS - Analyst Report) and Harmonic Inc. (HLIT - Snapshot Report) may also get more businesses for their respective edge QAM products.