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Lower Outlook for U.S. IPTV and SDV Subs

The North American telco IPTV and cableco switched digital video (SDV) equipment market declined sharply in 2Q08, pulling the worldwide market down 5 percent sequentially to $1.27 billion -- despite healthy increases in other markets, according to Infonetics Research.

The dip in the overall market is due to slowing IPTV and SDV subscriber additions by service providers in some regions hit hard by the uncertain economic climate, particularly in North America, according to the latest Infonetics market study.

In environments where the future of the economy is unknown, IPTV and SDV subscribers are more apt to stay with their current provider, rather than look for a new provider with whom they may have to invest in new equipment and other upfront fees; this is especially true in North America and Western Europe.

However, service providers around the world -- particularly in Asia, Europe, and Latin America -- are still investing in IPTV equipment because offering video service is increasingly becoming a requirement to increase revenue per user.

"Operators will continue to add IPTV and SDV subscribers, just not at the fast clip they previously expected," said Jeff Heynen, directing analyst for IPTV at Infonetics Research.

Highlights from the Infonetics report include:

- North America's share of the overall IPTV and SDV equipment markets dropped from 47 percent to 38 percent between 1Q08 and 2Q08.

- The number of IPTV subscribers is forecast to hit 72 million worldwide by 2011 (their forecast has been adjusted to reflect the global economy outlook).

- In 2Q08, the worldwide IP set-top box market is down 10 percent due to the subscriber slowdown, while the nascent IP video encoder market is up 8 percent as subscribers seek to add channels, particularly high definition (HD) channels.

- IPTV subscriber growth has been strongest in France, where a fierce battle for subscribers among Orange, Free, and neuf-cegetel has driven total subscribers there to nearly 3 million at the end of 2007.

- IPTV activation times for AT&T are ranging from days to weeks, increasing the cost to pass homes and turn-up subscribers, prompting IPTV operators to push harder for well-defined interoperability standards.

- IP STB prices are expected to decrease, thanks to volume production of system-on-a-chip (SoC) designs from STMicroelectronics and Sigma Designs, as well as the entry into the market of Broadcom.

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