Market Insight

Verizon launches Multimedia Home Gateway

April 08, 2014

Daniel Simmons Daniel Simmons Executive Director, Enterprise & Residential Communications Technology, IHS Markit

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US IPTV operator Verizon has launched its Multimedia Home Gateway (MHG), the VMS1100 Verizon Media Server, and associated thin client IPC1100 STBs, under the brand name Fios Quantum TV. The VMS1100 has a 1TB HDD, 6 tuners and can support 4 thin client devices. Verizon’s marketing for Fios Quantum TV is focused on a two MHG per household option that supports the simultaneous recording of 12 channels, viewing on 10 TVs and 2TB of recording capacity. As with previous Fios STBs, it relies on MoCA home networking to connect the boxes. Similar to most MHGs deployed in North America, it does not have integrated Wi-Fi. Nor is it designed to act as a broadband residential gateway. It relies on a separate routing device to connect to the wider home network and Internet.

The product is being supplied by ARRIS and was originally announced as a pre-acquisition Motorola Home deal. ARRIS is supplying content security and software, as well as hardware for the platform.

Our take

MHGs and thin client STBs are an evolution of the multiroom DVR concept, which allowed a central DVR to serve recorded content to other STBs without internal storage over the home network, but still required all STBs to have a broadcast connection to access linear channels. MHGs improve on this by centralising all the tuners in the MHG and distributing liner and on-demand content as IP streams over the home network to thin client STBs. This potentially enables the delivery of broadcast content to consumer electronics devices connected over the home network as well. Verizon was the first operator to launch multi-room DVR (mDVR) and MoCA home networking, using the feature to help win market share from incumbents in the saturated US pay TV market. However, it has lagged behind other US pay TV operators Comcast, DirecTV and Dish Network in transitioning to MHGs, despite announcing that its own would launch in 2012. This delay in launch, combined with Verizon's acquisition of Intel's OnCue video delivery platform, had led to speculation that the operator's strategy had moved on from the VMS device.

The VMS hardware specification is much the same as other US MHGs: 6 tuners, 1 TB HDD and MoCA home networking. Differentiation comes from its deployment and marketing. Fios Quantum TV’s two MHG configuration is seeking to appeal to subscribers by offering a higher number of simultaneous recordings and larger recording capacity than other operators. The ability of this package to support 12 simultaneous recordings is higher than even the 10 Cablevision offers its network DVR subscribers. The lack of residential gateway support further emphasises multi-room DVR as the key marketing feature for US MHGs. This is in contrast to European MHGs, which have focused on the integration of the STB and broadband gateway as the main message to subscribers. 

Broadband and television CPE is of increased importance for ARRIS as a result of its Motorola Home acquisition. CPE accounted for 68 per cent of ARRIS and Motorola Home's USD 4.4Bn combined revenue in 2013, up from 66 per cent in 2012. CPE held steady in value terms across both companies, whilst combined infrastructure revenues declined 15 per cent year-on-year. Motorola Home typically derived 75 per cent of its revenues from CPE. Unlike Motorola Home, ARRIS's strategy had been more infrastructure-led, with CPE comprising less than half of ARRIS's revenue: 35 percent in 2011 growing to 45 percent in 2012 - partly as a result of its early MHG deployments.

ARRIS was the market leader for MHGs, having deploying the first MHG with Canada's Shaw communications in 2011. It has since lost market share to Pace, Echostar, Samsung and Sagemcom. Combined with its recent deliveries of MHGs to Comcast, this deal should see ARRIS re-establish its position in the MHG Sector, which will be of critical importance to future growth.

Geography
North America USA
Organization
Arris Verizon
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