General

Sezmi: An Alternative to IPTV — continued

by Gerry Blackwell [August 22, 2008]

Digital TV helps
The transition to digital broadcasting solved some of the problems with over-the-air reception, but not all. The Sezmi technology solved the rest.

Allred, again, is vague, understandably, about how the media receiver actually works. One thing he does say is, "Instead of tuning the [signal] manually, with our technology it's done electronically. [The receiver] is constantly scanning and adjusting to find the best way to receive [a signal]"

And the set top box provides a kind of feedback loop, sending information to the receiver about the quality of the signal it's getting. The receiver uses this data to further refine and adjust recepition.

The really brilliant thing about the receiver is that it's customer installable and in most homes can be placed almost anywhere.

"In a pretty well-covered part of a market where you've got good wireless coverage, it can go anywhere [in the house]," Allred says. "If you're out on the edges of where the digital TV signal reaches, you're more likely to find that you get better results when the receiver is somewhere near a window or possibly upstairs."

The upshot of all this is that Sezmi can deliver digital signals, including HD, that are superior to those from cable and satellite providers.

"When ABC hands off [a signal] to a cable or satellite provider, it's typically then, when they're encoding it to reduce the size of the file, that you lose quality," Allred explains. "But anything that comes across the air is in the highest, most pristeen quality. We expect to see a pretty significant difference [in signal quality] versus cable or satellite."

The licensed content from cable networks and studios, because of the way it's delivered, will be more comparable to signals from cable and satellite.

Aligning CAPEX and growth
Accepting for the moment that this is a technologically superior distribution method, why is it better for ISPs than IPTV? A couple of reasons.

Sezmi will provide virtually all the technology and infrastructure required to launch a local service in partnership with an ISP. The ISP is only on the hook for the sales and marketing costs associated with launching a service—a cost they would incur anyway if launching an IPTV service.

They will also pay a small launch fee to Sezmi, to help it with its cash flow and ensure a full commitment to the undertaking. That amount is eventually returned to the service provider as it brings on subscribers, Allred says.

"The upfront capital to launch a [Sezmi] market is—insignificant," he insists. It would depend on the size of the market and the service provider, but would definitely not be in the millions of dollars, he adds.

Service provider partners pay wholesale per-subscriber rates for the service, so their costs will be "success based" by which Sezmi means that as each ISP adds subscribers, it pays more.

IPTV, on the other hand, is typically a capital-intensive proposition, costing in many cases millions or hundreds of millions—sometimes billions, Allred claims, if the ISP or telco needs to extensively upgrade network infrastructure. "And that's before you've brought on a single customer."

The other reason the Sezmi solution should be attractive to ISPs: they'll be able to offer service at "a significant discount" compared to cable and satellite providers.

This is because Sezmi's own cost structure is lean, thanks to its partnerships with Harris and the broadcasters. It's leveraging the infrastructure (the Harris NOC and broadcasters' networks) that these partners have spent billions developing over the last several years.

"Our cost of building out the entire end-to-end solution—let's just say it's very attractive," Allred says.

The company won't reveal exactly how many service providers it has attracted so far. But Allred claims, "We've had tremendous success in signing up partners. We have contractual commitments with several major telcos and several more are in the final stages of negotiation and we expect to finalize them soon."

Technical trials are underway now. Consumer trials will begin soon. Commercial roll-out should start late this year or early in 2009.

Can you get in on the action?

Allred mostly refers to potential distribution partners as "telcos," but regional and even local broadband ISPs are definitely on the radar. "Some of it [the order in which partners are brought on] is priorization around size and [the] markets [partners are in]," he says.

Is Sezmi for real? Maybe. Probably. But we can't see the heavy hitters in the IPTV camp—who have invested their own millions, even billions—rolling over and playing dead in the face of a lone start-up. Sezmi will have to prove it's for real.

—End

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