The first step might be agreement on the definition of a virtual set-top box. One idea behind virtualization is to take the CPU, GPU, memory, and browsing capability out of the device and centralize it in a data center. While some are saying connected TVs fit the bill, this functionality has just been swapped from one device, the set-top, to another, the TV, said Sachin Sathaye, VP of strategy and product marketing for ActiveVideo.
Other concepts important to virtualization are service velocity and subscriber reach. In addition to reducing hardware costs, moving to the cloud allows for more of a web-like user experience. Upgrades can be made quickly and deployed easily across an entire subscriber base via software or firmware. With connected TVs, the apps are still specific to some extent to the device. As newer models come out, the browser type might change, for example.
"Some of the apps will never work on your television even though it is only two years old," Sathaye said.
The primary and original function of the set-top box is to decode video and convert it to the proper format for the TV screen. The CPU, memory, etc., are really to power navigation and drive the user experience. ActiveVideo and others have been talking about cloud-based user interfaces for some time. The idea is that moving guide functionality out of the box and into the cloud gives operators more flexibility to make changes easily and quickly, which will allow them to provide an experience similar to that provided by the IP-based over-the-top (OTT) video providers.
The cloud infrastructure can now be used to offer online video streaming that appears as another channel in the subscriber's lineup. For example, UPC in Hungary has extended its YouTube app, powered by ActiveVideo's CloudTV, to around 200,000 of its set-top boxes. After the first six months, the company announced 80% of those customers have tried it and returned. The service will be launched on an additional 250,000 set-top boxes in the coming months.
Do these things together constitute a virtual set-top box? The answer is that there still needs to be some sort of device on the user end to decode video. But T-Labs in Greece has given out what they call a virtual set-top box for free on an HDMI dongle, and Ziggo (NYSE Euronext Amsterdam:ZIGGO NA) in the Netherlands has given customers the ability to purchase conditional access modules at retail stores. These are plugged into the PCMCI card slot on the TV set for pay TV service.
"Operators want to deliver the same experience and service to their entire footprint," Sathaye said. "That is where you need to take into account the commonality across devices - the video decoding capability. The boxes decode content .... With (a virtual set-top box), the entire experience is rendered in the cloud and delivered as an interactive video stream."
Scale has come in part from integration of technology from companies like Intel (NASDAQ:INTC), Sathaye said. One data center rack can deliver cloud-based pay TV guides to 1 million subscribers, and there has been a tenfold increase in the real-time video transcoding sessions that allow online video content to be adapted. The estimated data center capex profile is as low as $1 per sub.