Cable Show 2009

Alcatel-Lucent Seeks Revenue Opportunities in Cable TV’s Interactive Agenda

| Apr 2, 2009 | Digital Media Infrastructure | Show Update

| Analyst: Yoav Schreiber

Current Perspective: Neutral Vendor Importance: High Market Impact: Low/Moderate

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Event Summary

April 1, 2009 – Alcatel-Lucent announced at the 2009 NCTA Cable Show in Washington, D.C. that its Interactive Media Manager (IMM) solution, can also address the cable industry’s emerging requirements for interactive TV and advertising services, through the IMM’s support of the cable industry’s two main standards-based platforms: Enhanced TV Binary Interchange Format (EBIF), and tru2way.

Analytical Summary

• Current Perspective: Neutral on Alcatel-Lucent’s introduction of its 5930 Interactive Media Manager (IMM) solution, since the extension of the IMM platform to address the emerging interactivity and advanced advertising requirements of cable TV operators was to be expected. Following Alcatel-Lucent’s integration of its Tamblin acquisition, (which cut its teeth providing interactive capabilities in the UK MSO market with the BBC, BSkyB, Sky Media and Virgin Media), and the IMM implementations at DT and Telefonica, the cable MSO market provides a new and large addressable market for Alcatel-Lucent (please see Alcatel-Lucent Nibbles on the IPTV Application Stack with Tamblin Buy, September 24, 2007). However, despite the market potential, Alcatel-Lucent is relatively new to the cable MSO space, faces multiple established players with deployed platforms for enabling interactive cable applications, and thus will face challenges penetrating this market, further complicated by the fact that the announcement did not include an initial customer endorsement.

• Vendor Importance: High to Alcatel-Lucent, which needs to identify new and large addressable markets in order to grow revenue, especially during the continuing global economic downturn. The cable industry is a good bet considering it is relatively virgin territory for Alcatel-Lucent, and unlike the overall fixed and wireless telecom infrastructure market, the cable industry’s focus on enhancing video offerings with interactive applications and advertising models is likely to withstand operator CapEx budget cuts. While the same is true in the telco-IPTV space, the cable market is much, much larger. In addition, following Microsoft TV’s penetration of the cable market with its Mediaroom platform deployed at Guangzhou Digital Media Group in China, Alcatel-Lucent needs to make sure that its solution set for interactive media applications is not left behind.

• Market Impact: Low to moderate on the overall digital media infrastructure market, because Alcatel-Lucent’s positioning in the cable industry is relatively new and weaker than the company’s strong positioning in the telecom networking market. Thus, while rivals are well advised to follow/counter Alcatel-Lucent’s competitive moves in the telco market, this current initiative does not rise to that threshold. However, even established players addressing the cable application market, such as NDS, OpenTV and itaas, as well as newer companies such as ActiveVideo Networks, This Technology and Openet, should make efforts to determine Alcatel-Lucent’s commitment to cable, as it potentially crowds a competitive market where competition for both wallet and mind share are critical.

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