Following months of anticipation, video set-top boxes using MPEG-4 compression are finally finding their way into the hands of North American telcos. A few were shown at the TelcoTV show in Dallas last month, where, according to Think Equity Partners analyst Anton Wahlman, the consensus was that high-definition MPEG-4 set-top boxes would be ready for mass deployment before the end of the year. Set-top vendors have echoed the notion, give or take a month or two.

The unclogging of this product pipeline is a present to both carriers and vendors alike. Some independent telcos have delayed network upgrades, waiting for the next-generation gear. Equipment vendor Tut Systems, for example, blamed disappointing revenues on surprise delays of the new gear in both the second and third quarters.

The successor to widely used MPEG-2, MPEG-4 (based on the global H.264 standard) offers tighter compression, delivering the same traffic using only a fraction of the bandwidth. Whereas MPEG-2 encoders might require up to 6 Mb/s for standard definition (SD) video and 12 Mb/s to 30 Mb/s for high-definition television (HDTV), MPEG-4 can squeeze SD video down to about 2.5 Mb/s and HDTV to perhaps 8 Mb/s. That extra muscle is especially valuable to carriers as they head into what many expect to be a big HDTV holiday season. According to Leichtman Research, U.S. consumers could buy about 5 million HDTV sets in the last two months of this year and another 17.5 million next year. HD DVDs, which have only trickled into the market so far, might multiply near the holidays as well.

AT&T has pledged to launch HDTV in Houston by month's end and fiber to the node in a total of 15 markets by year's end. As cable companies round up ever more voice and broadband subscribers, any potential drags on its IPTV progress are perilous. “Time is of the essence for AT&T to catch up to its cable TV competitors — and even Verizon,” wrote Morgan Keegan analyst Simon Leopold in a recent note. But the carrier's primary MPEG-4 set-top vendor, Motorola, said it's on schedule, having begun shipment last month.

What caused the kink in the MPEG-4 pipeline depends on whom you ask. To hear the Tut people tell it, the delay started years ago at the chip level. Chip vendors figured the first generation of MPEG-4 set-tops (based on digital signal processing from the likes of Texas Instruments) would focus on SD video, and a subsequent generation of system-on-a-chip (SOC) gear would follow three years later, focusing on HD. But when problems pushed the first generation of SD gear back, it began to crowd the expected HD schedule.

“System-on-a-chip vendors were forced to accelerate to make up for the trough of the first generation of set-tops that fell on themselves,” said Keith Wymbs, Tut's director of strategic marketing. “When you run really hard, sometimes things get pushed out the door a little early, and you go through more cycles.”