(Third in a series)

Given the growing attention paid to Chinese vendors ZTE and Huawei on the global stage, it is surprising that a California-based company, UTStarcom, is the leading IPTV vendor in China, a market where the technology is now moving into scaled deployments.

To be sure, UTStarcom has Chinese roots--the company was created from the merger of Unitech Telecom, founded by Hong Liang Lu, and Starcom, founded by Ying Wu. Both men are of Chinese origin but were educated in the U.S., and Wu cut his telecom teeth at Bell Labs.

In fact, as he explained to a group of U.S. analysts and media in April, the UTStarcom headquarters in Hangzhou was modeled after the Bell Labs facility in Holmdel, N.J., where he once worked--a facility now being torn down.

Wu, now vice chairman and executive vice president of UTStarcom, as well as chairman and CEO of its operations in China, is passionate about what his company is doing for the Chinese as it rolls out IPTV systems in Shanghai and Harbin.

“I view IPTV as revolutionizing people’s lives,” he said. “It will give them the freedom of time – the ability to watch any program at any time.”

It can be said that IPTV is revolutionizing UTStarcom as well, as the company moves into a growing market with what it believes is a mature system, ready to scale.

In addition to the two major Chinese deployments, UTStarcom’s RollingStream IPTV platform is being deployed in Japan, with Softbank, where 200,000 set-top boxes are deployed, according to David King, senior vice president of sales and marketing for UTStarcom, as well as in Brazil with Brasil Telecom and in India, with MTNL and AKSH. In each of those markets, UTStarcom is providing the IP digital subscriber line access multiplexers (DSLAMs) to deliver broadband services as well as its IPTV technology.

That is one of the company’s strengths, said Manish Matta, director of international marketing, in that UTStarcom delivers an end-to-end system for IPTV.

“The company was founded around IP, and the decision was made not to invest in any legacy infrastructure,” he said. China was a key market from the outset because the company could provide “a low-cost alternative to copper with an IP infrastructure,” using wireless technology.

UTStarcom’s first major success in the country was the deployment of its IP-based Personal Access System (iPAS), beginning in 1998, and now counting almost 55 million subscribers in China and more than 65 million globally. At the heart of that system was the company’s mSwitch softswitch, which it then leveraged to develop a fixed/mobile convergence solution, Matta said.

UTStarcom also developed IP-based broadband access products, its Universal Broadband Server IP-DSLAM, which it has successfully sold in Japan, India and Europe, Matta said.

The experience in building IP networks and scaling them for mass market applications is what UTStarcom is calling on now, said Brian Caskey, vice president of worldwide marketing. “This is a mature platform, and we are 100% confident of our ability to scale, as we have for FMC and wireless,” he said. “RollingStream is single-vendor IPTV – it is all built by one company, every single element, and that allows us to scale.”

Having an end-to-end solution from a single vendor does address what has been the biggest stumbling block for mass market IPTV in the U.S.--integration, said Danny Briere, CEO of the TeleChoice consultancy.

“Most of the things people are stumbling over here – integration and software/support for service – aren’t going to be issues in an end-to-end solution,” he said. On the other hand, unless customers want a single vendor, they may not be able to capitalize on what UTStarcom is doing in China and elsewhere.

UTStarcom’s approach is also to do media streaming from the network – not bulk up a set-top box with a lot of storage to handle functions such as digital video recording.

“That means you can stream to any device,” Caskey said. “It can go to a PC, a set-top box or a wireless device. We think just going to a set-top box hard drive is the wrong model.”

The RollingStream system was actually developed initially by RollingStream Systems, a 2003 acquisition by UTStarcom. Its co-founder, Qiang Li, is now chief scientist for RollingStream IPTV at UTStarcom. The system was first deployed in Japan in July of 2005, then in August of the same year in Harbin, China.

As Li points out, UTStarcom doesn’t do one critical piece of the system – the encoders – but it integrates encoders into its system, using either the customer preference or its own. The company does make its own streaming servers, middleware, set-top box, and conditional access system/digital rights management system, but it will also integrate with other STB and CAS/DRM makers.

“We are setting up a lab for testing integration with other set-top box makers,” Li said. “And we are open to integrate with whoever a service provider choose for conditional access/DRM, or we have our own.”

UTStarcom’s DRM system has been audited by the Merdan Group, an organization recognized by Hollywood for security engineering, he said.

In addition to doing the usual functions – pausing live TV, delivering video on demand, providing an electronic programming guide, etc., RollingStream features music, gaming, karaoke, ad-insertion, context-based ads, and TV messaging for polls or trivia contests, Li added.

“We are 100% ready for High-Definition TV service, if the service provider has the bandwidth and the content,” he said. Based on its FMC experience, UTStarcom can also deliver a three-screen strategy, and has messaging capabilities for doing SMS on the screen, as well as video conferencing with recording capability for corporate applications and TV commerce capabilities.

“These are not future applications,” Li said. “We also have an application development platform for a service provider to add applications without having to come to us.”

The systems uses a dual hierarchy of streaming servers, including a Central Media Server, Home Media Server, which is actually a regional unit, and an Edge Media Server. A Middleware Server handles user session control, and a Media Location Registry tracks every piece of content being delivered. Content can be distributed dynamically based on policies the service provider establishes that address the different types of content, viewer demand and available bandwidth.

Based on experience in early trials, UTStarcom devised its own protocol, Broadband Media Distribution Protocol, that divides content into what it calls “program segments,” and stores the first segment of VoD content – about four minutes – at the edge of the network to facilitate user behavior such as rapidly scanning through multiple movies before viewing one at length.

“In Harbin, one user scanned through 80 movies in a night,” Li said. “We thought it was a denial of service attack. We have one Edge Media Server with 3000 users and 50 or 60 of them scanned through 40 to 50 movies. That is the extreme case, but it is a challenge to traditional streaming and storage design.”

The key to the system is the intelligent software design that ties together the distributed servers and content, Li said, in a way that is more cost-effective and enables service providers to keep the cost of their service low.

“Our design goal was to optimize the user experience and minimize the impact on the network,” he said. “To do this we implemented policy-based push that determines to what level content is pushed. The service provider can specify day, time periods and maximum traffic. We also implemented On-Demand Pull – the Home Media Server and Edge Media Server can request content, based on user demand.”

The system is designed to easily integrate into existing Operations and Support Systems, based on open interfaces, Li said.

For the immediate future, most of UTStarcom’s IPTV prospects lie outside the U.S., and the company is not actively marketing the system here, Caskey said.

One reason for that is that its IPTV model, which is heavy on interactivity and network-based functionality, works better in countries where PC penetration is low and network-based Digital Video Recording (DVR) capabilities are legal, notes Steven Hawley, senior IPTV analyst with Multimedia Research Group.

“UTStarcom has clearly architected this thing [IPTV] for deployment in China,” he said. “There are service modules they are doing that don’t play elsewhere. In the U.S., the judgment against Cablevision says network PVR is not legal. The UTStarcom system lets you roll the program guide back 48 hours – that’s network PVR. So in North America, their best opportunities are in Latin America, not the U.S.”

Still, Hawley said, the kind of system UTStarcom has now would be appealing to Tier 2 and Tier 3 U.S. players.

In addition, in places like China and India, where the PC penetration is low – only one-tenth of the Chinese population surfs the Web regulatory according to Gallup – interactive TV gives people access to Internet content and e-commerce functions that they wouldn’t have ordinarily, Caskey said.

Because of the volume of those markets, UTStarcom could have its hands full, and be less interested in the effort required to pursue a U.S. opportunity.

As the China Telecom and China Netcom IPTV deployments expand into other cities, UTStarcom will have to compete for that business, as it will also be competing in India.

“The market in India is 300-plus million, and the number in China is bigger,” Caskey said. “If we win either one of those markets, it is going to be a rocket ship. We have two big markets and 42 to 45 trials in other markets, and they are huge markets for us. If we can mature the platform while other people are tackling the North America market, or even Western Europe, then if somebody falters, would we be willing to come in? I think so. I’m not saying we aren’t interested, but our focus right now is not in North America.”

Click here for more on IPTV in China.