451 Research updates industry on Octoshape’s ‘promising’ multicast technology

Octoshape Multicast Technology Has Many Paths to Adoption

October 31, 2012
Analyst: Jim Davis

Octoshape, a developer of software for content distribution, has a promising technology for delivering HD video using multicast techniques. As many vendors in the television ecosystem have learned, there’s a lot of pieces in the puzzle to be put in place before widespread adoption of a new technology can take place. Octoshape has been busy the last few months since our initial report on building a base for further adoption.

Background
Octoshape was founded in 2003 in Copenhagen, Denmark. Apart from being around a while, it last announced a round of funding back in 2010, when it took in just under $5m from Nexit Ventures; previous investors included NorthCap Partners and Nordic Venture Partners. The company has 50 employees.

Technology
Octoshape’s Infinite HD-M technology is used in conjunction with a multicast-enabled network. While multicast technology has been around for a long time, Octoshape says it makes multicast easier to implement by making it usable on best effort networks; HD-M offers resiliency from a form of forward error correction by pulling data from multiple sources as needed without adding redundant packets.

Strategy
Octoshape wants to grow a federated multicast network for linear video by getting telcos and cable operators to enable multicast support on their networks. Octoshape hands off multicast feeds of popular content (usually from a live event) so the service providers can efficiently deliver it across their networks.

The hope is that service providers decide to then use the technology to power their new services such as their own IP video subscription services, with ‘TV Everywhere’ being a common interest these days. The key part of the plan from a content owner’s perspective is that Octoshape is planning to charge a ‘per channel’ fee, in contrast to a bandwidth-based pricing model that has a cost that increases with audience size and bitrate.

Customers
So is the strategy working yet? Since its still relatively early on since the introduction of HD-M, there’s no definitive answer yet, but executives are hopeful that some large projects in Europe and North America will break cover in the coming months. There’s a large service provider in Europe that’s looking to add multicast delivery of video to IP-connected devices in addition to its IPTV service lineup. The North American market might see some action for Octoshape in 2013 as providers move beyond technology trials and into commercial availability.

Another promising group of customers is satellite providers, who don’t have an easy path to the connected consumer. Multicast technology would allow these providers to economically deliver online video for customers on the go, for example.

Competitors
Any of the networking equipment vendors that have moved into video networking, including Cisco, Alcatel-Lucent and Ericsson, are potential competitors. These companies have multicast built in to routers and switches already, but Octoshape says the technology is complicated and services can be brittle; the result is that service providers have not widely used standard multicast technology for large scale broadcast events on the Internet. These same vendors have video caching offerings that some service providers are using to build CDNs, which are useful for on-demand content, but are not cost-effective for live events on the Internet, where millions of users ‘tune’ in to servers for the same stream at the same time. CDN service providers like Akamai, Limelight Networks and Level 3 Networks provide large-scale online video streaming services for events such as the Olympics and on-demand services such as Hulu and Netflix.

Partners
Octoshape has been busy in the last few months establishing partnerships within the broadcast online video ecosystem. Some partners, like NetRange, are not widely recognized players but have worked with TV makers such as Sharp and Loewe to build software for smart TVs. This reflects a move to build multicast-enabled TV sets that would be able to receive broadcast events from the Internet. Others include satellite distribution providers like Inviso, which is focused on the Latin American market and ONE CONNXT, a provider of IP transport services.

One crucial set of partners that haven’t been announced yet is the content security providers like Cisco/ NDS Group and NAGRA that provide content encryption and conditional access systems to pay TV providers around the globe. Octoshape is aiming to have partnerships announced in the near future – the January Consumer Electronics Show or the National Association of Broadcasters trade show events in January and April 2013, respectively, would be T1R’s estimate for the timing of announcing such partnerships.

T1R take
Octoshape has a promising technology in HD-M that appears to be gaining some traction in the market. To its benefit, Octoshape’s initial pitch is that service providers adopt multicast because it will save money by reducing the amount of traffic on their networks. As we’ve stated before, there are markets such as South America, where broadband penetration is relatively low, that can benefit from Octoshape’s multicast technology.

What about the big markets like North America and Europe? Apart from saving money on transporting video across their networks, telco and cable network providers (not to mention satellite TV providers who don’t even own access networks) could power their new TV Everywhere online video services with multicast and pay for the technology with a predictable per channel fee. The argument is compelling, but getting the pieces in place will be a challenge. Along those lines, a partnership with a company like Cisco, with all its assets from the Scientific-Atlanta and NDS acquisitions, would be a key signal that large pay TV providers are getting in line for Octoshape’s HD-M technology.