January, 2001 | A number of veteran vendors of
MPEG hardware/software solutions (companies like Optivision,
Optibase, and Minerva) have recently all but abandoned the
DVD and CD-ROM publishing markets and have even backed away
from the professional and broadcast video markets. Instead,
they are building and selling video network appliances.
They're banking on these brick-like boxes to secure the
foundations of new business models, turning streaming video
into a new revenue stream that flows directly into their
It's an interesting market phenomenon that raises some
interesting questions. How strong is the current market
for MPEG network appliances and what is its future potential?
Is it a niche market or something with wide and enduring
appeal? Do rank-and-file workstation jockeysnot to
mention overtaxed IT prosreally want huge video files
clogging up their networks? Will video become a valuable
corporate commodity (data type) or remain forever relegated
to entertainment applications?
These network appliances for streaming MPEG video are
essentially black boxes containing an MPEG encoder, a decoder,
or both. They've got video inputs for plugging in a camera
(or other video source), video outputs for plugging into
a TV, and network ports for attaching to a network (IP,
ATM, etc.). They're not cheap, ranging from $5000 to $20,000
per box. If all you want to do is convert analog video into
MPEG files to share on your network, you could do the same
thing with video capture cards and software encoders that
start as low as $299. The key difference here is that these
network appliances capture and encode in real time. But
is that an advantage or a limitation? Time is as precious
a corporate commodity as any data type, and real-time encoding
can prove a real drag when other ongoing network work has
to share bandwidth with it. It raises the marketing question:
to whom is live, real-time video mission-critical?
From an outsider's perspective, this market looks very
niche-oriented and, well, small. But the black-box vendors
see it differently. In fact, they are downright bullish.
They say that their appliances will make digital video so
easy and inexpensive to capture, distribute, and manage
that everyone will want to use video on their networks.
The question won't be "Why use video?" they insistit
will be "Why not?" These appliances, the vendors say, are
poised to break the shackles of their niches and burst forth
onto the boundless playing field known as "corporate communications".
And it isn't just the vendors who are saying such things;
so are some of the users out in the field. "This is still
relatively new technology," says Kevin Ross, director of
networks for Fulton-Montgomery Community College of Johnstown,
New York, and a user of MPEG network appliances from VBrick
Systems in distance-learning applications. "Once people
find out about this technology," he says, "they will flock
Some market analysts are also quite positive: "Where video
quality is important and bandwidth plentiful, these things
are a slam dunk," says Andrew Davis, senior analyst and
managing partner for Wainhouse Research of Brookline, Massachusetts.
Infrastructure Already There
Of course, key to the grandiose profit-making dreams of the
vendors is bandwidth availability. These appliances do virtually
nothing to solve the perennial bandwidth problem; rather,
their ability to deliver video to connected workstations depends
on the throughput capacity of the existing network and whatever
constraints everyday traffic may place on it at a given time.
And that's to say nothing of extranet connectivity technology,
which still lags several bandwidth breakthroughs behind the
video delivery capability of Local Area Networks (LANs). Consider
the use of network appliances for video conferencing, for
example. Adding an MPEG streaming appliance to your company's
LAN will empower you to capture video from a camera and use
it at whatever bandwidth your LAN can comfortably provide,
but if you want to connect your LAN to someone else's LAN,
you're in trouble. Say your company has a remote office in
Istanbul, for example, and you want to conduct a video conference
with the staff there. You'll still need to connect your local
LAN to that remote LAN, and you're still stuck with the bandwidth
limitations of that LAN-to-LAN connection.
Indeed, when it comes to streaming video, bandwidth is
key to everything. "As bandwidth goes up, this market will
explode," says Rich Mavrogeanes, president and CEO of Wallingford,
Connecticut-based VBrick Systems, Inc. But while he's looking
forward to the future, he also isn't complaining about the
present. The only people who think bandwidth in America
is a problem are people who Web-surf from their home using
copper phone lines to America Online and the like, says
Mavrogeanes. In corporate America, however, the bandwidth
picture looks very different, he insists. Universal access
to massive amounts of bandwidth is just around the corner,
not years away but months, he says.
Wainhouse Research analyst Andrew Davis concurs. Most
big companies now have at least a 100-MB Ethernet network
and such networks are more than capable of supporting MPEG
streaming, he says.
"Most big corporations have run fiber- optic lines and
now have more than enough bandwidth for digital video,"
says Michael Liccardo, president and CEO of Palo Alto, California-based
Optivision. [Optivision recently announced a merger agreement,
and that it will change the company name to Amnis Systems,
Inc., but at press time the merger had not been finalizedEd.]
Over the past few years, telcos, cable companies, and other
telecommunications providers like Sprint and Qwest have
been busy installing fiber optic cables, notes Andrew Davis.
"Over the last couple years," he says, "the big boys have
been laying fiber optic lines in the kazillions." Mike Savic,
director of product management for VBrick, has seen this
trend too. All of yesterday's investments in "infrastructure"
are finally beginning to pay off today, he says. "It won't
be long," says Savic, "before America is one big IP network."
And not only are lots of these backbones already in place,
new switching and routing technologies are making them more
efficient. "The great thing about a fiber-optic line is
that its bandwidth is virtually unlimited," says Ken Regnier,
director of product development for InnovaCom, Inc. of Clara,
California. "People keep coming up with ingenious ways to
take get more bandwidth out of these existing fiber lines,
and there seems to be no limit to the engineers' ingenuity,"
says Regnier. A prime example is a new technology known
as Wavelength Division Multiplexing (WDM), which divides
a light beam into many wavelengths, thus multiplying the
amount of data that can be carried over a single optical
fiber by that light beam. Thanks to technologies like WDM,
telcos and other providers now have bandwidth to spare,
says Regnier. Prices for leased lines and other services
are coming down. And as more technological advances continue
to arise, things will get even better, Regnier predicts.
But what about mid-size and smaller corporations? Are
network appliances a viable solution for small companies
with old, anemic small-piped networks? "I can't emphasize
enough that to take advantage of these network appliances,
you must have a robust network infrastructure already in
place," says Kevin Ross. There at Fulton-Montgomery College
where he works, Ross has access to an "ATM backbone with
a 600MB pipe capable of 2 million packets per second." Not
exactly your average mom-and-pop network. "Wherever bandwidth
is available, this technology will thrive," says InnovaCom's
Regnier. "However, there will always be legacy systems that
can't take full advantage of new technologies like this."
While they are waiting for this technology to gain mass
acceptance in corporate America, vendors have targeted several
key niches in which video could be considered mission-critical
or near-critical: video conferencing, surveillance, telemedicine,
and distance learning.
Tough Rooms: Video Conferencing
Streaming video network appliances are a natural for use in
video conferencing, but as markets go, this one will be the
vendors' hardest nut to crack. That's because the market is
already overcrowded with well-established videoconferencing
products that are getting cheaper and better every day.
Because they deliver MPEG-1 (and sometimes MPEG-2) streams
at adjustable bit-rates, network appliances are capable
of delivering video of extraordinary visual quality. It
fact, it is this quality the vendors usually point to as
the products' major strength. "When people see that they
can get what looks like normal TV over a network, they will
want this technology," says VBrick's Mavrogeanes.
The appliances' primary competition is this area is the
existing surfeit of traditional ISDN-based conferencing
systems. This technology has rarely come cheap, ugly as
its reputation may be in some circles. VBrick's Mavrogeanes
insists that at $5000, his VBrick boxes are "20-to-1 cheaper"
than ISDN systems. But he's comparing them to very high-end
systems like the $110,000 Grass Valley system that Kevin
Ross is replacing with a VBrick-enabled network at Fulton-Montgomery
College. That might not be a fair comparison. There are,
after all, a whole slew of other lower- priced video conferencing
systems on the marketwhich look better and better
as network technology catches up with digital video technologyto
which network appliances might be more fairly compared.
"A few years ago, $50,000 for a videoconferencing system
was not out of the ordinary," says Wainhouse analyst Davis.
"But today, a very nice conference room system can be purchased
for under $5000 or even under $4000." He adds that all the
big videoconferencing manufacturers (PictureTel, Tandberg,
Polycom, and Sony) make systems in the $19,000 range that
provide video that is "suitable for general business communications."
Pricewise, VBricks, with their starting price of $5000,
stack up well against such systems, but some of VBrick's
competitors are selling network appliances in the $15,000-20,000
range. Remember too that in order to do point-to-point conferencing,
you need two appliances, so a VBrick conferencing setup
would cost at least $10,000, not merely $5000.
Mavrogeanes insists that the "herky-jerky video" of ISDN
systems is unacceptable. "We've all learned about video
at home, watching television. If it is not that easy to
use and at that level of quality, it is not good enough."
"ISDN-based video uses H.263 video compression, which
is designed to work at lower bandwidths," Mavrogeanes explains.
"It sacrifices smooth motion for image quality. Therefore,
if you have no motion, you will get great video. However,
if there is motion, the frame rate drops from [NTSC standard]
30fps to as little as one frame per second in order to get
full pictures through the network. MPEG, on the other hand,
is always 30fps full motion, providing much better videosimilar
to what you see on TV."
But it logically follows then that if all you're doing
is transmitting talking heads during a simple video conference
or a distance-learning session (usually just a teacher lecturing),
lower-priced ISDN videoconferencing systems would probably
fit the bill. It's only when video with a lot of motion
is used that the difference would be starkly noticeable
and distracting. If a science teacher wants to run footage
of birds in flight during a distance-learning session, for
example, the higher-motion quality of an MPEG streaming
appliance might be called for. Davis says that the trick
to getting better video quality out of a videoconferencing
system is to use a more expensive T1 line (offering 1.5
Mbps) in place of an ISDN line. He says systems from companies
like PictureTel and Tandberg in the $19,000 range "use compression
other than MPEG, and the quality is not quite as good as
MPEG, but it's not bad."
Davis adds that there are niches beyond business conferencing
in which motion video quality will be deemed more important.
Distance learning is a good example. "Fourth-graders aren't
going to sit still for non-lip-synched video. It will be
too distracting for them. They're used to television." Adults
in corporations will be more forgiving, he believes.
Mavrogeanes also says that another advantage of appliances
like his VBricks is that they are easier to use and set
up. Again, he compares them to a Grass Valley system: "The
Grass Valley system has a proprietary, difficult-to-use
Creston control system that only a handful of people understand
and can use." Network appliances, by contrast, simply plug
into existing networks via existing interfaces and protocols,
and video streamed via networked appliances is as easily
accessed as any other media assets delivered over the network
to which it is attached. Appliance-user Daniel Matthews
agrees with Mavrogeanes about these appliances' ease of
use. Project director for the Cascade Consortium of Chelan,
Washington, Matthews has spearheaded the installation of
a distance-learning system that links five remote schools
in rural Washington. Matthews reports that setup and maintenance
of the Consortium's Optivision network appliances is so
easy that he's assigned several of his high school students
to do the job.
But ease-of-use is not exclusive to these appliances.
Davis reports that once-finicky ISDN conferencing systems
have also gotten easier to use lately. "New conference room
systems are no more difficult to operate than a VCR or TV,"
In some areas, nonetheless, network appliance-based setups
remain unmatched, Mavrogeanes maintains. "The other advantage
of network appliances is mobility and size," says Mavrogeanes.
"They are small and portable. You can put them anywhere
you have a video source or TV. Systems like the Grass Valley
are large and not movable. How do you get a Grass Valley
system into a classroom? The answer is you can't. You need
to bring the students to the Grass Valleyextremely
inefficient." Here again, it's worth noting that Mavrogeanes
isn't so much comparing apples to oranges as new apples
to old ones. He's drawing distinctions between new-fangled
network appliances and a dinosaur-like system (Grass Valley)
that has been superseded by a whole bunch of small, lightweight
"roll-about" videoconferencing systems. These newer systems
can be put on carts and wheeled around from room to room
and used the same way carts filled with network appliance/camera/monitor
combs are being used.
As noted earlier, network appliances provide little advantage
when you're doing point-to-point teleconferencing. But where
the network appliances really start to show their value
is when people want to go beyond point-to-point, when they
want to send information from one site to many sites (broadcasting
or multicasting), from many sites to one site, and from
many sites to many sites. In order to duplicate the kind
of many-site-to-many-site connectivity you can get with
a network, a traditional videoconferencing system would
require multiple ISDN or T1 lines. And that would be difficult
to accomplish and expensive.
Clearly, MPEG network appliances face stiff competition
in this market. Too many people are too willing to sacrifice
video quality to save a few bucks. And appliance prices
are too close to those of established videoconferencing
systems. "This market will not be as easy for the vendors
as will other application areas," says Davis. Yet because
it is such a huge, wide market with so much pent-up demand,
in spite of the entrenched competition, it will remain one
with allure for the vendors.
Safest Bet: Surveillance
Currently the strongest market for streaming network video
is in security/surveillance systems. Here video network appliances
have an obvious advantage. Traditionally, surveillance systems
have been analog systems, essentially closed-circuit TV networks.
They've been expensive and inflexible. Video was often recorded
onto tapeswhich resulted in unmanageable tape libraries
and storage space nightmaresor onto expensive, massive
magnetic storage devices attached to expensive video servers.
Analog video surveillance systems often required users to
build dedicated cable networks. They were networks unto themselves.
In contrast, users of network appliances need merely hook
a camera to their existing data network, and voila!instant
surveillance network, without the agony of having to build
one from scratch. You just piggyback on your existing data
network and kill two birds with one stone. All you need to
buy are the network appliances and the cameras.
Another advantage of network appliances in the surveillance
field is that they do a better, easier, and more economical
job of managing and controlling video streams. In old analog
video security systems, this was done with expensive video-switching
equipment. Now network appliances do the same thing using
a simple point-and-click Windows software interface or via
a browser window. Many systems also provide the ability
to control cameras remotely (using the appliance's RS-232
port). Also, network appliances give you the flexibility
to view video on either a PC monitor or an ordinary TV (that's
what the MPEG decoder is for).
A popular subset of surveillance systems is remote monitoring
systems. You often find such systems in industrial sites,
such as in factories where they monitor assembly-line robotic
equipment and in power plants where they monitor critical
instrumentation controls. Remote monitoring has also become
popular with government agencies responsible for today's
new complex computerized traffic control sys- tems, commonly
known as Intelligent Transportation Systems (ITS).
Telemedicine has been hailed as one of the solutions to America's
health care crisis. When doctors can diagnose, consult, collaborate,
and teach remotely over vast distances, travel time will decrease
and efficiency will increase. Doctors will no longer have
to spend time driving from clinic to clinic or hospital to
hospital. In fact, they may not even need to take the time
to step from office to office or room to room. Telemedicine
will be particularly valuable for doctors and hospitals in
rural areas that serve wide geographical areas.
Doctors with telemedicine systems will be able to make
telepresence visits, the 21st Century's equivalent to a
house callthough true virtual house calls will have
to wait until more people have cable modems and DSL lines
in their homes.
A virtual house call would use a dedicated point-to-point
link. A nurse or nurse-practitioner could, for example,
take a portable AV cart with a camera and a network appliance
to a patient's location and plug it into a TV. The doctor
could tell the nurse to move instruments, probes, and cameras
to examine the patient. The nurse and the patient could
see the doctor during the examination, while the doctor
could see the patient and the instrumentation readouts.
A telemedicine system could also be used for multipoint
sessions where several doctors could get together to diagnose
a patient collaboratively or to consult on a live ongoing
surgical procedure. Such systems could also replace medical
schools' traditional "surgical theater" teaching sessions
in which students gather in balcony-like seats above an
operating room to observe surgery in progress. In this case,
the camera's ability to get close-up shots clearly outstrips
the advantages of being there live. Telemedicine will remain
a key market for MPEG network appliances, because this is
an application where video quality is clearly mission-critical.
Visual quality may not be crucial in video conferencing
or distance-learning where the video is primarily talking
heads, but in telemedicine, poor video might lead to a poor
diagnosis, which might cost a life.
In the medical field as elsewhere, bandwidth isn't a problem,
the vendors insist. Most hospitals either already have robust
in-building networks or are busy installing them. Also,
as many smaller hospitals have been merging to form health
care system conglomerates, they have also been investing
in broadband interconnects. The infrastructure is already
there, the vendors say. Classrooms in the Computer: Distance
MPEG appliance providers are particularly enthusiastic
about the distance-learning market, mostly because they
see so much government funding available for technology
initiatives in public schools. Also, thanks to government
mandates, schools can get high-bandwidth connections at
special educational discounts called "E-rates," notes InnovaCom's
Regnier. He also believes that like most hospitals, most
schools already have the infrastructure for video streaming,
having invested in broadband in-building and school-to-school
networks. Indeed, according to Wainhouse Research's Davis,
"Thirty-eight of the 50 states have already funded initiatives
to connect schools with broadband networks."
Like videoconferencing and telemedicine systems, distance-learning
systems are often used to connect two or more geographically
remote sites. Just as this helps doctors cut travel time
and be more efficient, it will help teachers and administrators
be more efficient. Many rural schools throughout the U.S.
are in a position similar to the five in rural Washington
state that make up the Cascade Consortium. For years, one
of these small schools has wanted to offer a calculus course
but didn't have a student body large enough to justify hiring
a calculus teacher, reports Daniel Matthews, the consortium's
distance-learning project head. By videoconferencing with
four other school and pooling resources, they can gather
together enough students to justify the cost.
Using MPEG appliances from Optivision and a high-bandwidth
ATM network, the Cascade Consortium now conducts distance-learning
classes for Calculus, Advanced Spanish, Sociology, Psychology,
and Advanced Technology/ Robotics. The system uses not just
a camera pointed at the teacher but also a document camera,
a smart board, and a VCR for playing prerecorded tapes as
part of a distance-learning session/virtual class.
Fulton-Montgomery Community College in Johnstown, New
York is currently conducting nine virtual classes using
VBricks on its ATM network. These highly portable VBrick/camera/monitor
combos can be wheeled on carts to any of the school's 89
classrooms. Live, virtual classes are often recorded so
absent students can view them later, and they can do it
in the comfort of their dorm room, using a Web browser on
Fulton-Montgomery's Kevin Ross raves about the advantages
of the college's VBrick-enabled network and claims the college
has saved at least 50 to 75% of the yearly networking budget
by switching from the old Grass Valley system. He says that
with VBricks, he can get the same video quality from a T1
line that he formerly needed a DS3 line to get. When you
compare the $45,000 per-year cost of that DS3 line to the
$9000 annual expense of a T1 line, you can see his point.
"If people can get distance learning this easily," says
Ross, "everybody will want to do it."
If I Had a VBrick...
Perhaps the best thing about network appliances is that they
are truly appliances. "A VBrick is an appliance, a tool,"
says Mavrogeanes. "It's a tool the way a hammer is a tool.
And like a hammer, these tools can be used for many different
Although Fulton-Montgomery Community College started out
using network appliances primarily for distance learning,
the college has quickly moved into videoconferencing, security,
broadcasting, and information disseminationand all
done over a single network. "We're finding new uses for
VBricks every day, and buying more and more, and hanging
them off the network as the need for them arises," says
Fulton-Montgomery has camera/VBrick/monitor combos set
up all over the campus. In dorms and classroom buildings,
the TV monitors display text-based information during the
day, things like class schedules, sports schedules, and
announcements for upcoming cultural events. Then during
the night, these same two-way camera/monitors become the
nodes of a surveillance system. The college has plans to
connect its campus television studio into its ATM network
so that it can broadcast studio productions throughout the
campus, and it has plans to attach a PictureTel interface
to the network in order to share video with popular PictureTel
video-conferencing systems. Fulton-Montgomery's Ross says
he's also planning on using VBricks in recruitment kiosks
that will be placed in McDonald's restaurants. These kiosks
will use a Web browser, and not only will students be able
to view HTML pages describing the college and its programs,
they'll also be able to connect videophone-style with a
recruitment advisor. "They'll be able to speak to a real
person, live, right there while they're eating a burger,"
Corporate Communications: The Final Fiscal Frontier
Appliance vendors are banking that, like schools and colleges,
corporations will also be impressed by the Swiss army knife-style
flexibility of these products. Companies too will find more
and more uses for them every day, as they discover that video
doesn't have to remain the clumsy, static tool it has proven
to date in corporate communications. Like a brick through
the window of big business, today's handy, box-based network
appliances may indeed break digital video in the coveted corporate
Companies Mentioned in This Article
3400 Garrett Drive, Santa Clara, CA 95054; 888/464-6734, 408/727-2447;
Fax 408/727-6625; firstname.lastname@example.org; http://www.transpeg.com,
2111 Tasman Drive, Santa Clara, CA 95054; 408/567-9400;
Fax 408/567-0747; email@example.com;
3031 Tisch Way, Plaza West, Suite 1, San Jose, CA 95128;
408/260-6760; Fax 408/244-0545; http://www.optibase.com
3450 Hillview Avenue, Palo Alto, CA 94304; 800/239-0600,
650/855-0200; Fax 650/855-0222; firstname.lastname@example.org;
VBrick Systems, Inc.
12 Beaumont Road, Wallingford, CT 06492; 203/265-0044; Fax
Wainhouse Research, LLC
112 Sumner Road, Brookline, MA 02445; 617/975-0297; Fax