Cisco seeks IP route to living room

With a new Media Solutions Group in place and a basket of products coming out at the International Consumer Electronics Show in January, Cisco Systems Inc. is gearing up for changes in its increasingly important consumer strategy. The company won’t — or can’t — say much about what it will be doing, but with a presence in carrier as well as home networks, it could play a growing role in how people are entertained and keep in touch.

Cisco is strongly pushing IP phones such as the iPhone, introduced earlier this week. But digital video was on the lips of all major Cisco executives last week at the company’s C-Scape analyst conference, where they talked up the recently introduced Telepresence Meeting system for enterprises as well as other business and consumer uses of video.

A data networking company can only become a home entertainment company if TV, movies, music and other media all turn into movable packets, which is what is happening now on telecommunications and cable networks. To take advantage of this, Cisco is helping broadband providers build core networks, and it bought Scientific-Atlanta, one of the biggest makers of the set-top boxes that deliver video to TVs. Its Linksys division is already the sales leader for home networks. The company doesn’t expect to make cell phones, but it wants to offer the infrastructure for delivering services across all wired and wireless networks. Before long, those technologies could comprise the path that most entertainment takes into homes.

Executives were vague about the San Jose, California, company’s plans. To start with, the company promised several new products at CES and hinted at a possible change in branding there. Though executives crowed about how the Linksys and Scientific-Atlanta brands are respected, only the Cisco name covers the company’s end-to-end vision. As for the Media Solutions Group, it’s expected to become a US$10 billion annual-revenue business. Charles Giancarlo, Cisco’s senior vice president and chief development officer as well as president of Linksys, could only give a hint as to how.

“Where can a user get access to many different areas of content, from many different companies, and bring that together so it all looks like one thing, and one list? Cisco is working with many of the content suppliers so that the solutions in the home will allow those content suppliers to be able to provide what they have, but from an end-user standpoint it all looks like one system,” Giancarlo said.

Video is the biggest piece of this vision. What’s changed most for end users, whether at work or at home, is that video is now personalized, said Mike Volpi, senior vice president and general manager of Cisco’s Routing and Service Provider Technology Group. Users don’t have to turn on the TV at a certain time to watch a show or leave their desks for a simple video chat, he said. They can get video where and when they want it.

Cisco wants to deliver everything needed for video services, including the core and edge of the carrier network, the home network, and the middleware to handle encoding, digital rights management, advertising, billing and other elements, Volpi said.

Users do want music, video and other content from carriers and the Internet in one place, said In-Stat analyst Joyce Putscher.

“The average consumer has a great interest in being able to share the content anywhere they want, see it anywhere they want, hear it anywhere they want,” Putscher said. However, it will have to be simple, she added.

Cisco’s vision of all-in-one digital entertainment could take the form of a home media server integrated into a set-top box, Putscher said. The central device could even be separate from the set-top box as long as Cisco made it easy for the consumer to use them together, she added. The company might offer an architecture that consumer electronics vendors could adopt for interoperability, Putscher said.

Cisco’s path is likely to take it up against many vendors with the same goal, including Microsoft Corp., PC makers and consumer electronics vendors such as Sony Corp. and Toshiba Corp. Motorola Inc., a major set-top-box maker, this week acquired video infrastructure vendor Tut Systems Inc. While Cisco has a great opportunity to simplify digital entertainment for consumers, whatever it comes up with will have to work smoothly with those other vendors’ products, IDC analyst Jonathan Gaw said. He doesn’t see a train wreck, though: In the next year or two, some useful systems should appear, he believes.

That’s not to say the consumer picture is completely rosy for Cisco, Gaw said. He sees a very different home networking world developing in the next few years, one where service providers play a much bigger role. Increasingly, DSL (Digital Subscriber Line) and cable modems have integrated Wi-Fi, while wireless LAN clients are mostly built in to new PCs. That’s bad news for retail home-networking brands such as Linksys, though it makes Cisco’s acquisition of Scientific-Atlanta look like a smart move, he said.

The far-flung company’s consumer branding is another issue, Gaw said. Cisco has three unattractive choices, in his view: use one of its existing brands, buy someone else’s brand or establish a totally new name and then try to sell it to consumers.

To fully carry out its consumer strategy, Cisco is looking to the developing world. Dan Scheinman, senior vice president and general manager of the Content Solutions Group, told the C-Scape conference that emerging markets are one of the new division’s prime areas of investment, in addition to personalization.

“As people get richer, one of the things they choose to spend on is content,” Scheinman said. His views lined up well with those of Chambers, who said Cisco needs to work on expanding its home networking business outside the U.S.

For now, the new emphasis on content raises more questions than it answers, according to Frank Dzubeck, a long-time Cisco watcher at consulting company Communications Network Architects Inc. The move could open Cisco up to an even wider array of competitors.

“Gee, that’s Google, that’s Yahoo, that’s MySpace, that’s YouTube, that’s all sorts of entities. That’s eBay. How is a Cisco going to play into this new content world, and what are they going to provide?”