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Softbank unit sharpens Net video focus

Quality of content and service, including connection speeds above 1mbps, are the key to luring customers to paid premium services, according to a company executive.

Softbank's Internet video-on-demand efforts are getting a big boost from little-noticed technology that promises to stream DVD-quality movies online.

After a six-month trial, the Japanese company's Softbank Broadmedia (SBBM) subsidiary said last week that it plans to expand an agreement with Laguna Hills, Calif.-based EdgeStream--a deal that at least one executive credits with a dramatic improvement in quality of service and sales. EdgeStream, which emerged from stealth mode about a year ago, claims its technology can guarantee data throughputs of 1 mbps (megabit per second) over the public Internet.

"Currently, two-thirds of the VOD (video-on-demand) content sold by SBBM over the public Internet is now enabled by EdgeStream technology," SBBM business development group executive director Tony Kato wrote in an e-mail last week in response to written questions about the service. "This has been accomplished with little advertising or promotion. The above trial results over the last six months have convinced us of the effectiveness of EdgeStream technology."

Kato said the company has been using EdgeStream's technology over its servers in the United States, but plans to add EdgeStream servers in Japan in May. Others that have adopted EdgeStream's technology include Korea Virtuecom, which unveiled a Web service using the California company's products last week. An EdgeStream representative said the company plans to announce details of the service next month.

Quality of service remains a significant barrier to selling video content online, second only to content licensing, according to Kato. SBBM's trials showed that willingness of customers to pay for video increased sharply at delivery speeds equal to or exceeding 1mbps, he said.

Those rates far exceed the capacity of most consumer broadband services in the United States, but are poised to become a service benchmark in Japan and other parts of Asia, according to Kato, where broadband adoption has moved more quickly.

SBBM's VOD trials come as parent Softbank is refocusing its business after a wild ride as one of the world's most prolific investors in Internet ventures during the dot-com boom. The company has recently been selling off portions of its stakes in a number of its holdings, including Yahoo Japan, to help fund its broadband efforts.

The company tapped EdgeStream for its SBBM subsidiary last September, a few months after the start-up went public with a product aimed at an intractable problem of video delivery over the Net: congestion.

Performance problems in streaming media have led to hardware-intensive products from networking caching companies such as Akamai, Digital Island and RealNetworks.

EdgeStream, by contrast, offers a software-based product for intelligently routing data across the so-called "middle mile" of the Internet.

EdgeStream's software suite consists of its main Internet Congestion Breakthrough Technology component, supported by advanced Continuous Route Optimization Software, Real-Time Performance Monitoring Service and Self-Healing Network Architecture. According to company statements, the software enables 1mbps and higher video streams without interruptions over the public Internet, at one-fifth the cost of competitors' products.

Companies such as Sockeye Networks and InterNap Network Services also offer intelligent routing services that attempt to alleviate data congestion problems that can frequently degrade the quality of live streaming broadcasts over the Net.

In addition, both Microsoft and RealNetworks in the past year have announced improvements that herald the "end of buffering"--a core symptom of the congestion problem. Those efforts both rely on using excess bandwidth to mask the congestion problem, as opposed to managing data flow to ensure a high-quality connection over the duration of a session.

Kato said the SBBM service has seen a gradual increase in the number of people who pay for quality content, with traffic increasing month over month in spite of little advertising or promotion.

Viewers on average buy about 2.5 clips per month with an average length per clip of about 80 to 90 minutes. Prices range from $2.50 to $6.50 a clip, depending on the content, Kato said.

The service is operating at loss, but is expected to begin turning a profit by next year, he said.

While quality of service is important in attracting paying customers to online video-on-demand services, Kato said content remains king.

Quality of service "is of secondary importance since current Internet paid content viewers are mostly 'Internet maniacs,' and tend to watch the content as 'Internet content' by being compromised with delivery quality," he wrote.

"We see this market structure will soon change to expand to and include more ordinary people, and that they see importance on equivalent delivery quality with TV and DVD environment."