Sun seeks profit from Internet TV

The Sun Streaming System consists of video-streaming software, a handful of ordinary Sun servers, Sun Fire X4500 "Thumper" storage systems and the highlight, the X4950 Streaming Switch. In a top-end $8 million configuration, the X4950 holds 2 terabytes of memory and 32 10-gigabit-per-second Ethernet ports, and can pump out 160,000 simultaneous video streams onto the network.

Most TV shows today are broadcast over the air or cable distribution networks, but Sun's new system lets people select which shows they want to see and when they want to see them. This "video on demand" world resembles ordering DVDs through the mail with Netflix or watching recorded video using TiVo, only the TiVo is a server that doesn't run out of hard-drive space and the movies are sent nearly instantly over the Internet through a technology called IPTV--Internet Protocol television.

Although the Sun Streaming System is on the fringe of Sun's product line, it once was the core product of a start-up, Kealia, that Sun acquired in 2004. That wasn't just any old acquisition: it brought to the company its general-purpose "Galaxy" line of x86 servers and returned to Sun one of its co-founders, Andy Bechtolsheim.

People want their video delivered on their own schedules, Bechtolsheim said, and Sun is intercepting that trend.

"Blockbuster is already history," Bechtolsheim said, replaced by Netflix, and Netflix's current model will be replaced by video on demand.

Frank Dickson, an analyst with iSuppli, called Sun's product "an impressive system. The design is very well thought through," and the price is reasonable. However, he said, video-on-demand hardware is a "niche market," with spending estimated to reach only $60 million this year.

The prime candidates for Sun's product are telecommunications companies, he said. "Telco is anxious to be in the video-viewing market," he said. Cable companies' infrastructure is less amenable to video on demand, he added, because many subscribers share the same bandwidth, an issue that has limited current video-on-demand offerings.

Sun's streaming system employs several features desirable to consumers, including the ability to fast-forward or rewind at various speeds. It requires a set-top box that can communicate with the central servers, but it's designed to work with inexpensive models. Alternatively, a PC can be used to receive the video streams.

Bechtolsheim recognizes that merely having the hardware and software to send video streams is only one part of an overall video-on-demand ecosystem that must be built. Other aspects include relationships between content suppliers such as movie studios and those who control the networks that deliver content to consumers' homes, chiefly cable TV or phone companies.

"The legal issues behind video distribution are humongous," Bechtolsheim said.

And it's taking time to build that system. Bechtolsheim pitched his technology to potential customers in 2003 and 2004, and they said they'd be deploying video on demand on a broad scale in 2005 and 2006. That proved premature.

"We were a little early, quite frankly, but it works now," he said.

Paula Patel, head of Sun marketing for the video system, argues that it's better to store video information in central servers than on personal video recorders that run out of capacity. A single standard-definition movie typically takes about 4GB of space, so it would take about 10 24-terabyte Thumper systems--few enough to fit into a single 6-foot rack--to hold Netflix's current 60,000-title library, Bechtolsheim said.

Sun's system pumps data onto other switches from Cisco Systems, Nortel Networks or others that ultimately handle routing it to individual destinations. However, many Internet subscribers today don't have the capacity to handle 2 megabit-per-second standard-definition video or 8-megabit-per-second high-definition video.

But iSuppli's Dickson said the network should be able to keep up with the new burden of video streaming.

"In general, bandwidth does not seem to be a problem," he said. "The goal of these systems seems to be to deliver content within a 'walled garden' much like (Verizon's) Fios or (AT&T's) U-verse. The telecommunications companies will provision the network to provide the quality of service needed. As long as the holy grail of triple-play revenues exist"--customer spending on networks for video, phone and Internet access--"bandwidth limitations are not an issue."

Sun's Streaming Switch name could imply that the Santa Clara, Calif.-based company is getting into competition with networking switch giants such as Cisco, but it's not really accurate to call the product a switch, Bechtolsheim said.

"It's a server with a bunch of 10-gigabit ports," he said.