THE FUTURE TRUST

Q&A

Network Service Providers Prepare for 4K/UHD Traffic to Deliver Immersive Augmented Entertainment Experience

A Conversation with Michel Rahier President, Connected Home, Technicolor

2THE FUTURE TRUST technicolor

A Conversation with Michel Rahier President, Connected Home, Technicolor As the race to develop and deliver the

technologies that will transform the digital consumer experience accelerates, the service provider community – cable operators, satellite providers and telecommunications companies – will play a critical role

This is especially true for 4K UHD which will significantly increase both the volume and the complexity of traffic that will be carried to the home, car and personal devices over a heterogeneous wired and wireless infrastructure.

To help us better understand some of the key issues service providers face, we sat down with Michel Rahier, president of Technicolor Connected Home. Here is what he had to say:Q: How close are we to seeing UHD experience rolled out to a mass audience, and what are the market drivers that are going to get us there?

Michel: My firm opinion is that the massive deployment of 4K UHD is going to come in 2016-2017 with some slow ramp-up probably starting in 2015. What we’ll see in the meantime are pilots and demonstrations. The industry is going to be impacted big-time no doubt, but timing-wise, we’re talking about 2016-17 and beyond.

The initial drive for 4K is coming from the TV manufacturers. From time to time, as we all know, they need something to differentiate themselves from the previous generation. Definitely 4K is a very good topic for them to accelerate the renewal of the installed base. They have found the “next thing” that eventually is going to boost their sales in the medium term.

But for us at Technicolor the real difference created by UHD should be not only in the increase in resolution delivered by 4K, but also in the quality of the image that end users receive in their living rooms, or other screens. And it’s in that quality of service that technologies like HDR (High Dynamic Range, which enables a better rendering of contrast) are playing an important role. 4K is great for TV manufacturers, but for end-user customers, 4K on its own may not be such a dramatic revolution. If 4K is coupled with something that also improves the quality of the picture, then indeed this is a very different ballgame. That’s why we believe that the association of 4K with HDR will have a real impact on the end-user experience.

Q: What challenges will massive deployment present for the different Network Service Providers (NSPs) that will have to

A Conversation with Michel Rahier President, Connected Home, Technicolor

3THE FUTURE TRUST technicolor

carry that next-generation of UHD content on their pipelines?

Michel: If I’m looking at the different types of network operators, the problem at hand is clearly one of bandwidth. How is the operator going to cope with the bandwidth increase that is required for 4K and 4K-HDR?

Not all the operators are going to be affected the same way, so my view is that the ones who will have the most difficulty are the Telco operators because they have more limited bandwidth than Cable operators, for example. Cable operators will have much fewer issues in terms of taking on 4K and 4K-HDR than Telco operators. The bandwidth available for Cable operators is close to an order of magnitude bigger than for Telcos.

For Satellite operators it’s a little bit different. During the initial roll-out, pay-TV operators will only offer a handful of 4K channels, and adding a few channels won’t be a problem. But after a few years 4K content will becomes more pervasive, prompting satellite operators to add capacity. Technicallly this can be done, but there is a cost associated with adding transponders, which would eventually mean launching additional satellites. Where satellite operators will meet the toughest challenge is with video-on-demand (VOD). Today, they do it “over-the-top” using existing broadband connections that they don’t manage. This will prove more challenging with 4K.

Q: Is it fair to say that Cable operators have an advantage over other providers because of their network capacity?

Michel: Yes, from a network capacity standpoint. Now that being said, we need to realize that the investments that operators have to make in order to deploy 4K-HDR are not only bandwidth related. That’s an important element, but there are also other elements like upgrading their encoders and their set-top boxes – a shift that we witnessed when we went from SD to HD; there was an upgrade of the decoders in the home.

The industry will also need to make sure that content is being filmed, digitized, and/or upscaled in 4K. So upfront in the consumer-facing link of the content chain, there are investments to be made, and those investments are roughly the same for all types of operators. The bandwidth investment and capital expenditures are important, but they’re not the only elements.

It is also important to keep in mind that bandwidth in the network can be added or freed-up by removing existing services. For instance, some cable operators still have analog channels that they could turn off to make room for digital channels. But there again this means buying and deploying additional set-top-boxes.

Finally, the fact that cable operators can ultimately use more network capacity does not mean that they will be more aggressive in launching UHD. Video is only one of 3 or more services (voice, video and data) that cable operators offer to their subscribers – and it is not the most profitable.

By contrast, video is typically the only service that satellite operators provide. This means that satellite services they must differentiate either through exclusive rights, or through better

4THE FUTURE TRUST technicolor

A Conversation with Michel Rahier President, Connected Home, Technicolor

service or picture quality. As a result UHD and HDR is essential to them.

Q: From your perspective, what type of content and events would trigger faster adoption of UHD?

Michel: What we see already, at this point in time, is that two types of service providers are making early investments in UHD. OTT providers are busy lining up a catalog of 4K content for VOD. That is why our M-Go colleagues are very active in this arena and made important announcements at this years’ CES.

Satellite operators are extremely active in demonstrating the ability to deliver 4K to their customers, focusing on live content, and in particular sports programming. This is something that customers want to see. We will see this enhanced experience being promoted during the FIFA World Cup in Brazil in June-July of this year.

It will be interesting to see how these major sporting events drive demand for 4K technology among consumers. These could trigger significant 4K/UHD movement in mature markets in North America, Europe, and even in Asia in 2014.

Q: Are Telco providers doing anything to catch up to -- or mitigate the effects of -- the bandwidth gap?

Michel: It is important to understand that there are several types of UHD. The simplest evolution vs. HD is to just increase resolution to 4K, and keep the rest (frame rate, color and contrast rendering) more or less the same. This is OK for some types of content (like live newscasts that typically involve limited motion, as well as movies as they can be pre-processed). But when it comes to broadcasting live sporting events, fast motion can create artifacts that can distract from the viewing experience.

In these scenarios, the frame rate needs to be doubled, from 30 to 60 frames per second – creating an experience based on what the industry refers to as 4Kp60. This requires additional bandwidth vs. 4Kp30. Finally, adding HDR or WCG (Wide Color Gamut) adds yet another level of bandwidth requirement. Overall, the “easiest” UHD (4Kp30) would require 3 times the bandwidth of HD, while the “best” UHD (4Kp60 with HDR and WCG) would require up to 5 times the bandwidth.

Telecom operators are aware of the challenge and are adding bandwidth by upgrading their networks, either with the latest generation of xDSL (using vectoring, bonding, and eventually G.fast techniques) and by installing more fiber cables. These technologies provide enough bandwidth for UHD, but are costly to implement and only make economic sense in densely populated areas.

In other areas (like countryside or suburban environments), Telcos will either not be able to offer UHD, or in some cases will have to settle for delivering the “easiest” UHD (4Kp30) and/or offer it only to a single TV in the home, as they will be lacking bandwidth to carry several 4K streams to the same home.

A Conversation with Michel Rahier President, Connected Home, Technicolor

5THE FUTURE TRUST technicolor

Q: So is there a race under way among NSPs to be first to market with UHD capabilities and scoop up all the customers?

Michel: The real question is: What appetite exists among end user consumers to upgrade their equipment at home to receive 4K?

It all depends on the experience that 4K is going to create for them. That said, two things immediately come to mind. The first is that it is probably in the interest of all service providers to make sure that the standardization process does not take too long. A collaborative approach in finalizing standardization will allow the entire community to plan and implement effectively over the short-, medium- and long-term. The standards efforts should be viewed across the spectrum of initiatives to enhance the image experience.

There are several companies, including Technicolor, that are trying to advance the standardization of HDR as well as 4K, even if there is no immediate demand from customers around HDR. We do not want to be in a position to ask consumers to upgrade to 4K only one year, and then 4K plus HDR the very next. Some coordination on this front is necessary.

4K on its own is fine, but what is much more important for creating consumer demand for an immersive and augmented experience is to 4K with something else. In my view, that other main ingredient is HDR.

ABOUT TECHNICOLOR With more than 99 years of experience in entertainment innovation, Technicolor serves an international base of entertainment, software, and gaming customers. The company is a leading provider of production, postproduction, and distribution services to content creators and distributors. Technicolor is one of the world’s largest film processors; the largest independent manufacturer and distributor of DVDs (including Blu-ray Disc); and a leading global supplier of set-top boxes and gateways. The company also operates an Intellectual Property and Licensing business unit.

For more information: www.technicolor.com

Contact Information Published by the Thought Leadership Team ritu.asthana@technicolor.com

Technicolor Worldwide Headquarters

1, Rue Jeanne d’Arc 92443 Issy-les-Moulineaux, FranceT +33 (0)1 41 86 50 00F +33 (0)1 41 86 56 15www.technicolor.com

© Copyright 2014 Technicolor. All rights reserved. All tradenames referenced are service marks, trademarks, or registered trademarks of their respective companies. Specifications subject to change without notice.WP021-v01-1403