Is Cloud TV on the horizon for Google?

A cloud-based content delivery system could benefit a host of players in the tech sector.

By TheStockAdvisors Feb 24, 2012 1:48PM
By Paul McWilliams, editor Next Inning

I've recently been pointing to evidence suggesting Google (GOOG) will enter the content delivery business and speculated as to which companies might benefit.

Based on what I've learned, I think we can put a bow around this and predict with solid footing that Google in fact will make the move. Further, any such move should be viewed as a rising-tide event that benefits a broad swath of tech companies.

Google is building out an ultra-fast fiber optics network in the Kansas City area (on both sides of the Kansas and Missouri state lines).

Further, GOOG applied last December to the FCC for a license to build an "antenna farm" in Iowa it could use to pull in programming from satellite feeds.

I've since learned GOOG has in fact applied to both the Kansas Corporation Commission and Missouri Public Service Commission for licenses to deliver video content.

An attachment to its application to Kansas, which was dated February 17, 2012, stated, "Google Fiber Kansas, LLC will utilize national and regional video headend facilities to send IPTV across a private IP network to subscribers."

GOOG will obviously need to build out massive video head end(s) to support the venture and if speculation is right that GOOG aims to deliver what some describe as "Cloud TV," those head ends will not only be massive, but also very complex.

Cloud TV means essentially searchable TV on demand content - something similar to how consumers find content on YouTube.

To pull off Cloud TV GOOG would need to store massive amounts of video, and to fully leverage it would need to be able to control advertising insertion - possibly tailored to individual subscribers just like its Web advertising does today.

This pretty well limits the competition for the head-end to Cisco Systems (CSCO), Ericsson (ERIC), and Harmonic (HLIT).

While HLIT is the smallest of the three, I view its head end offering for this sort of an installation as possibly the most complete and most capable.

Of course, to store and manage all this video GOOG will need to substantially expand its Iowa data center that is close to the intended location for GOOG's antenna farm.

This means more servers and more storage (a lot more storage), as well as the assorted networking gear necessary to hook it all together.

This opens new opportunities for a number of companies, but clearly points to Intel (INTC) as an obvious winner for the processors used in the servers and data systems. Given the new chips INTC has developed for networking, it may see some upside there too.

The networking gear, however, will be a dog fight. Juniper Networks (JNPR) has enjoyed very good positioning at GOOG for some time, but long-term readers might recall our report from last year that pointed to CSCO hiring a number of top JNPR sales executives including the guy who led the effort at GOOG.

Given that GOOG's new network, not to mention data center, will rely on fiber optic connections all the way to end users, I think it's clear Corning (GLW), a leader in fiber optics cable, will see new opportunities.

In addition, fiber optic component/subsystem manufacturers like Finisar (FNSR) and JDS Uniphase (JDSU) will also benefit from the rising tide.

Beyond these headline companies, there are a bunch of smaller boats that this rising tide should lift, but that list is long, so we'll wait until there is more clarity about the tide before digging any deeper.

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