Cisco Predicts TV Revolution

Web and TV are on a collision course, potentially spelling good news for Cisco.
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Networking giant

Cisco

(CSCO) - Get Report

is predicting a home entertainment revolution as the worlds of TV and Internet collide, creating a whole new breed of technology.

With broadband speeds increasing and services such as

YouTube

enjoying phenomenal growth, service providers and technology manufacturers will have to rethink their strategies, according to Bob McIntyre, chief technology officer of Cisco's Scientific Atlanta division.

Speaking at the Cowen & Company conference in New York, McIntyre said he foresees a very different broadcasting landscape within the next five years.

"Set-top boxes of the future will not only be able to access all the broadcast video content

and all the video-on-demand content but also, in many cases, direct access to websites," he said. "

The video streams will go directly through the set-top box to the TV in the living room."

Scientific Atlanta, which Cisco acquired for $7 billion in 2006, makes DVRs for the likes of

Time Warner Cable

(TWC)

, and McIntyre thinks that users are looking for new ways to view and handle content.

"It will be a two-way communication process," he said. "Eventually you will be able to upload your digital photographs through set-top boxes, you will be able to upload your own video for user-generated content."

McIntyre estimates that 60% of all Internet traffic is video-related, a figure that he says could rise to almost 90% by the end of 2012.

Moving forward, the Internet video explosion will require much more "personalization" in how content is viewed, he added.

"Think of being able to watch the video you want on any screen you want," explained the CTO. "The TV screens, for sure, the laptop, the PC, and eventually you will be able to transfer this to your wireless devices."

There have already been signs that the tech sector is gearing up for the big bang when TV and Internet come together. Korean electronics giant

Samsung

, for example, has built a set of Internet "widgets" into some of its latest

LED TVs

. The applications let users access Internet-based content such as Flickr and Yahoo! Finance directly on their TVs, underlining the convergence of traditional broadcasting and the Web.

Other companies are also getting in on this act. In addition to sending out DVDs by mail,

Netflix

(NFLX) - Get Report

is now touting what it calls "Netflix-ready" devices, which download movies from the Internet direct to customers' TVs.

"Netflix-ready" devices include

Microsoft's

(MSFT) - Get Report

Xbox 360,

LG's

BD300 Network Blu-Ray Player and

Roku's

Digital Video Player.

Online retail giant

Amazon

(AMZN) - Get Report

also offers its own "Video On Demand" service, which can be watched on TV via a broadband-connected device or on a computer.

Inevitably, changes in how content is viewed will force an advertising rethink, according to McIntyre.

"There's a move afoot to be better at inserting advertising and to be better at targeting advertising at the consumer," he said. "There are experiments being done by many of the online advertisers where consumers can actually pick what types of advertising that they would like to see."

Cisco

blew past

analysts' estimate in its recent fiscal third quarter, although sales slipped more than $1.5 billion compared to the same period last year. The company also forecast fourth-quarter revenue 20% less than the prior year's quarter, highlighting the

challenges

posed by the economy.

In an attempt to open up new revenue streams, the networking giant has recently moved into the server space, unveiling its

Unified Computing System

, much to the

chagrin

of long-term partner

Hewlett-Packard

(HPQ) - Get Report

.

Cisco has also ramped up its efforts to target consumers, recently

buying

Flip video camera maker

Pure Digital

. McIntyre explained that the firm is now pushing its telepresence technologies into the home.

"We have pushed telepresence to smaller devices and small and home offices, and we have plans to go into consumer telepresence over the next year," he said.

The San Jose, Calif.-based firm is also keeping its eye on its more traditional networking products, according to McIntyre.

"We're continuing to look at speeds and feeds in our optics, our routers and our switches, and we're doing experimentation with 100-Gigabit Ethernet-type applications," he said.

Cisco shares slipped 27 cents, or 1.5%, to $18.22 Wednesday, as the Nasdaq slumped 1.1%.