Cisco Funds Internet TV Firm

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Could Internet TV technology be coming to a Cisco Systems home-networking device near you?

The company has invested in startup GridNetworks, which has developed software for distributing high-quality video among endpoint devices in a peer-to-peer architecture. Cisco’s funding, along with a previously announced investment from Panorama Capital, brings GridNetwork’s first-round financing to $9.5 million.

Tony Naughtin, president and CEO of GridNetworks, said Cisco was interested in investing in his company because the technology offers a way to cost-effectively transmit large amounts of Internet video to millions of viewers.

“Over time, with help from our friends at Cisco, our technology will be embedded into consumer network devices and edge devices,” Naughtin said, including potentially Cisco’s set-top boxes and home wireless routers.

Cisco senior manager of public relations John Noh said it was “premature to talk about any product integration” plans.

“We typically invest in companies to better understand the markets they serve,” he said, adding, “Clearly, video is a market Cisco has invested in and has acquired companies in the past.”

Seattle-based GridNetworks is pitching the video-distribution system to content owners and is currently engaged in trials with “major television networks,” Naughtin said.

A demonstration on the GridNetworks Web site features clips from the BBC Motion Gallery of HD content, but the startup would not say whether the British broadcaster is one of its trial partners.

GridNetworks founder and chief technology officer Jeff Payne previously was general manager of RealNetworks’ broadcast operations and chief architect of its content delivery network for Internet audio and video. Naughtin, one-time CEO of Internet hosting company Internap Network Services, joined the company last year.

Unlike other Internet video-distribution services, GridNetworks envisions its technology slinging HD content to TV sets, not just PCs.

“This is a set of technologies designed to provide real television -- not just streaming video on your desktop -- but a real 720p high-def experience,” he said. The 720p HD specification delivers video at 1280-by-720 screen resolution at between 24 and 60 frames per second.

The GridNetworks software runs as a 4-megabyte application for Windows and Mac computers today. The client supports Adobe Systems’ Flash and Microsoft’s Silverlight multimedia environments.

At a high level, it works the same way as other peer-to-peer software, such as BitTorrent. When a user accesses content distributed through GridNetworks, the software pulls in pieces of the video from the nearest PCs or other devices that have cached the content.

By the same token, each user’s own client device serves up files as requested by others. Naughtin said GridNetworks is “respectful” in terms of the user resources it commandeers. For example, the software caches no more than 2 gigabytes of data.

That means, theoretically, a content provider could send out HD content using much less of its own bandwidth and server capacity, because “peers” at the edge of the network would handle most of that work.

“This is a form of peer-to-peer that is extraordinarily network friendly,” Naughtin said. “It keeps the video-intensive traffic at the edge of the network.”

Eventually, he added, cable operators and other broadband service providers could use the GridNetworks system to offload high-volume video traffic from their backbone networks.

According to Naughtin, GridNetworks is purchasing wholesale CDN capacity to provide source caching of content. He wouldn’t identify the provider except to say it was a “top-four CDN.”

The startup’s peer-management servers, which control how data is exchanged among endpoint devices, are collocated at Internet data centers run by Savvis and Equinix.

GridNetworks’ competitors will include startups specifically aiming at delivering HD video content online, such as BitGravity and Asankya. The firm will also run up against the services offered by traditional CDNs like Akamai Technologies, Limelight Networks, Internap, Level 3 Communications and Panther Express.

What makes GridNetworks different from others, Naughtin claimed, is that its software has been designed from scratch to provide high-quality television over the Internet.

“There’s more involved here than taking someone’s peer-to-peer client and bolting it onto your CDN,” he said. “This system has been designed to scale to Nielsen-size audiences, and to also provide the reporting and analytics that go with that.”

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