The R&D Tax Credit Aspects of Video Compression Technology
Video-Compression
Some call it a “data diet”, consumers see
it as a way to reduce monthly data and overage charges,
bandwidth operators see it as a way to defer capital
expenditures and reduce operating costs. Whichever the
case, video compression technology will revolutionize the
delivery of video services to all types of internet connected
devices such as smartphones, tablets, and television.
The popularity of video
streaming and broadband usage in general is growing
exponentially, which also means operators are facing
increasing strain on their networks. Large bandwidth
users such as Netflix and YouTube typically increase their
bandwidth usage by about 25-35% each year. According to
Cisco, global internet traffic will reach 18 GB per capita, up
from 6 GB in 2014.
As more and more
data-heavy services ride over the broadband superhighway each
year, electrical engineers and broadband developers keep
asking the same fundamental question: “Will our capacity to
deliver bandwidth keep up with the human race’s ability to
consume it?” - John D’Ambrosia, Head of Bandwidth Assessment
Group at IEEE (Institute of Electrical and Electronics
Engineers).
Video compression offers
a practical solution which involves coding and decoding to
eliminate redundancies in transmitted data. Algorithms
effectively shrink the size of the audio or video file so that
less bandwidth is used during transmission and storage.
This allows more Netflix movies, video games, and YouTube
videos to be transmitted to users with less streaming
time.
In addition, as users
demand more services with fewer interruptions, at quicker
speeds, they also demand higher definition and improved
content. These demands however, are at odds with each
other since the general rule is the more video and audio
content is compressed, the more it suffers in quality.
However, video compression technology ultimately addresses the
trade-off between reducing the video bit-rate and maintaining
the coded quality as close to the uncompressed content as
possible.
Providing quality
content at superfast speeds and without interruption can only
be achieved with innovative methods to handle the underlying
huge amounts of data. This requires constant research and
development (R&D) efforts some of which result in
innovative solutions.
The federal government,
America’s top research universities, and private broadband
firms of all sizes have been spending heavily on R&D since
the 1970’s in order to develop the robust broadband ecosystem
that exists today. Although measuring the effects
of R&D spending is difficult, studies find that firms
typically earn between 20% and 30% returns on their
investments in the broadband industry. In addition to
the direct financial benefit, federal and state governments
offer significant tax incentives to spur innovation, such as
the R&D Tax Credit.
The Federal R&D
Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent. On December 19, 2014 President Obama signed the
bill extending the R&D Tax Credit for the 2014 tax year.
As of this writing, proposed tax extender legislation would
extend the tax credit through December 31, 2016.
Video Compression
Innovation Challenges
Although image compression has been around
for some time, video compression is a relatively new
technology that is probably in the infant stage of its
development cycle. Video compression technology eliminates
redundant data in order to transmit video content more
efficiently. It is based on the principle that most of
the information in adjacent frames remains constant. The
amount of data lost on any given conversion is determined by
the compression ratio. Generally, the higher the compression
ratio, the more data and quality is lost in the compression
process.
Opportunities for
innovation in the industry are abundant. With consumers
increasingly demanding higher quality broadcasts, the pressure
is on to deliver a myriad of content in the most effective and
efficient way possible.
Processing Requirements
One particular challenge
involves overcoming the large processing requirements that are
needed to compress data on a massive scale. The
processing requirements needed to compress even a single frame
of video (30 frames per second) are massive. That
capability is currently being delivered by rapid advances in
semiconductor technology, another overlapping, innovative
field that is also R&D intensive.
In addition to
increasing processing power, another practical solution
involves the use of less complex compression formulas.
Improved compression efficiency comes at the expense of
increased computational complexity. Therefore, any
practical implementation of advanced video compression
technology means reducing complexity to a manageable level
without sacrificing compression performance. This often
means simplification of algorithms.
Algorithmic Development
Currently, there is a
plethora of video compression algorithms and a few common,
well known standards including MPEG-2, MPEG-4, H-264, and
VP8. Each of these standards as well as the less common
algorithms differ in their design and specs since they are
developed to address certain specific compression requirements
desired by each user. If you were to watch a movie in
late 90’s you might notice a lot of pixilation. This is
because the compression algorithms used back then to make DVDs
were rather primitive.
In the more modern era,
YouTube can take an HD home video and display it within
seconds to the entire world with better quality than the late
90’s movie which were made with the best film equipment
available at the time. To a large extent, this is
because of the development of compression algorithms.
Much of the research in
video compression technology involves creative ways of
splitting signals and determining what’s negligible and can
therefore be discarded. Some algorithms are actually more
efficient in cutting down slivers of data and determining
which parts are most powerful and should thus be kept and
which can be pushed aside to reduce bandwidth.
Privacy
One of the major
concerns with most of today’s technological developments
involves some aspect of privacy invasion. The video
compression industry is no exception. Many internet
users worry that the data they transmit across the broadband
superhighway each day could be hacked, stolen and re-used
without their permission and for illegitimate purposes.
Therefore, a fundamental concern is that encrypted data stays
encrypted, even so the broadband provider itself or the video
compression service provider cannot read the data.
This issue is
exemplified nicely in the video surveillance industry.
Engineers are currently working to develop mechanisms that
protect identity while ensuring legitimate security needs are
met. The main concern is the fact that private citizens, who
are not suspects, are being recorded and recordings are being
archived through the use of video surveillance systems.
One solution being
developed at Florida Atlantic University in Boca Raton, FL
involves the selective encryption of objects that reveal
identity (e.g., faces, vehicle tags) in surveillance videos.
Objects in a video can be encrypted to ensure privacy and
still allow decryption for legitimate security needs at
anytime in the future. Selective encryption is effective
because it allows the monitoring of activities without
revealing the identities of those being monitored. When a
suspicious activity needs to be investigated, the identities
can be uncovered with proper authorization.
Cloud-Based Video Processing
As video data travels
the internet, economical, fast, and high quality delivery of
content becomes critical to support user demands. However, the
specific formats and standards being used to compress,
package, and render this content is changing at an
increasingly rapid pace. Systems built with special purpose
hardware will struggle to keep up with these changing demands,
while software implementations will be unable to meet
performance, density, and cost-benefit considerations.
Cloud based processing offers a potential solution to this
issue.
Many portable electronic
devices aren’t powerful enough to run the software programs
required to perform graphic-intensive applications.
Sophisticated movie editing or architectural design tools, for
example, will soon be accessible to hundreds of millions of
internet connected smart phones, tablets, and devices through
the cloud. For consumers, it will provide the ability to fast
forward and rewind streamed movies in real time.
Buffers
Some of latest
innovations in this area involve eliminating buffers that are
typically used to store a few seconds or minutes of streaming
video. Though buffers allow time for any lost or delayed data
to be resent before it's needed, they create a lag that makes
it impossible to do real-time work. Bypassing the
buffers involves using creative strategies to fill or hide
missing details that would otherwise be corrected in the
buffering process. In some cases that means filling in entire
frames by extrapolating from frames received earlier — so that
the eye does not detect a problem should some data get lost or
delayed. Doing so saves milliseconds so that responses
can be generated to users without a delay.
Industry Players
Users of bandwidth and
video compression technology are extensive and broad.
They range from individuals with smartphones, small
businesses, large cable companies, and industry giants like
Google and YouTube. Figure 1 below demonstrates some of
the largest beneficiaries of the technology.
Figure 1:
U.S. Peak Internet Traffic Produced by Companies’ Networks
Aside from these large
users, there is a wealth of different businesses of all sizes
developing and utilizing the technology as well. The growing
use of broadband along with the limited capacity of the
current broadband network infrastructure has opened up new
opportunities for innovative start-ups and established
companies who know how to effectively shrink data.
Onavo,
based in Menlo Park, CA, helps iOS users reduce the amount of
bandwidth they consume each month. The company uses a
cloud-based solution that runs on Amazon Web Services to
compress as much data as possible so users can consume more
data without running over their monthly data usage
limits. Originally a Tel Aviv based company founded in
2010, Onavo was acquired by Facebook as part of the parent
companies’ collaborative initiative, Internet.org which aims
to eventually connect everyone across the world to the
internet. Using data more efficiently is a key component in
that mission.
Opera Software, with
operations in Mountain View, CA, also offers data compression
services. Their signature product The Rocket Optimizer
provides mobile operators with a 60% boost in bandwidth
capacity across smartphones, laptops, and tablets. It
can effectively optimize more than 90 percent of videos, which
now make up the majority of transmitted mobile data. Not
only does it provide benefits for users who will consume less
data overage charges but it also provides a huge benefit for
bandwidth operators. The company estimated that it could
actually help a tier one carrier save $100 million annually in
deferred capital expenditures and operating costs.
Goldman Sachs recently
invested $20.5 million in a high frequency trading technology
company that provides telecom capabilities to financial firms
using advanced video compression technology. The deal
for partial stake in the New York City based Perseus
demonstrates the value that large financial firms place on
high-speed trading capabilities where microseconds can mean
the difference between significant profits or losses.
Perseus derives the
majority of its profits from banks like Goldman by providing
the ability to execute trading orders at near instantaneous
speeds using its patented Perseus technology. Patented
technologies are excellent candidates for the R&D tax
credit under the patent safe harbor provision. “We
see a great opportunity in the financial technology sector in
general, and Perseus in particular,” said Terry Doherty, Vice
President in the securities division at Goldman. “They have
the potential to dramatically shift the way that the global
markets engage by introducing the fastest and most secure
managed services the industry has ever seen.”
Igolgi Inc.
is a North Brunswick, NJ company with a wide range of
software products for optimizing content on multiple
platforms. Their codecs are written from the ground up
with algorithms to leverage multi-core CPU architectures and
to work around limitations. They have also developed
patent pending adaptive load balancing techniques that enable
them to scale operations efficiently and effectively.
Ooyala Inc.
Was founded in 2007 in Santa Clara, by former Googlers Bismark
and Belsasar Lepe and Sean Knapp. It is one of the world’s
largest video platform companies and prides itself on R&D
and innovation which is at the heart of any successful
business strategy in the industry. CEO Jay Filcher had
this to say about the company - “We continue to raise the bar
for innovation on behalf of our customers, driving new
standards of efficiency, quality and scale to meet the needs
of multi-screen, multi-platform video businesses.”
Conclusion
With an increasing amount of data-heavy
services emerging each year, broadband providers face a
daunting task; discovering how to transmit an enormous amount
of data across limited infrastructure at lightning speeds and
with high quality. Federal and state research and
development tax credits are available to support and stimulate
the efforts.
