Long-time communications tech entrepreneur Cheng Wu wants to help the telecom industry with a makeover. His company, Azuki Systems, is looking to turn the telecomms into media moguls using Internet Protocol TV (IPTV) technology, which allows digital content to be delivered over Internet-based networks.

Wu's the right guy for the gig. He has a long and impressive run in building networking technology with Massachusetts startups: He was the founder of ArrowPoint, which had an initial public offering (IPO) only months before being sold to Cisco Systems Inc. (CSCO) for $5.7 billion in the bubble days of 2000. Prior to that, Wu had founded Arris Networks, a Mass.-based developer of access products that was sold to Cascade Communications in May, 1996 (Cascade was later acquired by Ascend Communications, which in turn was acquired by Lucent, which in turn merged with Alcatel, and so on ... ).

Other companies more recently on Wu's roster include Acopia Networks, acquired by F5 Networks in 2007  -- where he was Founder and Chairman -- and now we have Azuki.

Azuki's story is straightforward: It's building software that allows service providers to manage and deploy media formats across any network they want. The idea is that it is cross-platform and easily integrated into any media company's back-office system. Or, in Wu's soundbite: It's "virtualization for video delivery technology."

That's catchy, and it makes sense. As the digital media networks expand and become more complicated, service providers need management systems to format, encode, and deliver digital IP-based media across a variety of networks in a flexible way.

The name Azuki comes from the Japanese word for red bean paste. Wu said he used this because red bean paste is a "mash-up," and the idea behind Azuki is to be able to seamlessly blend and manage, or mash up, various digital elements.

Azuki's target market is a range of different service-provider types (cable, telecom, satellite, e.t.c.)  that are trying to reach subscribers consuming digital media on an increasing number of devices (set-top boxes, computers, tablet computers, and mobile phones). This presents the "multi-screen" issue for network and content providers -- they need to be able to simultaneously deliver content to many devices on many different networks.

How big is the market? Wu sees billions in opportunity. "The addressable market is very large," he says. To make a rough calculation, he says, imagine a few large telcos with millions of subscribers (one might use Verizon and AT&T, for example, as a baseline with about 12 million IPTV subscribers between them, though Azuki is targeting many providers who are smaller than these two). If content services are valued at at least $100 per month to a provider, this adds up to a l lot of money. In order for a telco to jump into the content business, a sizable percentage of that money would need to be invested in the technology.

The Broadband Forum recently estimated that there are 75 million IPTV subscribers worldwide.

Wu points that the Over-the-Top (OTT) video model, in which consumers can find their own content on the Internet, gaining steam.

"Hulu [an Internet video provider] is now valued over a billion, so clearly value is being created by digital media," says Wu. "So there are a lot of questions about what is the right play for service providers."

Of course, Hulu isn't the only example. Another prominent one is Internet media provider Netflix (NFLX), which has scaled its streaming video business to the point where it is scaring incumbent cable providers and content providers alike, now that Netflix is starting to produce it's own content. Netflix now has a market capitalization of about $15 billion. Even so, Check points out that Netflix probably represents only 5% of the digital media content market.

Although Azuki will sell its technology to any service provider and already has customers in the cable networks, Wu says a bigger opportunity may be with traditional telcos. They are in the intriguing position of having a relationship with millions of broadband customers who also have a thirst for different ways to get digital media.

"What has been happening is the acceleration of IPTV is triggering the investment cycle on the telco side," says Wu. "Telcos are trying to catch up with video services."

Telcos have dipped their toes in the water of content, but it's still a tiny part of their traditional communications business. The biggest examples in North America are AT&T's U-verse IPTV service, which reaches about 8 million customers; and Verizon's FIOS fiber-optic media service, which cable-like access to hundreds of media channels and products, reaching about 5 million users.

In Europe, many telcos are also being aggressive. British Telecom (BT) has been ramping up its IPTV options in a partnership with Microsoft. BT has also recently been bidding for sporting events, points out Wu.

"Telcos are now trying to get broadcast rights the way ESPN is in the U.S." says Wu. Some sources point to BT gaining nearly a half a million customers in its early foray into sports.

These moves, which are happening rather slowly yet methodically, puts telcos, traditionally rulers of the communications space, in the position to encroach on cable turf.

"The cable industry is more limited and monopolized. You have a cable plan in each town and city," says Wu. "In a sense that's a monopoly.

The bottom line: Azuki looks to be one of the chief arms dealers in the coming IPTV war.

Azuki, based in Acton, Mass., has about 45 employees, says Wu. Investors include Sigma Partners and Kepha Partners. Wu's long-time partner in several prior startups, Chris Lynch, is Chairman of the board. The company has raised $31 million in venture funding to date.