Cable Operators

Ops Think Smaller

11/07/2004 7:00 PM Eastern

It’s not just the large MSOs looking to benefit from voice-over-Internet protocol telephony. Declining cost curves and creative geographical engineering have combined to enable operators to launch VoIP in smaller and smaller markets.

While the video and data businesses are largely engineered at the local level, VoIP is looking more and more like a local and regional hybrid, allowing service extensions to smaller communities.

For instance, Charter Communications Inc. has now effectively tied its St. Louis and Wausau, Wis., telephony operations together. Both are VoIP markets served by a soft switch in St. Louis.

Nortel Networks installed a soft switch in St. Louis, as well as media gateways in the MSO’s home market and in Wausau.

Locally, Wausau is served by an Arris Group Inc. cable-modem termination system and network-interface units.

“It’s worked very well,” said Charter director of business modeling for telephony Brian Clark. “We’ve had very good reliability out of the switch. And we’ve added some adjacent areas in Wausau and continue to grow these markets.

“The advantage of a distributed network is I can have one soft switch sitting in a central location and reach out to serve all the markets,” he continued. “It enables me to leverage the capital and the expertise of the people who are supporting the switch. They have backup and 24-by-7 management.”

Nortel director of cable marketing Elaine Smiles said Charter has installed the company’s CS 2000 and CS 2000-Compact switches, as well as its Passport 15000 gateway devices. The latter has a smaller footprint, but carries the same 150,000 lines of scalability.

The soft switch can serve markets as far as 2,400 air miles away without signal delay, Smiles said.

“The soft switch gives MSOs the ability to serve these little markets,” she said.

“They might want to leverage the investment of one softswitch across five markets. As the market takes off, they can deploy more soft switches locally.”

That’s what Charter intends to do in Wausau, Clark said. Plans are underway to install a soft switch in Wisconsin to serve just that market.

“The long-term planning tells us that in the Wisconsin area and adjacent markets, we’ll absorb a full switch,” he said.

Charter signed long-haul backhaul deals with Sprint Corp. and Level 3 Communications Inc. to handle traffic when necessary, but Charter owns the switches it purchases from Nortel.

“Charter’s approach has been different than some MSOs,” Clark said. “We own and operate our own switches. We’re handing off our traffic directly to local exchange carrier or a long distance call to the inter-exchange carrier.” The soft switch in St. Louis can route calls using the local Nortel gateway in Wausau without that call ever needing to travel to St. Louis.

Those gateways can handle 12,000 lines, according to Smiles.

Clark breaks down VoIP expenses into two areas: general capital costs covering the switching and gateway equipment.

“The NIU [network-interface unit] device and the cost of doing the home install, those are purely success-based,” he said.

Added Clark: “The cost per unit per subscriber has been coming down. Whether NIU or the CMTS, or the switching platforms, they all have been coming down. We’ve also gained experience in running telephony markets.”

That experience has caused Clark to readjust the size of the smallest market that can support telephony.

“We used to run models that we wouldn’t enter markets with less than 100,000 homes passed,” he said. “We’ve now gotten comfortable with numbers way below that.”

Charter also plans to launch a VoIP rollout in Worcester, Mass., using gear acquired from CedarPoint Communications Inc.

“It’s a gateway and soft switch in the same box,” Clark said, which makes for a natural fit for smaller operations. “They are more specifically driven to smaller markets.”

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