Cable Ops Should Consider the Outsource

3/26/2000 7:00 PM Eastern

Cable operators today have their work cut out for them, as
they compete in a very crowded and complex interactive marketplace. To succeed, they must
be able to effectively juggle a multitude of tasks -- managing expenses, implementing new
technologies, integrating with existing legacy and third-party systems and even marketing
their products and services -- while also continuously evolving and expanding their
network to bring innovative new applications and services to the home.

How do they best manage these new complexities? Keep
services in-house, or consider outsourcing?

The answer is not an easy one, and mostly likely will
require a blend of outsource resources and in-house expertise.

What's driving the decision to get networks up and
running quickly is the need to maintain the competitive advantage. In the infancy of the
cable industry, the competitive advantage was easier to maintain. It belonged to those who
owned the franchise. Cable operators could pretty much establish service levels and
pricing to fit their financial goals.

Times have changed and today, consumers have more choices,
so the competitive advantage has shifted to operators that can deliver innovative new
applications quickly and profitably, because first-to-market is critical to winning
customers. The other defining criteria is who has the most "available network"
-- commonly referred to as the five nines of reliability, that is 99.999 percent. With
high network availability, you can deliver and maintain the integrity of multiple-service
offerings, and retain customers. Without it, these hard-won customers may seek

A major challenge for most cable operators today is just
keeping up with everything that's going on in their multifaceted business. Five years
ago, the industry talked about channels, now we talk about applications or services.

We used to talk about megahertz, now it's megabits. It
used to be channel allocation, now it's traffic modeling. Today's interactive
digital set-top is basically a network computer residing on a highly sophisticated
IP-based, packet-data network -- essentially a wide-area computer network with few
boundary conditions. As a result, operators must develop a completely new understanding of
information-technology issues such as design and installation of network architectures,
control systems, applications and physical and communication layers. And the challenges

Network construction projects, such as super headends, are
extremely complex to manage. In the past, networks were 550 to 750 MHz and only a few had
reverse path. Today, we install networks with SONET-based transports, and
dense-wave-division Multiplexing (DWDM). Some projects may extend over a six-month time
period and require thousands of material line items from hundreds of vendors, not to
mention the effort necessary to integrate the system and activate it on time. For the
first time, additional levels of security and a fail-safe infrastructure must be factored
in, to ensure reliability requirements..

Even at the home, the situation has changed. Cable-modem
installations are routinely outsourced today. Why? Because it's not just a
"plug-and-play" task anymore for the average consumer or installer. Installation
involves modifying the consumers' PC without damaging any of the valuable
applications the subscriber was previously running. The modem needs to be hooked up to the
network, and the drop needs to be certified for return-path signaling out of the home. All
of these tasks need to be accomplished without damaging a $2,000 home computer -- or an
important customer relationship. To adequately perform them, installers must be trained
and equipped more thoroughly than their predecessors.

Operators do have the opportunity to build their own
resources to maintain their technical edge and keep their knowledge base fresh. However,
there's an immense expense and challenge to retaining ownership of the service
function, while also keeping the plant running, ensuring subscribers are happy and getting
the billing statements out. And that doesn't include having a separate set of
resources dedicated to growing and evolving the network.

So how does this play into why you might want to outsource
or use partners more aggressively? Service providers have the enhanced resources,
technical knowledge, the proven, time-tested processes and the ability to coordinate and
execute rapidly. They have proven themselves by successfully implementing these techniques
on hundreds of network installations. Some service organizations are closely aligned with
companies that design and manufacture the products that make up these networks, giving
them an added advantage. Being closer to the " mother lode" of technical
knowledge makes it easier for them to keep abreast of the latest technology advances and
to provide customized training programs to their employees.

Above all, the critical element of a professional service
provider is the quality of their professional-services workforce. To be successful, the
service provider must have field-deployable engineering resources that understand data
communications and network architectures but above all are well versed in video. At the
end of the day, it still comes down to understanding the network.

The successful service provider must be able to seamlessly
integrate into the customer's organization, either on a project or continuous basis.
This is critical because although some service functions can be centralized -- like
network monitoring and technical assistance -- most services must be delivered locally.
And as operators start deploying more and more valuable assets and services into homes,
any downtime means lost opportunity for revenue generation.

The future of the interactive network is wide open, with
almost unlimited boundaries and potential. But the job to maintain and evolve the network
will be continuous and challenging. The successful operator will use a blend of in-house
resources and service partners and fully capitalize on the strengths of each entity. A
subscriber in the analog world was worth about $2,000; subscribers in the digital world
are now worth more than twice that amount. The value grew to that level because of the
lucrative new applications and services that are available.

Tomorrow, the competitive advantage will shift to
execution. Over time, products and service advantages have a tendency to become
commodities. Execution, on the other hand, is really what it's all about and will
never be considered a commodity. It's the result of effective strategies, time-tested
processes and knowledgeable resources used to get networks up and running and applications

Larry Bradner, is Scientific-Atlanta's corporate
senior vice president and president, SciCare Broadband Services, which has installed more
than 1,000 networks and includes multi-vendor Subscriber Network Services and Broadband
Network Services.

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