Band(width) on the Run

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It’s no secret that cable needs to create or reclaim more bandwidth in its networks. The question is, how urgently?

Operators are facing telephone company and satellite rivals that are threatening to turn up the juice on high-capacity services. Exhibit A is DirecTV, which has promised to slot in 100 new high-definition channels later this year. Exhibit B: The FiOS fiber-to-the-home network from Verizon Communications, which the telco says could pipe 1 billion bits per second or more to a single household.

Cable’s engineering leaders aren’t daunted. “We’re not going to hit the wall,” said Charter Communications chief technology officer Marwan Fawaz.

But, he added: “It’s important to start now. We can’t put ourselves in a position where in two years, I don’t have the HD capacity. We’re making the investment now, so when there are 60 to 100 HD channels, we will be able to get there.”

For at least the next few years, Charter and other cable operators think they can get there on the backs of their existing hybrid fiber-coaxial networks. That means they’ll spend millions, they said — not billions.

The industry’s investment in bandwidth expansion is on the rise. Time Warner Cable, for one, expects to more than double its spending in 2007 on “sustainable network initiatives,” which include digital simulcast (transmitting every analog channel in digital format) and switched digital video (sending a channel only when it’s requested).

The operator spent about $80 million last year on such projects and will invest about $200 million this year, chief financial officer John Martin told Wall Street analysts on a conference call in February.

The idea, Time Warner Cable chief operating officer Landel Hobbs said on the same call, is to “provide improved picture quality and increasing programming choice to our customers without requiring a forklift upgrade of the network.”

The operator launched digital simulcast in 20 divisions by year-end 2006 and will roll it out to all 23 this year. That sets the stage to reclaim analog bandwidth, which cable has used since its inception to transmit TV channels: Once an operator is transmitting every analog channel digitally as well, it can start to eliminate the bandwidth-hogging analog broadcasts.

Switched digital video was in eight Time Warner divisions at the end of last year, and the company said it is aiming to have it in three-fourths of all divisions by the end of 2007. This technology allows an operator to send less-frequently watched channels over the network only when at least one subscriber has requested it — so, say, the Ferret Network won’t go to everyone and eat up valuable bandwidth. But it’s there in the lineup should any ferret lover want to check it out.

READY OR NOT

Some on Wall Street get skittish every time a cable company starts plowing money into infrastructure. Those fears were fanned by a CableLabs report last summer, leaked to The Wall Street Journal. The report, downplayed as “speculative” by CableLabs, suggested major investments may be required for cable to remain competitive: “At some point, optimization of the network becomes more expensive than simply deploying” fiber to the home.

Former Charter chief technical officer Wayne Davis, who is now CEO of bandwidth-expansion equipment vendor Vyyo, said there’s a different level of urgency for cable than there has ever been in the past.

“What would it look like if FiOS decided to replicate the entire analog lineup in HD?” he asked. “That’s the kind of thing cable needs to prepare for. The old model of, 'I’ll go get 50 more Megahertz,’ that’s just not enough.” That’s because vast tracts of HD (say, 300-plus channels) would chew up at least 80% of the existing capacity of most modern cable systems without using switched digital or other bandwidth-management techniques.

Not everyone thinks methodical spending on bandwidth improvements will be insufficient. “While we believe that operators will need to spend money to 'manufacture’ bandwidth, we do not believe that another 'free cash-flow-killing’ upgrade cycle is looming,” Bear Stearns analyst Spencer Wang wrote in a report last month.

Programmers, meanwhile, believe that 2007 is the year cable will have to expand the HD shelf space to keep pace with DirecTV, and they see a window of opportunity. Perhaps none is more eager to squeeze through that window than Cablevision Systems’ Rainbow Media, whose Voom bundle of 15 high-definition channels has not landed carriage with any U.S. cable operator — not even Cablevision itself.

“Competitively, operators know they will have to be there” on HD, Rainbow Media senior vice president of affiliate marketing Todd Green said. “We’re looking to maximize that opportunity.”

FUTURE FIGHT

Still, DirecTV’s HD claims — that it will add 100 new national high-definition networks this year — have caused consternation in the cable world.

Time Warner Cable, in fact, filed a false-advertising lawsuit in federal court against the direct-broadcast satellite operator. The cabler alleged that DirecTV’s claims, in ads featuring Back to the Future actor Christopher Lloyd in his nutty-professor role, of “soon” having three times the HD capacity as cable were bogus.

Why? Because, Time Warner Cable said, using a combination of bandwidth-optimization technologies like switched digital video and techniques like analog reclamation, it could also offer 100 HD channels “soon.”

“TWC is not limited to approximately 30 HD channels, even in the near term, because it may readily redeploy some of its existing bandwidth to accommodate more HD channels,” Time Warner Cable senior network engineer Ron Boyer said in a declaration filed as part of the proceedings. (The case is pending.)

Time Warner Cable also complained that at present, there aren’t 100 HD channels in existence. But they’re coming. Starz Entertainment this summer plans to launch three new Starz-owned HD premium services: Starz Comedy, Starz Edge and Starz Kids and Family.

The Weather Channel, meanwhile, is in the middle of a $50 million initiative to switch all live and recorded programming to high-definition. The network expects to complete the HD transition by mid-2008. When the HD channel goes live with DirecTV in September 2007, it will initially “upconvert” most of its programming from standard-definition, although at least 20% of the daily feed will be in native HD, according to vice president of public relations and affiliate marketing Marla Hoppenfeld.

The larger point: A slew of HD channels will arrive, eventually, and when they do, cable needs to be prepared. “The biggest push is HD content right now,” said Buckeye CableSystem director of engineering Jim Brown. “That’s a competitive thing, really.”

THE ITCH TO SWITCH

One of the bandwidth-boosting technologies receiving the most interest from cable is switched digital video. Basically, it lets operators stuff two or three pounds of programming — or even more — into a one-pound bag.

Operators are different stages of deployment. Time Warner, as noted, expects to have switched digital deployed in about 75% of its division, or 17 of 23, by year-end. Anomalously, Cablevision has deployed switched digital video gear throughout its entire footprint, serving about 2.5 million digital subscribers.

Others are either in the midst of trials or are getting ready to initiate them. Charter will have pilots later this year. Comcast is testing switched digital services in systems in Denver and New Jersey “in the lab and with employees,” chief operating officer Steve Burke told analysts on the first-quarter earnings call last month. “It’s too early to declare victory or say that the trials are doing well or poorly.”

Comcast chief technical officer Tony Werner, in a presentation last week at the company’s annual investor conference, said his team recently analyzed the viewing patterns of the 300 or so channels it offers in one of its East Coast systems.

Of the lowest-viewed 200 channels, Werner said, a maximum of about 34 were watched at any given time. The total number of viewers for that group, he said, was equivalent to the 11th-ranked channel in the system. Using SDV, Werner said, “you can stack channels up to infinity because the newer channels compete for viewers with others that are already in the lineup.”

Moreover, SDV is “not very expensive compared with a major rebuild,” Charter’s Fawaz said. “It’s within guidance of total capital requirements that we talk about … We’re capitalizing on the existing bandwidth.”

Outfitting a system with switched digital requires upgrades to headend gear and equipment that manages the process of sending channels down the cable. But on the set-top side, ideally, it should simply be a software update.

The cost of SDV is something that cable executives can stomach. ABI Research estimated that switched digital video deployment costs between $5 and $10 per home passed. By contrast, pulling new fiber to HFC nodes and upgrading the plant from 750 MHz to 1 Gigahertz can cost upward of $600 per home passed, according to the firm.

Operators are planning to use SDV for both high-definition channels (based on the assumption that just a portion of subscribers today have HD sets) and niche-oriented content. For example, Cablevision is using BigBand Networks’ switched digital video technology to provide iO International, nine packages of in-language channels from abroad in Spanish, Russian, Italian, Chinese, Korean, Hindi, Japanese, Polish and Portuguese.

What’s the downside of switched digital video? “It’s the lack of maturity of the platform,” Fawaz said. “The system must support all existing set-tops.”

The software that runs in the customer’s set-top box must coexist with applications like the interactive program guide and others like video-on-demand (so, for example, if someone uses the on-screen guide to tune to a switched channel like the Ferret Network, the program guide will issue the correct command to the headed to change the channel).

At Buckeye CableSystem, based in Toledo, Ohio, Brown said switched digital is “the most likely candidate” to help free up bandwidth to add more video-on-demand, HD and higher-speed data services. It’s early for the operator, but Brown said he anticipated making the move within the next 12 to 18 months.

“We don’t have the plan fully developed yet, but depending on where we end up with this thing, we’ll probably do a select group of channels that are not so highly viewed,” he said. Of the 86 channels in Buckeye’s digital tier, Brown said, around half will likely be candidates for switched digital video.

The key to switching video is to make sure the right programming gets switched. If a channel is very popular — that is, there’s a good chance someone in a group will always be tuned to it—it is probably more efficient to simply broadcast it.

“It’s a classic traffic-modeling issue,” Fawaz said. The engineering teams at Charter are currently studying viewing patterns in its pilot so the company can design system to only switch channels that are not being watched on a regular basis.

That also means that the switched channel groups will need to be managed on an ongoing basis. “You keep it dynamic,” Fawaz said, “so if there’s a popular show on a particular channel — if viewers are going to go up tenfold — we could change it back to broadcast.”

The task, he pointed out, is similar to how Charter manages VOD today: “We need to make sure the right resources are supporting the product.”

BOUND FOR BONDING

On the broadband front, there’s another technology that cable believes gives it plenty of runway against telco competitors: CableLabs’ Data Over Cable Service Interface Specification 3.0.

Among other things, DOCSIS 3.0 allows for downstream data rates of 160 Megabits per second by virtually bonding multiple channels together. It does more than that, but the faster download speeds are what most operators are interested in initially. To that end, CableLabs recently outlined a certification program for DOCSIS 3.0 headend gear that provides a basic certification level — bronze — for equipment that conforms to the downstream-bonding features.

The goal is to get systems with those capabilities tested and approved, and into operation, faster than if CableLabs was to require products to bite off the entire spec.

Operators are eager to get their hands on the new technology. “I do believe [DOCSIS 3.0] will be a very valuable tool for us to improve speeds in the future,” Cox Communications chief technical officer Chris Bowick said. He said he expects to see commercial deployment of the next-generation cable modem equipment probably in the latter half of 2008 and into early 2009.

Bowick, though, said the actual speeds Cox markets in the future will be based on competition in a particular area. “We don’t know exactly what bandwidth we’ll be offering,” he said. “You’d certainly be able to see speeds in excess of 100 Megabits [per second] down. That’s pretty interesting to us.” Verizon talks of delivering 100 Mbps to every customer by 2010.

He also pointed out that higher-speed service, beyond Cox’s top downstream speeds of 15 Mbps, “cost us only marginally. There is not a correlation between speed increases and cost in a linear fashion.” That’s because if someone provisions, say, a 100-Mbps pipe, it almost certainly won’t be filled nonstop. “It’s what your users are downloading and for what periods of time they’re downloading it,” Bowick said.

RCN, meanwhile, is expecting to migrate from DOCSIS 1.1 to version 3.0. Rick Swiderski, the cable-system overbuilder’s vice president of network engineering, said bandwidth utilization among Internet subscribers has been climbing ever since 2000, but that RCN noticed a marked uptick in 2006.

“The way people interface and interact with the broadband connection has changed dramatically in the last year,” he said. “Do I feel comfortable that continuing down this path is the right way to go? No — that’s why we’re looking at other architectures.”

Swiderski is currently working with RCN’s CMTS vendor to come up with DOCSIS 3.0 migration plan.

“The availability of standardized product is an issue,” he said. In addition, the move will require some “heavy lifting,” including reconfiguring hubs and headends and deploying new cable modems to customers.

FRESH BANDWIDTH

In addition to longer-term, strategic projects like switched digital video and DOCSIS 3.0, some operators are in a position to turn up fresh bandwidth with relatively straightforward upgrades.

Cox, for example, is looking at expanding the bandwidth in its systems that operate at 750 MHz — about two-thirds of them — to 870. “We can do that from a just-in-time perspective,” Bowick said. “It’s not a 'build-it-and-they-will-come’ situation.”

Comcast, meanwhile, is checking out new statistical multiplexing techniques, Werner said, which provide 50% more channels in a single 6-MHz channel. Whereas typically 10 streams of VOD fill a 6-MHz channel, the new statmuxing equipment can pack in 15, he said.

Charter’s Fawaz pointed to other tactical techniques that don’t require a lot of investment and are done as demand dictates, including node splitting, which reduces the number of homes served per node to reduce contention for services like on-demand and Internet access.

Here’s one of the technically easiest bandwidth-maximizing solutions, though it is fraught with business concerns: eliminating analog channels.

In Chicago, for instance, Comcast is giving subscribers to its expanded-basic analog service until July 1 to move to digital set-tops or lose access to about 37 channels (which subsequently will be broadcast only in the digital tier). That will free up enough bandwidth for more than 100 HD channels, though Comcast hasn’t specified how it plans to use that spectrum.

The issue is, “you end up in a situation where you have to put a set-top at multiple places in the home,” Fawaz said.

That’s costly, but the alternative would be to risk angering subscribers. Analog reclamation, Fawaz said, “is something we’ll be doing in a way that’s as painless as possible to our subscribers.”

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