Comcast Corp. executives last week detailed plans to launch a digital simulcast of its analog channel lineup across most of its systems by the end of 2005, the largest single commitment by an MSO to the first stage of an all-digital transition.
The MSO also signed a 20-year, $100 million fiber backbone deal with Level 3 Communications Inc. last week, covering the lease of 19,000 route miles that will reach 95% of Comcast systems.
The backbone will provide Comcast with greater efficiencies for VOD transport and capacity for the implementation of digital simulcasting.
“Digital simulcast is the first step towards all digital,” said Dave Fellows, Comcast chief technology officer, at a Credit Suisse First Boston analyst conference last week in New York.
Although Comcast will keep its 80 or so analog channel lineup intact, Fellows said digital simulcast “gives us significant near-term benefits,” he said. “It gives us 100% digital product availability and allows us to deliver VOD more broadly.” It also gives the MSO packaging flexibility, including the ability to offer a “lower-than-basic tier.”
Fellows pegged the infrastructure cost of digital simulcast at $150 million, largely spent on digital ad insertion and encoding equipment. Current low-end digital set-tops are trending in the $70 to $75 range, the other significant costs in a digital simulcast strategy.
“This gives us the ability to be more competitive across multiple customers segments,” Comcast chief operating officer David Watson said at a UBS Warburg Media Week conference last week. Comcast could go to analog subscribers who have a pay service and present an offer to get digital that would include VOD, he said. “It’s a natural, elegant way to start the process.”
Comcast has to convert analog signals and buy digital ad-insertion equipment to handle the digital feeds of Cable News Network, ESPN and MTV: Music Television, which had previously been delivered in analog.
Comcast has started to purchase encoders for each of its systems to handle the conversion of local TV station signals and local origination channels, Fellows said. In some markets, that could be as many as 30 or more encoders.
“The assumption is that with the off-airs, we will have to do the encoding,” Fellows said.
The rest of the current analog lineup consists of satellite-delivered networks. Comcast has started talking to programmers about originating a digital feed for its headends that would include digital cue tones for ad insertion, similar to the cue tones for analog feeds.
That would be more efficient than Comcast encoding 40 to 50 analog feeds at hundreds of headends across the country.
Fellows said the Comcast Media Center will encode content for the digital simulcast. The CMC can handle some digital ad cue tone insertion. It will also provide some high-quality encoding for analog signals.
Those signals will be delivered from the CMC in Denver to headends via satellite. Once the Level 3 backbone is up and running, that content will get shipped over the national fiber backbone, Fellows said.
He added Comcast has enough bandwidth in its markets to convert its 80 or so analog channels to digital.