Fellows Lays Out Plans for Digital TV

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Washington— Comcast Corp.’s top technologist met with senior Federal Communications Commission staff to explain how the company plans to expand its digital programming offerings, deploy digital-only set-tops, and manage bandwidth in a manner that maximizes capacity to accommodate new, nonlinear services.

The meetings occurred between Comcast executive vice president and chief technology officer David Fellows and several FCC officials, include Media Bureau chief Kenneth Ferree and some of his DTV transition staff.

According to a summary Comcast filed last Tuesday, Fellows explained that the company’s intention is a digital simulcast of its analog tiers, anchored by a $50 digital-only set-top with downloadable security.

But development of such a box, which would not take vendors long to produce, can’t really go forward with known costs until the FCC decides whether cable companies must deploy after July 2006 new set-tops with separate security functions, activated by a CableCARD similar to the one used for plug-and-play DTVs that recently hit the market.

“[Fellows] stressed that a separate security requirement would pose a major impediment to the development of a $50 box,” Comcast outside counsel James Casserly said.

Comcast’s summary also explained the company’s concerns about bandwidth management, were the FCC to require cable operators to carry multiple programming services offered by local DTV stations.

If one programming service is required, Comcast can “recapture” bandwidth when a TV station uses less than the maximum 19.4 megabits per second and put it toward video-on-demand services and the pre-positioning of content on digital video recorders “that are used by a growing number of Comcast customers.”

VoIP ROLLOUT COMING

Meanwhile, a report by Sanford Bernstein & Co. cable analyst Craig Moffett last week indicated that Comcast has accelerated its plans for voice-over-Internet-protocol telephony and could launch the service in “four or five” markets by the time of its scheduled fourth-quarter earnings report in mid-February.

While Moffett did not identify those markets, he estimated they would cover about 5 million households (representing 15% of its total footprint) and that Comcast would begin marketing VoIP in those areas about one month after the announcement.

Comcast has said it expects about 50% of its plant will be ready for VoIP deployment by early 2005 and 100% will be VoIP-ready by the end of next year. The MSO is currently testing VoIP service in the western suburbs of Philadelphia; Springfield, Mass.; and Indianapolis.

In his report, Moffett quoted Comcast co-chief financial officer John Alchin, who said the MSO has “turned 180 degrees in our enthusiasm for VoIP over the past 12 months.”

Facilitating that change in attitude is the shift in economics for VoIP service versus the circuit-switched telephone business Comcast inherited from AT&T Broadband.

HUGH RETURNS SEEN

Moffett estimated that VoIP margins “even if the service is offered at a significant discount to their current telephony offerings — will be accretive to overall cable EBITDA margins, and will be enormously accretive to growth and ROIC [return on invested capital].”

In his report, Moffett also wrote that Comcast “articulated a rapid six- to 12-month deployment schedule for digital simultrans,” which will enable all of its subscribers to access video-on-demand (not just subscribers to the digital tier).

Moffett added that digital simultrans would also allow Comcast to construct alternatives to its existing expanded-basic programming package and would enable lower cost digital set-tops that don’t require analog chips.

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