Now that MSOs have largely completed their major system swaps and many of their plant upgrades are well under way, managing that newly found bandwidth poses one of the industry's most critical challenges.
Charter Communications Inc. vice president of engineering Larry Schutz compared neglecting bandwidth management with spending a big salary increase frivolously and suddenly finding oneself financially constrained.
"With bandwidth, you have to make sure it's going to be there when it's needed," he said.
"It's a huge issue," Discovery Networks U.S. executive vice president of sales and marketing Bill Goodwyn said.
Goodwyn is scheduled to host a panel on bandwidth management at the annual Cable & Telecommunications Association for Marketing Summit in Boston today (July 17), which includes executives from Adelphia Communications Corp., Cox Communications Inc. and Comcast Corp.
Of two primary issues involved, the first is allocating enough bandwidth among the 750-megahertz or 860-MHz spectrum for new services, including telephony, high-speed data, video-on-demand, near-VOD, high-definition television, interactive television and electronic commerce, while keeping enough spectrum aside for today's analog-video channels.
A second issue, Goodwyn said, involves recapturing bandwidth for new services, which could involve migrating all premium channels to digital and eventually digitizing the entire video spectrum.
"In not too many years, we'll begin moving all of our analog premium services to digital and taking back the bandwidth from scrambled analog," Time Warner Cable chief technical officer Jim Chiddix said.
After that, Time Warner may look at offering its full video services on digital, including what are now considered basic and expanded-basic analog channels, Chiddix added, "but that doesn't mean we'll turn off analog."
Turning off the analog feed would take away cable's competitive advantage in serving multiple televisions in the home, Chiddix said. He noted that the average digital-cable customer has one-and-a-half digital set-top boxes, but there are typically more televisions in the home than that.
"It's much simpler for us to serve the extra TV in the playroom and the kids' room and the bathroom and the kitchen with just analog," he added.
Goodwyn said it's important that a number of departments within an MSO have a hand in strategizing how the bandwidth will be allocated.
"There are so many marketing issues," he added. "If someone wants to digitize an entire system, it might make sense from an engineering standpoint, but not from a marketing standpoint because it takes away cable's multiple-box advantage."
In the move to digital, Insight Communications Co. Inc. senior vice president of marketing and programming Pam Euler Halling said it's important to remember where today's cable customers are starting from, and that even some of cable's premium-channel subscribers don't want set-top boxes in their home.
Euler Halling predicted that full digital-video conversion would require a huge capital investment because every household would need a set-top box. And customers would have to bear the cost of leasing those boxes unless the industry finds a way to subsidize them.
"Eventually, we will be 100 percent digital," she said. "Our challenge over time is promoting the benefits of having the box in the home" by highlighting new services such as VOD.
Cablevision Systems Corp. has said that it plans to accelerate its move to full digital conversion by replacing every analog set-top box in subscribers' homes with digital set-top boxes. The MSO plans to start its digital-cable rollout late this year.
Schutz predicted Charter's move from analog to digital would be evolutionary, based on consumer acceptance of digital boxes in the home.
And Chiddix predicted it would be "many, many years" before digital set-top boxes are ubiquitous.
But Starz Encore Media Group LLC chairman John Sie wants the cable industry to move more quickly and aggressively to full digital conversion of its video service or risk losing its core business to the likes of direct-broadcast satellite, which is already 100 percent digital.
"Cable has an advantage that it's not using-its bandwidth," Sie said. With video compression, moving the majority of cable channels to its digital lineup could give an operator the ability to add several hundred new channels.
Sie suggested that if the industry converts 60 percent to 70 percent of its subscriber base to digital, it can then move to full digital conversion. He also envisioned that perhaps 20 or so video channels should be left in analog to serve as a lifeline-basic option for customers who never upgrade to digital.
When Sie throws out the 60 percent to 70 percent figure, he's talking about households, and not customers who already have converter boxes in their homes. "I don't mean just moving the addressable box to digital," Sie said. "That would be easy."
Sie warned operators not to be content with their early digital successes, but to think of digital as fundamental to their core business.
"If you look at this as a line extension, you're content with 20 percent penetration," he said, "but contentment leads to complacency, and that leads to erosion of your subscriber base."
Of course, the core video service is not the only product that will demand cable's attention in the years ahead.
According to AT & T Broadband spokeswoman Tracy Hollingsworth, "There's a lot of value in every 6-MHz channel" for the MSO, because it could be used for not only analog or digital video, but also for high-speed data or telephony.
Schutz said studies on the demand for new services has led Charter to transition its plant-upgrade strategy from 750 MHz to 860 MHz to make room for products including high-speed data and HDTV.
"Certainly, high-speed data will demand a lot of spectrum," he said. If they need to free up more bandwidth for high-speed services, systems can subdivide the nodes, he added.
"We have more than enough bandwidth to do all of the services we envision and then some," Chiddix said. For example, he added, "We have sufficient bandwidth to offer high-definition television over video-on-demand."
Time Warner looks out 10 years when it comes to bandwidth-allocation issues, he said.
No matter how far ahead an operator looks, Goodwyn said, "It's going to be a continuing process," because operators won't know the economic return on new services until they launch them.