Mark Bishop has seen the cable industry's digital technology conversion up close and personal, from F-connectors to high-definition digital video recorders.
The former Home Box Office regional executive who is now vice president of hardware for the National Cable Television Cooperative, began negotiating volume-purchasing discounts for cable technology in 1997 on behalf of NCTC members. When he started, the Lenexa, Kan.-based organization was handling about $5 million in annual business. This year, Bishop estimates the NCTC will spend $130 million to outfit cable operators with everything from set-top boxes to Data Over Cable Service Interface Specification high-speed Internet terminals — an increase of about 8% from 2004.
Along the way, the NCTC has witnessed big changes in the equipment its members demand. “Back then it was cable and connectors,” says Bishop. “Now it's video-on-demand and VoIP.”
And high-definition capability, too. “A year ago high-definition TV was something that people were interested in and knew they'd need to do,” says Bishop. “But around the turn of the year, in December and January, it almost turned into a panic.”
Bishop partly credits the phenomenon to a seminal influence in heartland America: Wal-Mart Stores Inc. The retailer made a huge push to sell enhanced-definition TV sets over the fourth-quarter holiday period.
“Wal Mart is rural America, and tons of those were purchased over the holidays,” Bishop says. As more consumers planted new TV sets in living rooms, grassroots demand for cable HD set-tops soared.
Also gaining in popularity among NCTC members are digital video recorders. The NCTC expects to process buys for roughly 75,000 integrated DVR set-tops this year, 50% more than it purchased in 2004.
In addition to accommodating demand for new digital consumer gear, the NCTC is working to democratize the cable-technology sector. Bishop's latest mission is convincing suppliers to make new digital technologies affordable to even the smallest of cable companies. A recent example: This summer, the NCTC concluded negotiations with broadband technology firm Sandvine Inc. to make a bandwidth-management platform available and affordable to cable operators reaching 10,000 households. A previous version of the tool was engineered for operations with at least 50,000 broadband customers.
Bishop also is working with Motorola Inc. as it modifies the “HITS Quick Take” multiplexed channel-delivery service (a joint product from Motorola Inc. and Comcast Corp.) to accommodate HD feeds of popular cable networks. The new variation could make it more economical for very small cable systems to deliver pre-encoded HD channels directly from satellite feeds to subscriber set-tops.
Bishop calls the new emphasis on affordable digital technology a form of “downscaling.
“It's funny, because when vendors say 'scalable,' they're talking about the ability to scale up. When we talk scalability, we're talking about scaling down.”
Yet more vendors are embracing the idea of making technologies available to the NCTC's membership as they seek to grow beyond the large metropolitan cable operations that largely are completing capital-spending plans. Bishop says technologies designed originally to serve larger, urban cable operations have become more affordable and accessible to smaller operators as vendors “nose around for that next frontier.”
One example is on demand. The NCTC is recommending that its members consider starting VOD services based on subscription-VOD and free-VOD models rather than transactional movie-rental approaches.
Bishop estimates members can deploy on-demand television for roughly half the capital cost associated with storage and servers if they avoid the movie-transaction model for now. Later, as rights windows associated with VOD movies become more attractive, “VOD will be a much bigger moneymaker for our members,” Bishop figures.
The NCTC currently arranges purchasing on behalf of member companies serving about 10 million customers. For vendors, the organization represents a one-stop cooperative that reduces the costs of doing business with hundreds of small cable companies. Just as it does for cable-programming networks that do business through the cooperative, the NCTC pays invoices for equipment purchases directly based on contributions from its members. It also negotiates for volume-based shipping arrangements that save members money, and it helps selected vendors showcase their products in front of NCTC members through marketing and communications materials.
“We offer to represent and to help them communicate their solutions into our marketplace,” says Bishop. “When they see they don't have to put sales teams in 1,500 locations in rural America, that becomes very attractive.”