Operator Of The Year: Inside Time Warner Cable’s Technology Strategy

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Time Warner Cable’s legacy of experimenting with new technologies can be traced back to the cable industry’s early days and the operator’s own beginnings.

Jim Chiddix, who spent 15 years as Time Warner Cable’s chief technology officer, remembers his own early days with Oceanic Cable in Hawaii in the 1970s, a system that later became part of Time Warner Cable. One of his key innovations in the Aloha State was the use of fiber optics to connect cable systems. That would lead to the development of the hybrid-coaxial cable architecture under Chiddix’s watch in 1988 at American Television and Communications, which would become Time Warner Cable.

Such breakthroughs were “initially out of desperation,” said Chiddix.

“We were on that financial edge and therefore were motivated to try new things,” he said. “Being desperate for revenue is a healthy thing.”

Manhattan Cable, another TWC precursor, was similarly desperate, according to Chiddix, because customers didn’t need cable to get over-the-air TV reception in urban markets. Multichannel video was also a tough sell because New York City offered about a dozen local broadcast channels.

That entrepreneurial tradition continues, as Time Warner Cable has notched industry firsts in the areas of interactive program guides, video on demand, subscription VOD, high-definition set-tops, digital video recorders and switched digital video.

In the case of its Mystro network DVR project, the company may have been a bit too far ahead of its time, sparking programmers’ objections. But the project spawned Start Over, a service that lets viewers replay certain shows while they’re still on the air without the ability to fast-forward — a concession to broadcast and cable networks.

“Being first isn’t really important, not as a means to an end,” said Mike LaJoie, who has served as TWC’s CTO since 2004. “But it’s important that we make the kinds of investments that let us make sure the capability for new features is there.”

For example, Time Warner Cable first tested out voice-over-Internet protocol services, in its system in Portland, Maine, in 1997. “Technically, we knew it worked,” LaJoie said.

But before the company could launch VoIP commercially in 2000, it had to first work through certain regulatory changes and other market dynamics. “It takes years to be an overnight success,” LaJoie said. “It wasn’t like all those pieces came together out of nowhere.”

Peter Stern, Time Warner Cable’s executive vice president and chief strategy officer, said the company has been able to use its systems across the country as proving grounds, to “weed out the technologies that are good from those that are not.”

“I believe we have operations that have consistently shown the ability to productize technology in ways that make sense for customers,” Stern said.

Industry observers agree that the Time Warner Cable divisional structure has allowed it to carefully deploy new products and services before rolling them out more widely. The operator was among the first to “own” an entire market like Portland, said Bruce Leichtman, president of Leichtman Research Group.

“One of the advantages in owning the market was that they were able to test things, fine tune them and then roll them out across the country,” Leichtman said.

In addition, Time Warner Cable has benefited from picking amenable suppliers. Specifically, Scientific Atlanta (now part of Cisco Systems) helped the cable operator try some things “a little earlier than they otherwise might have,” Leichtman said.

LaJoie’s take is that Time Warner Cable has “a history of working aggressively with the vendor community.”

“We cook up these ideas, come up with the initial design, then work with the vendor community to pull the best out of their back rooms, and also feed their thinking and their development dollars with our imperatives,” he said.

The Time Warner Cable technology team certainly harbors a sense of pride, as they’ve watched services they pioneered get borrowed later by other MSOs. Comcast, for example, is in the midst of building its own version of Start Over after TWC proved it was a popular feature.

As one of the operator’s former engineers put it, “In my time there, the sense that we were pushing the envelope was very real, even though it felt from the inside we were moving pretty slowly.”

Any technology organization faces the challenge of how to avoid “not invented here” syndrome, LaJoie said — engineers rejecting an idea because it didn’t originate on their team.

While it’s sometimes tough to avoid that mindset, LaJoie said, cable has been pragmatic about drawing from many sources to get the job done. “Largely these days, if you really want to get the best [technology], you have to realize that the best isn’t focused in any one location.”

The entire cable industry, in its formative years, had a decentralized approach to development by its very nature, said Chiddix, who now serves on the boards of several technology companies, including OpenTV, Symmetricom and Vyyo.

“Rather than having a Bell Labs-like R&D structure, cable had kind of a chaotic, throw-the-spaghetti-against-the-wall-and-see-what-sticks methodology,” he said. “And it did work.”

In Hawaii, for example, the Oceanic Cable crew developed their own homegrown billing system which has allowed them to experiment with new services much faster than if they were relying on a software provider.

But not all the spaghetti sticks. In 2005, Time Warner Cable’s San Diego market tested an Internet simulcast of extended basic video programming, delivered to customers’ PCs. According to Stern, people didn’t really find the service useful.

The cable company instead has put a priority on enhanced video services where people like to watch video — on their HDTV sets.

“We are all about meeting the needs of the 80% first, not the 20%,” Stern said.

Hence, Time Warner Cable is pushing initiatives like Start Over and Look Back, which provides access to TV shows three days after telecast. A third service in the pipeline is Catch Up, to launch in 2009, which will provide episodes on-demand after that three-day window and include refreshed ads spliced in by either the programmer or the MSO.

To be sure, Time Warner Cable has been a follower in some areas.

For example, it has added PowerBoost, developed by Comcast, as an option for broadband customers. PowerBoost temporarily kicks up to the maximum connection speed available to a subscriber — from, say, 10 Megabits per second to 16 Mbps — when needed, such as during a large file download.

SOME MISSTEPS



And occasionally, when the MSO has been first out of the gate, things haven’t always gone well.

It bundled the first subscription VOD services with HBO as technical trials in 2001 in Columbia, S.C.; Austin; and Cincinnati. But in the early going, the service froze up when the servers became overwhelmed with requests.

Another hiccup: Time Warner Cable was the most eager to launch Pivot, the mobile phone service offered through Sprint Nextel, along with Comcast, Cox Communications and Bright House Networks.

TWC had deployed the service in more than a dozen markets before the operators and Sprint froze their rollouts in November 2007. The parties called it quits on the Pivot venture in April, with Sprint citing technical integration problems for the failure and the MSOs chalking it up to low consumer demand.

Meanwhile, Time Warner Cable has been a leader in deploying tru2way, cable’s platform for delivering standard interactive applications to set-tops and any other compatible device. To date, the company has rolled out more than 1 million set-top boxes compatible with the technology, making it the only MSO with any significant number of tru2way-based boxes in service.

But getting all of a Time Warner Cable system’s set-top boxes standardized on the same Digital Navigator guide has given some customers headaches. After the MSO upgraded the guide in Dayton, Ohio, this summer, there were complaints that the new guide was slower to change channels and introduced other errors, such as delivering some channels only in Spanish.

“Sometimes being out front doesn’t always work,” Leichtman said. “That’s why cable is traditionally fast-followers.”

Stern acknowledged issues with the set-top code deployments but argued that TWC would have experienced them sooner or later.

“We just wound up experiencing those challenges sooner,” he said. “Just as with the advent of digital video, any time you do something new there are going to be bugs.”

In Chiddix’s view, now that the MSOs are very large operations, it’s much more difficult for them to innovate. Cable companies run massive networks, with millions of customers using them 24 hours a day. The risks of introducing widespread outages are natural inhibitors for playing too far outside the lines.

“Maturity is something that happens to an industry,” Chiddix said. “We all wish we’re 18, but we’re not. Innovation in the cable industry is certainly not over. But it’s harder and takes more time. On the other hand, it’s a much less chaotic business that’s more predictable.”

LaJoie, for his part, said that even as cable operators run some of the most complex networks in existence, they’ve also developed processes and best practices for how to introduce new services in ways that don’t disrupt existing ones.

In 2008, for instance, Time Warner Cable expects to have completed more than 4,000 discrete configuration changes, such as set-top box and cable-modem firmware upgrades, across its entire footprint.

'IN OUR BLOOD’



“The notion of managing an extremely rich, extremely complex, large-scale network is just something in our blood,” LaJoie said.

Stern maintained that — as a company with a much larger and more complex set of businesses than it had 20 years ago — the mission of delivering innovative products and services has never been more important.

“If you look at the history of the business, we used to be just in video. We had one front on which we could innovate,” Stern said.

Now, Time Warner Cable has eight different service areas it must continue to drive forward, he said: Consumer video, data and voice; commercial video, data and voice; advertising; and wireless. The last two are references to Canoe Ventures, the advanced advertising initiative TWC formed with the five other largest MSOs; and the WiMax joint venture with Sprint, Clearwire, Comcast, Google and others.

“We’re going to have to execute across multiple business lines,” Stern said. “I’d say yes, it’s a challenge, but it’s a challenge we all welcome.”

And while Time Warner Cable isn’t necessarily focused on being first compared with other cable operators, Stern said, it’s in highly competitive markets that prevent it from resting on its laurels.

Among the biggest threats is Verizon Communications, which has steamed into New York City with a triple-play offer and is actively trying to pick off cable subscribers.

To Stern, competition is all the justification Time Warner Cable needs to invest in future innovation: “We believe that a company that can deliver what customers want is in a position to both charge a premium price, and capture a significant share of customers.”

 To read more of the Operator of the Year report, check out the Sept. 29 issue of Multichannel News or click here.

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