This looks to be the year that video-on-demand over cable will rise, but it also may be the year that the cost of delivering the service will fall. Cheaper, more efficient VOD gear — ranging from higher-density servers to Ethernet transport products — has already started to make its way onto the market. That's good news for cable operators, as the benchmark cost for starting up VOD now stands at roughly $700 per stream.
"It's only going down," said Bob Chism, chief technology officer at VOD systems provider Concurrent Computer Corp. "In fact, I've seen some models by some cable operators that in future years out — when you really get to a network-based [digital video recording] capability — that they are projecting sub-$100 price per stream, as technology in the next couple of years drives down even that far."
There's already evidence of that in Concurrent's product lineup. The stream density of its MediaHawk 3000 VOD server, introduced in January, is already double the capacity of its initial MediaHawk 2000 model.
"Obviously, we've been able to do that with effectively the same hardware cost," Chism said.
The Atlanta-based VOD provider also is counting on additional improvements as Gigabit Ethernet technology replaces the older, slower asynchronous serial interface (ASIs) connections, effectively making the channel for VOD traffic between headends and central hubs wider.
"Right now, you are starting to see modulation units that will accept Gigabit Ethernet, so a lot of the cable operators are inquiring about it," Chism said.
Concurrent has already deployed such technology in China, with Shanghai Telecom.
"We are ready to go for that," Chism said.
Gigabit Ethernet products, which offer greater bandwidth and more flexible channels, have entered Scientific-Atlanta Inc.'s lineup, said vice president of product strategy, subscriber sector Bob Van Orden.
"They are going full speed ahead and deploying SVOD and VOD, but as the penetration and growth of that climbs, we migrate to an extreme VOD, where there is more and more and more content-on-demand," Van Orden said. "That's when you are going to see this migration to introduction of Gigabit E technology in the VOD network."
Other improvements include a multiple quadrature amplitude modulation (QAM) unit that can combine four signals and support 40 VOD streams.
The QAM unit has become S-A's most successful headend product. More than 6,000 units have been shipped to provide service to 3.5 million households, Van Orden said.
Start-ups such as Internet Photonics Inc. also are in the hunt.
Last week, the company debuted its Ethernet overlay technology for fiber-optic networks. That product offers operators a means to boost access bandwidth without conducting costly fiber-optic upgrades. Cable VOD is one of the technology's target markets.
Internet Photonics's Ethernet overlay can add 240 gigabits per second of additional throughput to the connection between the central hub and the headend, said vice president of solutions marketing Gary Southwell.
Such an increase in bandwidth will reduce the number of servers required in centralized VOD server systems by 30 percent. It will also boost the number of streams the network can support, allowing providers to add more content titles.
"By centralizing the servers and providing them connectivity they can actually offer not 100 movies but 1,000 movies," Southwell said. "What this hopefully allows them to do — and Wall Street is interested in this — is if you offer more selections, you probably get more hits.
"At $2 to $6 per hit, you can increase the revenue from each household," he added.
Transport accounts for about $180 of the $700-per-stream cost of building out a VOD system, Southwell said. Internet Photonics' system comes in at less than $50, said Southwell.
"They've got their ears perked," he said.
IBM IN THE GAME
International Business Machines Corp. is also working on improvements to VOD. Big Blue — which has sold video servers to its enterprise customers for years — has talked with cable operators about creating a VOD delivery system that would cost less per stream, said IBM Digital Media chief technology officer Jurij Paraszczak.
"They are saying lowest cost per stream — I don't care how we get there, commensurate with their requirements for quality," Paraszczak said.
So far, IBM has focused its work on combining its hardware, middleware and computer-system research to create a more efficient server system. The result could be a 30 to 40 percent improvement in performance over the next two years, he said.
"What you are trying to do is to match up the system to try to tune it so that the processor has to do as little thinking and chopping up of the packets and reassembly as possible," Paraszczak noted.
That, in turn, will help drive down system costs.
"I think we are going to see there is a certain point, as processes improve and storage improves, we will see a considerable decline in the cost per stream," Paraszczak said. "And at first, it will follow the decline of the overall cost of these leading processors and storage subsystems.
"But it is going to get to a point where we can engineer these systems to be quite inexpensive, because the technology would have gone by so quickly so far."