In our last issue, we discussed six companies focused on expanding the digital carrying capacity of existing cable plants. Since then, we've talked to a seventh and have thought about what MSOs might do with all these opportunities.
We received some literature from Advent Networks and arranged a telephone interview with Geoff Tudor, Advent's CEO/Chairman. Unlike the companies we reviewed in the previous issue, Advent's system is not for expanding cable bandwidth; rather, it is a platform that permits MSOs to offer competitive telecommunications services to SMBs with a relatively small investment.
The Ultraband system provides TDM services with per-user downstream speeds from 5 to 40 Mbps and upstream speeds from 0.5 to 8 Mbps. Services are dedicated to each user, just like T-1/E-1 services from the telephone company (and unlike cable modem services, which share bandwidth between the users in each neighborhood). Applications include dedicated high-speed Internet access over symmetrical or asymmetrical facilities; VoIP telephone services; and video conferencing. These services are targeted to the SMB market and focused on customers with 15 to 150 employees that would like more bandwidth than a T-1 at a lower price. Geoff said that Ultraband is designed to fill the "huge gap between T-1 and T-3".
Ultraband operates over the existing HFC plant without any upgrades; to deploy it, an MSO would install a Switch Router at the cable headend, and an Access Gateway at each business customer site. The Access Gateway uses standard Ethernet, unlike T-1 and T-3, which require complex and expensive CSU/DSU interfaces and routers.
At first blush, this sounds like a simple business proposition for an MSO that wants to offer SMB services. A Switch Router with a single line card costs about $60,000 and supports 64 connections with an aggregate of 320 MBps of capacity; each Access Gateway costs about $400. Telephone companies charge at least $400 monthly per T-1 line, so an MSO wouldn't have to sell many connections at a competitive price to pay off the capital investment.
What Will Operators Buy?
The seven companies we've covered operate in three basic ways: they get more usable services into existing cable channels, put more usable bits in a given amount of bandwidth, and expand the available bandwidth of the cable infrastructure.
We think there's a logical progression by which cable operators will decide which technologies to use. Since the current market climate forces a sharp focus on the near-term bottom line, we think operators will start with those technologies giving the biggest near-term payoff from the smallest overall expense. Technologies which involve substantial changes in the plant and/or at the end points are less likely to happen in the near term.
So we think that companies will first buy those technologies that require capital expenditures only for headend equipment and for user equipment as sales are made. This would include the video multiplexing systems from BigBand and Terayon, and Advent's TDM over HFC system.
Next would come technologies requiring capex for upgrading or replacing previously-installed headend and user equipment. This would include DOCSIS 2.0 cable modem systems from Terayon and other companies; Rainmaker's wavelet modulation system; and Pulse~LINK's UWB system.
Over time, operators will start to run out of available bandwidth and will consider those technologies which require modifying the outside plant. This would include systems from Xtend and Narad. (Narad has positioned its system for the same short-term opportunity as Expand, but does require modifications to outside plant.)
There are considerable differences between cable systems, and each MSO will approach this differently. Some MSOs have a longer-term view, and might want to make longer-term investments sooner than others. Some are enthusiastic about new services - such as those for SMBs - and would install technologies to facilitate doing so on a large scale. Some cable systems have so much capacity committed -- to analog TV, digital TV, VOD, high-speed data, and telephony -- that they might be ripe for technologies which extend the carrying capacity at a lower cost than an upgrade.
Last month's issue covered technologies from BigBand Networks, Narad Networks, Pulse~LINK, Rainmaker Technologies, Terayon, and Xtend Networks; see http://www.bbhcentral.com/report/backissues/Report0206.html#link4 for more information.