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The June 6, 2007 Issue Provided by System Dynamics Inc.
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In This Issue

Heard on the Net

Briefly Noted
Updates, Observations and Trends

The Cable Show '07 -
Winning in Las Vegas

Using Cable's Magic Tricks -
"It's All About Competition"

Broadband Library
"Two Sides to Every Story"

High-Definition Media Networking--Our Game Plan

Your Voice -
Readers Comments

Upcoming Conferences


Heard on the Net

News about People and Companies Influencing The Broadband Home


People News

Geraint Anderson was named VP and General Manager, Service Provider Organization at Linksys, a division of Cisco Systems. Craig Gledhill was named VP, Asia Pacific (APAC); Vince Hassel, CFO; and Steve Silva, VP, Connected Home Integration. ( www.linksys.com ) ( www.cisco.com )

Lorenzo Bombelli has been appointed VP of Product Strategy and Management at Imagine Communications. Brian Bentley was appointed VP of Sales, and Mark Davis, previously at BigBand Networks, was named VP Engineering - Network Systems and Support. ( www.imaginecommunications.com )

Alberto Calcagno has been appointed COO at FASTWEB. He was previously the company's CFO and has been with FASTWEB since its start-up. ( www.company.fastweb.it )

John Canning, previously Director Content Distribution at Yahooo!, is now Digital Media Consultant, Media Producer, Professional Photographer at MediaSherpa, LLC.

Charles Cerino, VP of new media development at Comcast, has been named the new President of MoCA (the Multimedia over Coax Alliance). Charles had served as VP of MoCA since the organization's inception over three years ago. ( www.comcast.com ) ( www.mocalliance.org )

Susan Huberman has joined Entropic Communications as VP of corporate marketing and communications. Before joining Entropic, Susan was VP of corporate marketing at Cymer, Inc. ( www.entropic.com )

Adam Joffe, formerly CTO at Sony Online Entertainment, has become CIO at I4Commerce. ( www.i4commerce.com )

Alain Mutricy, formerly with Texas Instruments, has joined Motorola as senior VP, Platform Technology, within the company’s Mobile Devices business. ( www.motorola.com )

Joe Parola has accepted a position as Sales Area VP, MSO Accounts at Openwave Systems. Joe was previously at General Bandwidth. ( www.openwave.com )

Mike Volpi has been appointed CEO at Joost, a startup Internet television service. Volpi was senior vice president and general manager at Cisco Systems. ( www.joost.com ) ( www.cisco.com )


Company News

Acquisitions

Broadcom has acquired Octalica, a start-up specializing in silicon solutions for MoCA home networking applications. Broadcom paid $31 million for the acquisition. ( www.broadcom.com ) ( www.octalica.com )

Comcast acquired movie ticketing service Fandango to complement Comcast's new entertainment information service, Fancast. Financial terms of the deal were not disclosed. ( www.comcast.com ) ( www.fandango.com )

Entropic Communications is buying fabless semiconductor company RF Magic Inc in a stock swap for an undisclosed amount. ( www.entropic.com ) ( www.rfmagic.com )

Qualcomm has purchased the system-on-a-chip Mobile WiMAX assets of TeleCIS Wireless for an undisclosed amount. ( www.qualcomm.com ) ( www.telecis.com )

Ingenious Media Active Capital Ltd (IMAC) has completed an investment in Two Way TV of up to £5.34 million, for a significant controlling equity stake. ( www.ingeniousmedia.co.uk ) ( www.twowaytv.com )

Motorola is continuing its recent string of acquisitions. ( www.motorola.com )

  • It is purchasing Terayon Communication Systems, a digital video processing and networking vendor, for $140 million. Terayon will be a wholly-owned subsidiary and integrated into Motorola's Connected Home Solutions business--subsequently renamed the Home and Networks Mobility unit. ( www.terayon.com )
  • Separately, it agreed to buy privately-held Modulus Video, a specialist in MPEG-4 Advanced Video Coding (AVC) compression systems. Terms of the transaction were not disclosed. ( www.modulusvideo.com )

On2 Technologies, maker of video compression software and solutions, is acquiring Finland-based Hantro Products Oy, a provider of video technology for mobile devices, for $6.8 million. ( www.on2.com ) ( www.hantro.com )

Swisscom is acquiring over 80% of Italian broadband pioneer FASTWEB for a total purchase price of approximately EUR 3.1 billion and assumption of debt of about EUR 1.1 billion. ( www.swisscom.com ) ( www.company.fastweb.it )

Funding

Avega Systems, a home-entertainment networking company, closed a $7 million Series B round of financing. ( www.avegasystems.com )

Ellacoya Networks, a provider of broadband network/optimization equipment, has raised $13 million from inside investors. ( www.ellacoya.com )

Ensequence, a provider of Interactive TV authoring tools, has received an additional $40 million in funding. ( www.ensequence.com )

Jajah, a startup focused on IP communications, has received a $20 million series C round of funding led by Intel Capital and including Deutsche Telekom. ( www.jajah.com ) ( www.intel.com ) ( www.deutschetelekom.com )

Joost, an Internet-TV startup, raised about $45 million from five investors, including Viacom and CBS which are also content providers to Joost. Each took a minority stake in the peer-to-peer VOD system company. ( www.joost.com ) ( www.viacom.com ) ( www.cbscorporation.com )

Navini Networks, a WiMAX wireless access equipment provider, has received $50 million Series F equity financing. ( www.navini.com )

Provigent, a provider of System-on-a-Chip (SoC) solutions for the broadband wireless transmission market has increased its fourth round of financing to $17 million. ( www.provigent.com )


Other News

Boingo Wireless announced a roaming agreement with Spain's FON to provide access to an additional 130,000 hot-spot locations. FON members share their unused bandwidth via a FON router in exchange for free Wi-Fi access when roaming through any other FON access point. Separately, FON recently signed a partnership with Time Warner Cable which enables TW customers to deploy FON wireless access points, providing free Wi-Fi access to other Time Warner (and FON) customers. In return, the TW customers have access to any other FON equipped property. ( www.boingo.com ) ( www.fon.com ) ( www.timewarnercable.com )

CBS announced creation of the CBS Interactive Audience Network which will initially include content deals with online distributors including AOL, Microsoft, CNET Networks, Comcast, Joost, Bebo, Brightcove, Netvibes, Sling Media and Veoh. All content will be advertiser supported and free to the consumer. Advertising revenue will be shared between CBS and its partners. Some of CBS' top programs, including "CSI," "Survivor," and "Late Show With David Letterman" are included. ( www.cbscorporation.com )

Comcast announced plans to launch its "SmartZone" communications center, a fully integrated, Web-based communications center that lets customers go to one central location to receive email; to check voicemail online; to send instant messages; and to manage a new smart address book. Comcast has partnered with HP, Plaxo and Zimbra on the application. It will also incorporate Bizanga's email anti-abuse system, Cloudmark's email anti-spam and anti-phishing tools, and Trend Micro's anti-virus software. ( www.comcast.com ) ( www.hp.com ) ( www.plaxo.com ) ( www.zimbra.com )

PhyFlex Networks is the new name for Narad Networks, a provider of FTTx solutions for HFC cable systems. ( www.phyflex.com )


Countries

Canada

The CRTC, Canada's regulator, denied a motion by broadcasters that would have enabled them to charge cable companies fees for carrying their signals. The broadcasters did get a CRTC ruling allowing them to have an additional two minutes of advertising per prime time evening viewing hour, starting in September. ( www.crtc.ca )


Briefly Noted: Updates, Observations and Trends

Each month, we collect miscellaneous happenings, studies, trends or observations you might have missed. This month's briefs focus on the new face of Wi-Fi, a BPL deployment in Michigan, TV broadcasters' paths to mobile TV, and the deluge of CE products in our lives.

Redesigned Wi-Fi Logo Includes 802.11n

New Wi-Fi logo --> Click for larger pictureThe Wi-Fi Alliance unveiled a re-designed consumer logo for Wi-Fi CERTIFIED 802.11n Draft 2.0 products, and announced the products and reference designs that will comprise its test bed for interoperability certification. [See "Draft 802.11n"--On Track for Wi-Fi Certification (BBHR 4/12/2007)] ( www.wi-fi.org )

BPL System Deploying In Michigan

utility.net, a Broadband over Power Line (BPL) network provider, in cooperation with Consumers Energy, which provides utility service to 6.5 million of Michigan’s 10 million residents, announced its production BPL system will initially deploy to 10,000 homes in and around Grand Ledge, Michigan by the end of 2007. Subsequently, Consumers Energy will grant additional service areas to utility.net, in blocks of 100,000 customers. utility.net's goal is to reach one million Michigan customers over the next several years. ( www.utility.net ) ( www.consumersenergy.com )

Making US Broadcasting Mobile

Despite the fact that mobile television is in its infancy, there are many groups developing standards and trying to protect the interests of its members. In the US, two efforts were recently announced, relative to using broadcasters' DTV broadcast channels to bring programming to mobile and handheld devices.

The Advanced Television Systems Committee is proposing to create the ATSC-M/H Standard for facilitating broadcasters’ use of their DTV broadcast channels to provide new services directly to small hand-held devices and fast moving vehicles. Broadcasters will be able to allocate a portion of their 19.39 Mbps/8-VSB signal to mobile and handheld while continuing to transmit services such as HDTV. ( www.atsc.org )

Meanwhile, nine major TV broadcasting companies established the Open Mobile Video Coalition (OMVC) "To accelerate the development of mobile digital broadcast television, and capture the full potential of the digital television spectrum in the United States." The coalition will work with the National Association of Broadcasters' (NAB) Advanced Technology Advocacy Committee to promote mobile digital broadcast technical standards and objectives for broadcasters, drive regulatory support and promote consumer adoption. The OMVC is open only to US broadcasters, whereas the ATSC includes both broadcasters and non-broadcasters. ( www.openmobilevideo.com )

The broadcasters join other spectrum owners in the race to see what mobile TV services consumers will want and be willing to pay for. Each group (cellular, satellite, TV, and others) is looking at their spectrum and is defining ways to use what they have.

How Many CE Products Do You Own?

Sandy's electronics --> Click for larger picture[Sandy]I don't know how many CE products you own, but as I was packing my gizmos and chargers for a recent trip, I took a picture of some of the ones that travel with me. It is frightening!

According to the Consumer Electronics Association's eBrain Market Research, if you live in the US and are an "average" household, you own 25 consumer electronics (CE) products and spend $1,200 a year on them. Their 9th Annual Household and Teen CE Ownership and Market Potential Study also revealed that the top five growth sectors were digital video recorders (DVRs), network routers or hubs, MP3 players, cable modems and digital cameras. HDTV showed significant growth, with penetration now at one quarter of US homes. Some details are available in CEA's press release. The complete study is available free to CEA member companies and for purchase by non-members. ( www.ebrain.org )


The Cable Show '07 -- Winning in Las Vegas

The show floor --> Click for larger pictureThe Cable Show '07 themes matched its Las Vegas location. Winning and losing, getting the right numbers, where to place your bets and how to beat the competition were all hot topics. And rightly so. Competition has never been greater for North American MSOs. Satellite keeps battling with the promise of more HD services, interactive services like games, news and sports, plus portable video players (like PocketDish). Telephone giants AT&T and Verizon are adding TV services to their voice, data and mobile services bundles. New sources of video content from the Internet are increasingly competing for viewer's time and attention.

Steve Burke of Comcast --> Click for larger pictureIn the face of all this competition, MSOs pointed to positive results. First quarter financial results for both Comcast and Time Warner Cable showed accelerated subscriber growth in all key services and hefty increases in revenues and "revenue generating units". In a panel at the show, Comcast's COO Steve Burke reported that cable is taking many more phone customers from the telcos than telcos are taking video customers from cable. He also noted that 55% of net-adds for cable modem service are former DSL subscribers.

MSOs pointed out that their HFC technology continues to be up to the task, even as bandwidth demands keep rising. Multiple sessions and vendors focused on the numerous ways MSOs can get more bandwidth out of their existing plant and/or incrementally extend its capacity -- see the following article "Using Cable's Magic Tricks".

FCC Chairman Kevin Martin --> Click for larger pictureEven FCC Chairman Martin, who has a rocky relationship with cable, had some positive feedback for the industry. He said "You have succeeded where others have failed, providing the most successful and sustainable competition in the voice market ... You continue to lead the industry in terms of faster speeds". These positives were tempered by some less-welcome messages supporting "a la carte" (subscriber's ability to choose and only pay for individually selected channels) and "multicast must-carry" (in which cable systems would be required to carry all of a TV broadcasters free, ad-supported digital television (DTV) channels, not just digitally replicate the former analog channel).

One of the big stories coming out of this year's cable show was the push for OCAP set-top boxes. The Open Cable Application Platform (OCAP) specification, licensed by CableLabs, provides a standard way for set-tops, TVs and other devices to access interactive cable services like video-on-demand. The OCAP effort, underway since 1998, is currently in the testing phase with most MSOs, who are pledging to have the OCAP platform widely deployed by the fourth quarter of 2008. We'll hold off our reporting on this until tangible successes from the field are in.

A couple of items that particularly interested us at the show were:

  • Cable's current status and future plans for mobile services (below)
  • Whether cable will have sufficient bandwidth capacity to continue to accommodate the growing list of bandwidth intensive services (see the next article)

Cable's Mobile Play: A Work in Process

US MSOs are in the first inning of the mobile services game. Time Warner, Comcast, Cox and Advance/Newhouse Communications (Bright House) announced their partnership with Sprint in November 2005, and have started rolling out their initial bundles with mobile services under the Pivot brand. Their motivations are clear: their main competitors--Verizon and AT&T--offer mobility as part of the bundle, so they must also. But beyond the baseline "me too" requirements, a host of questions remain to be answered. The role of mobile video is one of the biggest questions.

The MSOs don't pretend to know all of the answers; as Steve Burke said at the show, "Cable's approach to wireless is a work in process." That's not surprising, since mobile video is in its infancy and the whole mobile industry is testing the marketplace to understand its wants and willingness to pay. The content industry is also in its infancy regarding mobile entertainment. Peter Chernin, President & COO of News Corp., summed it up by saying: "It's the first pitch of the first inning and we are trying to figure it out."

Cable Show speakers gave some clues on their current directions for mobile services. Here are a few of the questions raised, and the answers we heard from the MSOs:

  • What will the service offerings be?
  • How will MSOs use the AWS spectrum they won at auction last August?
  • What network will be used to deliver entertainment content to mobile devices?
  • Where will that content come from?
  • Where do mobile services stand in the MSO priority queue?

Service Offerings

There seemed to be much less talk about individual mobile services than about their attributes within the bundle. Although MSOs think individual services are important, they believe integration across services is the key. Brian Roberts reinforced this when he said: "If it's just about cell phones, you can go the mall and buy one."

Thus, when the cable partners and Sprint launched Pivot in March, their press release emphasized integration across service types and provided some tangible examples. These included the ability to display the cable guide on the mobile phone and program your DVR from it (the latter is still in the works); to check home email and voicemail from a single interface; and to make unlimited calls between your home VoIP line and your mobile phone.

Video content seems to be another MSO key to mobile services. Since it is the "bread and butter" of cable's traditional business, they are thinking about how users can have the same content available on all three of their screens -- the TV, the PC and the mobile phone. In the near-term, Pivot customers receive Sprint's mobile video package, which includes both live TV video and on-demand video clips. In the longer term, we expect some of the MSO-specific content, like Comcast's dating-on-demand service, will be a natural for the mobile screen. "Cable will work with videocentric devices -- not just focus on plain voice," said one MSO.

Role of AWS Spectrum

The MSOs are using Sprint’s current infrastructure and spectrum to provide their initial “quadruple play” services, and are also doing their initial service integration in partnership with Sprint. Questions have been raised about how the MSOs intend to use the AWS spectrum purchased at auction nearly a year ago by SpectrumCo (owned mainly by the MSOs with Sprint holding a 5% interest).

In a session at the Cable Show, Brian Roberts was asked about the AWS spectrum. His response suggested that this spectrum was more an irresistible opportunity than a strategic move: "The government auctioned off spectrum and we didn't need it at that moment. But they auctioned off more spectrum than at any time in their history. There was demand for about 60 MHz and the supply was 90. The cable industry was able to go in and buy 99% of the country with 20 MHz and begin to play with what could be done with the next generation of an integrated service -- with a relaxed timetable, if and when that's what consumers want." Given the laws of supply and demand for spectrum, he said he views it as "a growing asset. We paid half per POP of what the last auction had gone for" and 60% of what the incumbent cellular carriers paid in the same auction "because the demand had been soaked up."

Roberts indicated the industry's current focus is on rolling out the Pivot services: "It's one person showing up at your house with one hookup for three products, one company to call for service, and they're all starting to integrate. In the world tomorrow, we have a couple of horses. We really want to work with Sprint and make some things happen."

Dick Parsons of Time Warner --> Click for larger pictureDick Parsons, Time Warner's CEO, made a related point in an earlier session: “Human habit patterns don’t change as rapidly as technology”.

Getting Entertainment Content To Mobile Devices

At its simplest level, there are three different ways content can get to a consumer's mobile device:

  • Carriers can use their existing cellular networks--this is the mechanism currently used by services like MobiTV in the US and by 3 in many other countries. Delivering content on a one-to-one (unicast) basis creates a problem if video services are successful, since the cost per delivered bit is relatively high and there is not enough bandwidth for high-volume video services.
  • Carriers can build (or lease) a separate network specifically built with focus on the economics and technical requirements of video. Within this category, there are multiple methods, some of which are more prevalent in certain geographies--examples include South Korea’s digital multimedia broadcasting (DMB), Qualcomm's MediaFLO, Aloha Partners' Hiwire, and Crown Castle's Modeo. In most of these, the transmission is to multiple users simultaneously (one-to-many) using IP multicast. WiMAX could also be a contender in this category, and video could be carried either unicast or multicast, depending upon its popularity.
  • Consumers could make their personal entertainment collection portable without subscribing to a carrier's mobile content network, using a media card (or a mobile data service) to transfer media content from their home-based devices (DVRs or PCs) to their phones. Using a media card is often called "sideloading", although Tom Nagel, SVP & GM Wireless Services at Comcast, also described it as "load and go." It is being made possible by advances in memory and processing power of today's mobile phones and could encourage owners to spend more on the phone and less on the carriers' content services.

Nagel made a pretty convincing argument that consumers are likely to want a combination of all three methods. Since mobile video users are expected to be heavy users of DVRs, and the programs a user chooses to record are likely what they will want to watch, Nagel estimated that 80% of the benefit of mobile content could come from sideloading. He was quick to point out, however, that consumers sometimes want to see live events, like a baseball game or an important news bulletin, in real time; for these, broadcast/multicast would be ideal. Finally, there are the infrequently used items like user-generated content from sites like YouTube, for which unicast should work just fine.

The big issues in pursuing such a combination path relate to creating a seamless user experience. It is likely to be a huge job. In the mean time, everyone is testing pieces of the puzzle. It will take a while to put the answers together.

"On-deck" and "Off-deck" Content

Sideloading and user-generated content raise another question for mobile services providers. Moderating a session on mobile services, Scott Wills, President & COO of Hiwire, taught us some more new vocabulary in his opening remarks. Content received by the user as part of the service provider's user interface and coming through an approved vendor-partner relationship is termed "on-deck," while content from outside sources delivered over a high-speed mobile data service is (not surprisingly) called "off-deck".

"Off-deck" content could come over the Internet from non-approved mobile content providers. It could also come from the user's home media collection, using the mobile connection as a data pipe--flat-rate mobile data pricing is likely to encourage this behavior. Companies like Sling Media and Orb Networks use mobile data services to stream entertainment from home to mobile devices; their business models are based on the premise that your content from home should be yours anywhere -- and they facilitate your accessing and streaming it.

Since MSOs are looking toward a "three-screen experience," it seems reasonable to expect that they will aim toward making the video content cable subscribers already have available to them in their homes--whether through their HBO subscription or saved on their PVR--available on the same subscribers' mobile devices: the consumer buys the content once and can use it on any device. This raises lots of contractual issues that will need to be addressed for the MSOs to make good on the "three screen, any content, anywhere" vision. The IMS capabilities being incorporated into PacketCable 2.0 are one ingredient for enabling this capability.

Mobile in the Priority Queue

When will MSOs move mobile to the front burner and roll it out nationally? Historically, MSOs have addressed only one new service area at a time. This has changed somewhat as competition has increased, but there is still a limit on capital, mindshare and personnel training.

Glenn Britt, Time Warner Cable --> Click for larger pictureIn a session on Cable's Next Business Opportunities, Glenn Britt, CEO of Time Warner Cable, was asked about new services priorities. Without hesitation he answered "commercial, advertising and wireless" in that order.

Brian Roberts, speaking after the show at the Sanford Bernstein Strategic Decisions Conference, seemed to echo Britt's priorities. In speaking about how important he views both targeted and interactive ads, he said: "The money is humongous--and real cash." In answering a later question, he indicated that aggressively rolling out business phone services came first, with advertising close on its heels.

Mobile services are not at the head of the list in these MSOs' priority queues. The game needs to move forward with learning from the early innings before mobility could move to the front of the queue.

( www.thecableshow.com ) ( www.comcast.com ) ( www.timewarnercable.com ) ( www.mobitv.com ) ( www.three.com ) ( www.qualcomm.com/mediaflo ) ( www.alohapartners.net ) ( www.modeo.com ) ( www.slingmedia.com ) ( www.orbnetworks.com )


Using Cable's Magic Tricks -- "It's All About Competition"

We've written several times about "Cable's Magic Tricks"--a variety of technologies that cable operators could use to expand the capacity of the installed cable plant. Our second survey of these technologies five years ago concluded "All of these new technologies suggest that MSOs will be able to wring a lot more bandwidth -- probably many gigabits per second -- out of the existing plant. Taken together, they promise to postpone the need for additional massive capital investments for many years."

Until recently, many of these technologies seemed to be "solutions looking for a problem" since operators saw little or no reason to spend money to deploy them widely throughout their cable systems.

But the world has changed. Look at some of the recent articles and ads:

  • "The FiOS initiative has given Verizon an imposing lead in how much bandwidth it can deliver to U.S. homes" (Business Week May 29, 2007)
  • "Why overpay for your Internet connection? Get all the speed you need, cheaper than most cable." (Verizon web site)
  • "Cable's Bandwidth Shortage: A Looming Capex Crisis" (Lightreading's Cable Industry Insider)
  • "Right now, in terms of network architecture, Verizon Communications is best equipped to deliver multiple HDTV streams." (CNET News)

The impetus is clear--cable faces competition from multiple directions. And that competition has a lot to do with having lots of bandwidth at their disposal.

After the recent Cable Show, we wanted to know how seriously cable is responding to the competitive threats. We spoke by phone with Jeff Walker, Motorola's senior director of marketing. He confirmed that operators are on the move to expand plant capacity, and said "it's all about competition". He pointed to Verizon's FIOS service and satellite's threats of "150 HD channels" as key driving forces.

This article summarizes some of those competitive forces and looks at the wide variety of solutions available to MSOs, ranging from those that re-claim existing spectrum to those that expand it. It concludes "the sky is not falling" and that MSOs don't need to run out and put in fiber any time soon. They will have to spend some money, but nothing like what they spent to build their current cable plant.

In this article our main focus is on some of the newer and more innovative solutions. At the end, we provide links to our earlier articles which provide a more detailed exploration of the technologies that have been around for a long time, waiting for the MSOs to feel the competitive threat.


One Hundred--The Magic Number

While we don't believe in numerology, it certainly seems like 100 is today's magic number for the cable industry. That number simultaneously represents:

  • the dollars US cable operators have already spent on upgrading the plant ($100 billion)
  • the next magic goal for the amount of bandwidth available to each home (100 Mbps)
  • the number of high definition channels satellite competitors say they will have by year end 2007.

Here's the background on these.

Over the past fifteen years, the North American cable industry has upgraded its entire cable plant. Each major cable operator has consolidated its video and internet resources into centralized metropolitan-scale headends; built extensive redundant fiber rings throughout metropolitan areas; rebuilt the coaxial cable plant to carry frequencies up to 750 MHz or higher; and deployed optical nodes in each neighborhood to connect the fiber rings and coax plants. This upgraded hybrid fiber-coax (HFC) plant has cost the cable industry nearly $100 billion.

The North American telephone companies are becoming serious competitors to the cable operators. While the cable operators talked openly for many years about their plans to offer high-speed data and telephone service over the HFC networks, the telcos were slow to respond. Only when cable operators grabbed the lion's share of high-speed Internet service did the telcos start deploying DSL broadly and searching for ways to compete--mostly on price. When the cable companies demonstrated that they could take away a substantial number of primary residential voice customers--the telco's long-time cash cows--the telcos responded by starting to test IPTV.

Now all major telcos are rolling out the "triple play" of voice, video and data services. They are deploying more fiber to increase the capacity of their plant. Verizon is deploying fiber all the way to the home; others--including AT&T--continue to use copper twisted pair for the "last mile" to the home, much as the cable operators have continued to use copper coaxial cable.

100 Mbps Data

"100 Mbps to every home" has long been a mantra of the high-tech industry. In March of this year, the Fiber to the Home Council called for a "100 Megabit Nation" and asked the US Congress and President to adopt a strategy and timetable in 2007. On May 9th, Senator Rockefeller introduced S. Res. 191 calling for such a broadband policy. Verizon's FIOS service is based on a fiber to the home (FTTH) infrastructure capable of 100 Mbps service or more with the proper electronics at each end.

For some time now, the cable industry has been developing DOCSIS 3.0, the latest generation of cable modem technology. DOCSIS 3.0 bonds several individual cable channels--each operating at 30 to 40 Mbps--to provide peak data rates higher than 100 Mbps. Until recently, the industry had approached DOCSIS 3.0 with the same measured pace as previous cable modem standards, with years elapsing between the start of an initiative and volume production of products certified by Cable Television Labs.

To head off the perceived threat from FIOS, cable companies now want to accelerate DOCSIS 3.0 deployment. In April, CableLabs announced a "novel qualification testing approach" for cable modem termination systems "to encourage CMTS makers to submit gear for testing earlier than they otherwise might." It established Bronze, Silver and Full qualification levels to achieve "downstream data rates of 160 Mbps or higher and upstream data rates of 120 Mbps or higher". Ralph Brown, CableLabs' CTO, said he expects equipment to be submitted for testing in the fourth quarter of this year, to "enable our members to compete effectively in the very high-speed broadband data marketplace."

Brian Roberts demonstrating "Wideband" --> Click for larger pictureComcast, the largest North American cable operator, has been one of the leaders in this effort. At the Cable Show, Comcast's CEO Brian Roberts demonstrated downloading a file at 150 Mbps using DOCSIS 3.0 over four bonded channels--he called this "Wideband" compared with today's "Broadband".

"Better than 100 Mbps" is becoming the new cable mantra. But most cable systems don't have spare bandwidth to assign for four (or more) bonded channels.

100 HDTV Channels

In the US, the direct-to-home satellite companies -- DirecTV and EchoStar -- offer the only nation-wide competition for residential subscription video, cable's cash cow. Since satellite is a comparatively poor way to provide data and voice service, the satellite companies have concentrated on high-quality video--with some popular services carried exclusively on satellite--and have taken a significant share of cable's video customers.

The latest competition is in high-definition television. After years of waiting, high definition TV sets (HDTVs) are now flying off retailer shelves and prices are dropping fast. The Consumer Electronics Association (CEA) reports that 28% of US homes had HDTVs by the end of 2006. While some owners receive the HD signal free off-air, most pay to get it from a cable or satellite set top box.

At CES in January, DirecTV announced that its latest satellites will give it the capability to carry 150 channels of HD, and said that by the end of 2007 it plans to have 100 operating HD channels--far more than are now available on any cable system. DirecTV has recently been running ads encouraging cable subscribers with new HD sets to switch to satellite to receive these promised HD channels.

While analysts have expressed doubt that there will really be 100 distinct HD satellite channels at yearend, and whether the new channels will add much value, they agree that the number of channels available in HD will increase markedly this year, and that cable operators will need to increase the number of HD channels to compete successfully for the high-end customers who subscribe to HD services.

As new HD channels find a place on satellite, they are trying to sign carriage agreements with cable operators. But HD needs a lot of scarce cable bandwidth.

Other New Services

The demand for additional cable capacity is driven by more than pressure from satellite and telephone competitors.

  • Internet video is the latest hot phenomenon, and Internet users are increasingly watching videos like YouTube over broadband connections. Streaming video uses much more bandwidth than web browsing and email, and creates the need for more downstream cable capacity committed to data services.
  • "Everything on demand" has been a cable mantra for some time. Many programs are available on demand and more are coming. On demand requires downstream cable capacity committed to VOD services.
  • Business services is a growth area for many cable operators. Many business customers want the equivalent of symmetrical T1 and T3 services, creating the need for added upstream and downstream capacity.
  • Voice services are another major growth area. These also require symmetrical upstream and downstream capacity.

Overcoming Channel Lock

The cabling and electronics for a modern HFC cable plant have been engineered to provide a specific spectrum for services. The coax portion of the plant typically allocates the spectrum from 50 to 750 or 860 MHz to carry signals "downstream" from an optical node in each neighborhood to nearby customer homes, and allocates 5 to 42 MHz to carry signals "upstream" from homes back to the node. The fiber portion of the plant typically uses two fibers, one in each direction, to carry the same spectrum between the centralized cable headend and optical nodes. The downstream spectrum is divided into fixed 6 MHz channels (in North American systems), with more flexibility upstream.

The cable plant was originally engineered to carry analog television programming, and most systems still assign most downstream channels to analog programs--with the balance split among digital cable, HD, video on demand, high-speed data, and telephone service. Many if not most systems are "channel locked", with nearly all available channels assigned to services.

Cable operators clearly need to assign more capacity for HD and VOD video programming, DOCSIS 3.0 data, new telephone customers, and business services--but where will they find the space?

Broadly speaking, operators can use two approaches to gain capacity: make better use of their existing installed cable spectrum, or expanding the spectrum. Operators are likely to invest in reclaiming existing spectrum before turning to expanding spectrum, which usually requires substantially larger front-end capital expenditures.


Making Better Use of Existing Spectrum

Operators have a wide variety of choices to reallocate the existing spectrum. Since most of the spectrum is still allocated to analog programming, reducing or eliminating analog channels represents their best opportunity to recover large swathes of spectrum, but they need to figure out how best to address the huge installed base of analog-only TV sets. Switched digital video and DOCSIS 3.0 would allow more efficient use of the existing spectrum.

Going "All Digital"

The simplest solution would be to go "all digital" and eliminate analog programming as quickly as possible. Since the 6 MHz space of one analog channel can hold ten or more standard-definition digital channels, converting all analog programs to digital would free up an enormous amount of capacity that could be reassigned for other services. Most operators have been gradually reducing their analog programming in favor of digital, and they could accelerate it.

Analog programs work on old-fashioned "cable ready" TVs without a cable box. North American homes have a huge installed base of these, used without cable boxes as second, third and fourth TVs; other devices such as VCRs and PVRs also have analog-only "cable ready" tuners. (In our home, in addition to three TVs connected with set-top boxes, we have three more without cable boxes: two in guest bedrooms and another in the exercise room; we also have a VCR that's not connected through a cable box.) Since customers are unwilling to give up these legacy "cable-ready" TV sets and other devices, cable operators are understandably reluctant to remove the analog services until they have a way to support them.

This problem will gradually go away, since the United States is ending analog television broadcasting in February 2009, less than two years from now. Starting last month, the FCC has required retailers to display a label with the following text on or adjacent to any analog-only TV offered for sale: "CONSUMER ALERT This television receiver has only an analog broadcast tuner and will require a converter box after February 17, 2009, to receive over-the-air broadcasts with an antenna because of the Nation’s transition to digital broadcasting. Analog-only TVs should continue to work as before with cable and satellite TV services, gaming consoles, VCRs, DVD players, and similar products. ..." This is expected to accelerate the adoption of digital television sets and reduce the number of analog sets still in use.

Comcast has been aggressively moving toward an "all digital" service. Multichannel News reports that Comcast recently notified customers in Chicago that on July 1 it will stop carrying most analog channels. It will remove 38 channels from its expanded-basic tier, leaving only 34 channels in basic analog--the "off air" broadcast channels and a few cable channels.

But Comcast customers will need a digital set top box for each "cable-ready" TV set to receive the expanded-basic channels. They'll have to pay monthly lease charges for boxes on additional TVs, and they'll need to find a place to put the box. And Comcast will have to buy lots of cable boxes that become boat anchors when the analog TVs fade away.

BroadLogic -- How To Avoid All Those Boxes

BroadLogic Network Technologies--a Silicon Valley startup which includes Cisco, Intel and Time Warner as investors--proposes a different approach: don't buy any of those cable boxes. At the Cable Show, we met with BroadLogic's Danial Faizullabhoy, President and CEO, Jeff Huppertz, VP of Marketing & Business Development, and Del Allison, VP of Worldwide Sales.

Danial and Jeff described BroadLogic's innovative approach: broadcast all the channels in digital--but instead of using a set top box for each "cable-ready" device, install a small box just outside the home that converts the entire digital lineup to analog. That way, all "cable-ready" devices will keep working without any changes inside the house.

TeraPHY wideband receiver --> Click for larger pictureTeraPIX video processor --> Click for larger pictureAt first blush, this would appear to be a very costly approach, but BroadLogic's innovative chips make it possible. Their BL12000 TeraPHY wideband receiver (shown on the left) can simultaneously tune and demodulate sixteen 6 MHz cable channels. Their BL80000 TeraPIX (on the right) is a massively parallel video processor that can convert a complete digital cable lineup to analog. Packaged together in a box, these two chips can tune and demodulate the entire digital 80-channel extended-basic channel lineup, and convert it back to analog to serve all the analog tuners in the house.

BroadLogic applications --> Click for larger pictureBroadLogic's chips can be used in other cable applications. A chart in their booth showed many applications in the headend, in the distribution plant, and in the home--both for video and data applications. For example, the BL12000 can be used to create a cable modem which BroadLogic says "can receive over 600Mbps of downstream data."

Switched Digital Video--Making more effective use of channels

Whether analog or digital, all broadcast television channels are subject to Pareto's famous "80/20 law"--in this case, predicting that 80% of the viewers watch 20% of the channels. At any given time, many channels are not being watched by anyone in some segments of the cable distribution plant.

Switched digital video (SDV) provides the technology to take advantage of Pareto's Law by broadcasting only those programs that are actually being watched. All the less-popular programming is moved from fixed channel slots to a smaller number of variable slots; the SDV equipment turns on the channel for a specific optical node only when someone in that node tunes to it.

"Switched Digital Video" T-shirt from 1995 --> Click for larger pictureSDV has been around for a long time. We reminded ourselves just how long by pulling an old conference T-shirt out of Dave's drawer. The shirt says: "5th Switched Digital Video Conference" and the date is September 1995! More recently, BigBand Networks was the pioneer of the current generation of SDV--we wrote about BigBand and what was then called "switched broadcast services" five years ago. Now that cable operators are deploying SDV, other companies also offer SDV equipment.

SDV can be used for both standard-definition and high-definition video. It is likely to be particularly valuable as new HD channels come onstream, since many of these are likely to be rarely watched in the early days of HD.


Expand Available Spectrum

Just as cable operators have many ways to make better use of the existing spectrum, they also have many ways to expand the available spectrum. Over the past fifteen years, they spent nearly $100 billion to expand their spectrum (to an upper limit of 750 or 860 MHz) by physically replacing most of the original wiring and electronics in the cable plant. Further expansion (typically to 1 GHz) is possible, and some systems were engineered to facilitate this approach. Operators have also long planned to extend fiber deeper--reducing the number of homes per node to 125 or even 64--allowing reuse of the upstream and downstream channels allocated to VOD, high-speed data, and telephone service.

Some analysts have recently argued that to compete with FIOS cable operators now need to replace their HFC plant with fiber to the home (FTTH) and move toward IP video distribution--at a cost comparable to, if not higher than, the $100 billion or so they spent to build the HFC plant. While we have long believed that FTTH makes a great deal of sense for greenfield construction, we think existing HFC networks have many more years of life.

"Spectrum Overlay" from Vyyo and PhyFlex

Both Vyyo (formerly Xtend Networks) and PhyFlex Networks (formerly Narad Networks) have long promoted "spectrum overlay" techniques that carry additional services over the existing coaxial cables while operating at frequencies above 1 GHz. Vyyo provides additional RF channels, which PhyFlex provides Carrier Ethernet for IP services.

Vyyo's system creates additional 6 MHz channels which can be assigned to services the same way as the current channels below 1 GHz. Vyyo has written a white paper Preparing for an unknown future comparing its spectrum overlay approach with other techniques to expand spectrum. Not surprisingly, the paper concludes that spectrum overlay would cost operators substantially less than FTTH or extension to 1 GHz over deeper fiber.

In March, Vyyo announced that StarHub, a Singapore telecommunications company and cable operator, would use a combination of Vyyo's 3 GHz spectrum overlay and DOCSIS 3.0 to meet the challenge of Singapore's Next Generation National Broadband Network (Next Gen NBN) project. Vyyo says this will be built on StarHub's existing HFC infrastructure, and will double the downstream channel capacity and quadruple the upstream capacity.

PhyFlex's approach uses Ethernet over fiber and coax to carry IP services. PhyFlex recently changed its name to emphasize the flexibility of its approach, which can provide 1 and 10 Gbps Ethernet over fiber, and 100 Mbps Ethernet over coax. With many cable operators placing a strong emphasis on services for businesses, PhyFlex now positions its solutions to allow operators to deliver commercial-grade voice and data services over their existing fiber and HFC plant. PhyFlex recently announced that it has received Metro Ethernet Forum (MEF) certification for its Carrier Ethernet products, and claims to be the first to be able to provide certified Carrier Ethernet services for 100 Mbps Ethernet over coax.

More colors on fiber

Coaxial cable is not the only potential bottleneck in the HFC plant. As more services are delivered to homes and businesses, operators start running out of capacity in their fiber rings. At one session at the Cable Show, several papers discussed solutions for expanding the capacity of fiber rings.

Bi-directional fiber wavelengths --> Click for larger pictureWe were particularly struck by the paper "Multi Wavelength Access Networks: A Practical Guide to Implementation" by Ray Thomas1 of Time Warner Cable and Venk Mutalik of C-COR. They observed that the typical HFC fiber node is served by two fibers, one in each direction, each carrying one wavelength or color. They then worked through a series of techniques to use the existing fiber to carry progressively more bandwidth, culminating with a single fiber carrying ten wavelengths, some forward and some reverse, and including two symmetrical channels of Gigabit Ethernet (with 10 Gigabit Ethernet coming soon). They concluded that the economics of multi-wavelength optics technology makes it "an attractive alternative to construction of additional fiber for increasing throughput capability".

Cable has just started exploiting many of these technologies to pull more bandwidth out of their existing plant, and should be able to keep doing so for many years to come. They'll have to spend some money to do so, but it won't be anything like another $100 billion.

MSOs can proudly point to their many positive results, as they did at the Cable Show. However, in a competitive world, nothing stands still. Irving Berlin said "The toughest thing about being a success is that you've got to keep on being a success."


For further reference:

( www.motorola.com ) ( www.ftthcouncil.org ) ( www.cablelabs.com ) ( www.comcast.com ) ( www.ce.org ) ( www.directv.com ) ( www.broadlogic.com ) ( www.bigbandnet.com ) ( www.vyyo.com ) ( www.phyflex.com ) ( www.starhub.com ) ( www.timewarnercable.com ) ( www.c-cor.com )


Broadband Library: "Two Sides to Every Story"

Cathy Wilson (center) receiving Vanguard Award --> Click for larger pictureOne of the big events at the Cable Show is naming the recipients of this year's Vanguard Awards -- NCTA's recognition of individuals who have made significant contributions to the industry. Cathy Wilson, Founder, President and Publisher of Broadband Library, was one of this year's recipients. Broadband Library is a quarterly publication that goes to all members of the Society of Cable Telecommunications Engineers (SCTE).

Earlier this year Cathy invited us to write a column for Broadband Library called "Two Sides to Every Story". We use opposing pages in each issue to present conflicting viewpoints on a cable/telecom industry topic. Our first two columns have disagreed about the reality of the broadband home, and whether cable operators should participate in the metro Wi-Fi market.

You can click to read the first part of Sandy's and Dave's arguments online. Join the SCTE to receive the full copy.

( www.broadbandlibrary.com )


High-Definition Media Networking--Our Game Plan

We've been writing about home networking since the start of this report more than seven years ago, and have used our home and our Florida condo as "test beds" for current technologies.

The latest generation of home networking claims to be over the bar we described many years ago--they appear to have the physical speed and QoS required to handle one or more channels of high-definition television across the whole home. We have followed these technologies--802.11n, the latest generation of Wi-Fi; various forms of high-speed networking over power lines, phone lines and coaxial cable; and ultra wideband (UWB)--since their infancy. See our topical guide to Home Networking for links to our many articles on these technologies.

Now that these second-generation technologies are finally starting to reach the market, we're going to subject them to the same kind of testing that we did nearly five years ago on the first generation. One part of our testing will be quantitative -- measuring throughput speeds throughout our home at the same test locations we chose and documented for the first-generation technologies. We expect to see a substantial improvement in data throughput, perhaps approaching the 100 Mbps we've had for many years with Ethernet over the Category 5 cabling we installed throughout our home in 1996.

But data testing is not enough. These technologies all claim to be suitable for video as well as data--specifically for high-definition video. HD is the most challenging of all networking applications, since streaming video cannot tolerate "glitches" the way data can, and HD requires both very high data rates and consistency. So we're planning to augment our quantitative throughput testing with qualitative observations of networked high-definition video.

We've already installed a high-performance server to use as a data and video server, and are planning to upgrade some of our ancient Cat 5 cabling to Cat 5e so it can handle Gigabit Ethernet. We plan to store HD video content on the server, and stream it to several HD players -- first over GigE, and then over each of the various networking technologies. We plan to watch the video and look for glitches. We'll test "trick play" to see how well the network technologies handle fast forward and fast reverse. Finally, we plan to run several HD streams simultaneously, and set up a couple of PCs transferring files back and forth as fast as they can, to test network resilience and QoS.

Our previous testing took much longer than we anticipated, and we won't be surprised if this happens again as we learn about how to use all of these new technologies. We'll keep you posted as we get some results.

While we're getting under way, we'd appreciate some help from our readers. We'd like to include several different networked HD video players in our testing, including ones designed as DLNA clients and others for remotely playing HD DVD and/or BluRay disks. Ideally each player would have HDMI or component video outputs, or a built-in screen. We would appreciate your suggestions--and if possible loans of several types of players.

Please write us with your suggestions to make these tests as meaningful and useful as possible.


Your Voice -- Readers Comments

One of the great things about writing this newsletter is getting updates from people on what they are currently doing. Recently we heard from Jim Farmery, whom we last saw when visiting Pace in Yorkshire (UK). Now Head of Innovation at Yorkshire Forward, Jim wrote:

"...for the last few years have been working for a UK government organisation looking at ways of getting broadband into places the private sector doesn’t reach – in our case in Yorkshire rural areas and deprived communities. We’ve just invested £4m grant funding into a project with a local council in North Yorkshire that seeks to provide an open platform for service providers to offer products to businesses and households but is underpinned by the public sectors own business revenues – to connect their own offices, schools, tourist centres etc. ... The council has set up a specific business NYNET to run the network and sell capacity to service providers."

Underlying this work is the belief that broadband will help to improve the region's economy. Jim offered the opportunity "to talk further about our plans for Fibre to the Street Cabinet in Sheffield and the rest of South Yorkshire!"

( www.yorkshire-forward.com ) ( www.nynet.co.uk )


Upcoming Conferences

A wide variety of upcoming conferences will fit interests as diverse as wireless broadband, gateway standards, and remote healthcare.

WCA 2007

The Wireless Communications Association's annual conference is a major event for wireless broadband. This year's special 20th anniversary show will convene global leaders in key wireless broadband segments including WiMAX, municipal wireless, 700 MHz, government, public safety, and more! The show is at the Omni Shoreham Hotel in Washington, DC on June 12-15. We'll be there, so please stop and say hello if you see us. ( www.wcai.com )

WiMAX Strategies 2007 @ NXTcomm

Barry West, CTO of Sprint Nextel, will deliver the keynote address at WiMAX Strategies @ NXTcomm, presented by FierceMarkets on June 21 in Chicago. The event will provide a vision of the pros and cons of WiMAX’s capabilities. Registration for the show includes free access to the NXTcomm keynotes and exhibits.

OSGi Alliance Community Event

The 2007 OSGi Alliance Community Event, hosted by Siemens in Munich, Germany on June 26-27, will be an important gathering for all OSGi members, users and developers. The program includes keynote speeches by industry technologists and thought leaders, panel discussions, experience reports and a poster board reception featuring OSGi technology applications. ( www.osgi.org/news_events/2007_06_communities/overview.asp )

Healthcare Unbound   Special Focus on Remote Monitoring & Home Telehealth

Innovative technologies are driving opportunities to serve health consumers in new ways and settings. This year's Healthcare Unbound program will have a strong focus on use of remote monitoring / home telehealth technologies for wellness promotion and disease management, with a special emphasis on Baby Boomers and the elderly population. The conference will be held July 16-17, 2007 at the Marriott San Francisco Airport Hotel. We'll be there to catch up on what's new. ( www.tcbi.org/hu2007/index.html )


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