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Small Cablecos Weigh Digital Options

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
7/28/2009
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GRAPEVINE, Texas -- The Independent Show -- The top 10 U.S. MSOs might make up the bulk of the customer base, but there are still plenty of Tier 2 and Tier 3 operators scattered about, and many of them are still trying to develop digital video transition strategies that don't break the bank.

Many of these operators don't have much bandwidth to play with. A good portion of them are still operating plant with just 550 MHz of capacity, meaning there's not much headroom left for high-definition television and more advanced Docsis 3.0 cable modem services -- items that could help them compete with the video offerings of satellite TV service operators and incumbent telcos.

Instead of taking on expensive upgrades, many smaller operators are considering strategies to reclaim analog spectrum so they can multiplex and squeeze additional services into the more efficient digitized environment.

Naturally, several suppliers have tailored services for the cause. Based on discussions here at the conference and recent announcements, here's a brief update on some of that activity:

  • Leading the pack is HITS Quantum SD, a service from the Comcast Media Center (CMC) and Motorola Inc. (NYSE: MOT) that allows operators in smaller markets to do digital-domain simulcasts of the channels in their analog lineups. MSOs can then gradually strip away some of those analog channels as digital set-tops get more fully deployed to customers. That leaves more spectrum for services like hi-def and perhaps even video-on-demand (VoD).

    At last check, more than 260 cable systems are taking this route with Moto and the CMC. Uptake on that service started slowly but has accelerated through this year, "which is something we're pretty proud of, given the state of the economy," says CMC chief operating officer Gary Traver, noting that most customers are approaching this with gradual digital migrations rather than hard cutovers. (See MSOs Tap Comcast Unit for Analog Reclaim.)

    The CMC is getting ready to complement the offering with a Digital Terminal Adapter (DTA), the one-way digital-to-analog channel zapper Comcast Corp. (Nasdaq: CMCSA, CMCSK) is using to fuel its own all-digital strategy. "We're not into the [DTA] trials yet, but we will be there shortly," Traver says. Moto-made DTAs will play a role, but the CMC intends to work with multiple suppliers, he adds. (See Comcast's $1B Bandwidth Plan .)

    The CMC is also giving Tier 2 and 3 MSOs the option to add VoD via a partnership with Arris Group Inc. (Nasdaq: ARRS) (the combined offer is branded as "VoD in a Box"), and interactive applications via a centralized offering called HITS AxIS. The latter is starting off with Enhanced TV Binary Interchange Format (EBIF), an interactive platform that can address cable's entire universe of digital boxes. More advanced tru2way applications will come later. (See Comcast Media Center Buffs Up for EBIF , Comcast, itaas Engage on EBIF , and More MSOs Test 'HITS AxIS'.)

    Traver acknowledges that VoD in a Box is "making small progress," primarily due to the bad economy and the lack of access to capital markets for some operators. "But it's a compelling business case to put VoD in," he says. (See Phonoscope Picks VOD In a Box.)

  • Evolution Broadband LLC also says it's making progress using a digital video system powered in part by by DTAs outfitted with the Conax AS conditional access system.

    Brent Smith, president of Evolution's digital division, says the company is discussing deployment options with as many as 15 operators as they prepare their budgets for next year. Some deployment deals could pop this fall, but "a lot will land in 2010," Smith predicts.

    Evolution, which recently obtained a Federal Communications Commission (FCC) waiver for its standard-definition DTAs, has developed an MPEG-4-capable hi-def version that, according to Smith, is six weeks away from production. Evolution has drafted a waiver request for the HD-DTA, which is expected to cost less than $100 per unit, even with the encryption element baked in. (See FCC Believes in Evolution-ary DTAs and Evolution Guns for HD Box Waiver .)

    "The HD/MPEG-4 box is really phase 2 of our whole D-to-A strategy," he says.

    Cable ONE Inc. has already obtained a condition-filled waiver to use HD-DTAs in one small system in Tennesee. Evolution's the obvious candidate for that business, but Smith would only say that his firm is in discussions with the operator. (See Cable ONE Snares HD Set-Top Waiver .)

  • R.L. Drake LLC , meanwhile, is aiding digital migrations with a system called "Digital Freedom" that uses a downloadable conditional access system from the Beyond Broadband Technology LLC (BBT) cable consortium that adheres to the FCC's ban on integrated security set-top boxes. (See Countdown to 'Seven-Oh-Seven'.)

    A few operators have signed up for field trials involving a mainstream HD box that can decode MPEG-4. (See Drake Downloads Some Deals .)

    BBT and Drake say they expect to add a DVR box and a "low-cost, all-digital" set-top to the mix. Two new set-top suppliers (still unnamed) have joined the group to help get those products off the ground, according to Tony Swain, the chief operating officer of BBT, and president and CEO of Tele-Media Broadband (which is one of the MSOs backing the BBT project).

    — Jeff Baumgartner, Site Editor, Cable Digital News

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