Breaking new ground for a major cable operator, StarHub has agreed to use spectrum overlay technology from Vyyo Inc. (Nasdaq: VYYO), a move that will boost StarHub's upstream and downstream broadband speeds.

StarHub, a big Singapore MSO that passes about 1 million homes in the city-state, says it will start deploying Vyyo's 3GHz out-of-band technology in some new-build areas later this year, having already finished lab and field trials. (See StarHub Selects Vyyo.)

The deal, announced Monday, is the first major MSO win for Vyyo, which has aggressively promoted spectrum overlay to the cable industry for years. Although Vyyo executives insist they have other cable deals, only Cox Communications Inc. has admitted using the technology, mainly for the delivery of commercial services.

"It's great to have that validation," says Jeff Fryling, VP of business development for Vyyo.

Moreover, StarHub is including Vyyo in its bid for Singapore's "Next Generation National Broadband Network" (Next Gen NBN). In a bidding contest staged by the Singapore government, StarHub is facing off against 11 other telecom companies or consortia including Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY), Japan's NTT West, Siemens Networks, Alcatel Singapore, BT Singapore, and other heavy hitters.

"We are going with Vyyo for the RFP," says Thomas Ee, senior VP for cable, fixed, and IP services at StarHub. "But it's something we're going to do anyway."

The idea behind NBN is to develop a nationwide "open access architecture" that can deliver both upstream and downstream speeds of up to 1 Gbit/s to subscribers. With the new broadband network, Singapore's telecom agency, known as the Infocomm Development Authority (IDA), aims to offer "affordable broadband services" to 95 percent of the country's homes and businesses by 2012. The IDA plans to pick the winning bidders before the end of the year.

Spectrum overlay isn't the only way to increase bandwidth, obviously. Other big cable operators are trying fiber node splits, switched digital video technology, digital simulcasts, and/or plant upgrades to 1 GHz spectrum. They're also exploring such concepts as shifting to advanced video codecs like MPEG-4.

StarHub officials say they liked the performance and cost of spectrum overlay and felt they could deploy it quickly. On the performance side, they especially liked the idea of gaining an extra 130 MHz of spectrum upstream and about 700 MHz downstream.

"Going up to 1 Gbit/s wouldn't be enough," Ee says. "We need to know there's enough upstream for channel-bonding, not just enough downstream... We can't look at the upstream and downstream in isolation because we can't do one without the other."

Upstream capacity is a big issue for StarHub because the company wants to be fully prepared for the channel-bonding potential of the Docsis 3.0 specification from Cable Television Laboratories Inc. (CableLabs) . Ahead of just about every MSO in the world, StarHub has begun incorporating channel-bonding technology in its network, preparing to launch downstream cable modem speeds of 100 Mbit/s in late December.

StarHub executives don't seem fazed by the price tag of the Vyyo system, which is estimated to cost $60 to $80 per home passed, not counting labor costs and the expense of the system's required home video converters. With 1 million households to cover, the bill tops $60 million.

That's still peanuts, StarHub and Vyyo execs say, compared to the cost of ripping up StarHub's HFC plant, which has largely been upgraded to 860 MHz capacity, and putting in all-fiber networks from scratch. In the U.S., for example, Verizon has been spending $800 to $1,000 per home passed to install its new FTTP network for FiOS.

"We don't have to lay a fiber network," Ee says. "There's no need to have the additional costs of an optical network."

Industry analysts say the agreement should bode well for Vyyo. In a research note sent out earlier this week, ThinkEquity LLC projects Vyyo's revenues will jump more than six-fold to $64.6 million this year, largely because of the StarHub contract.

"We also believe that Vyyo is going to win other cable TV operators for its 3 GHz solution," writes ThinkEquity analyst Anton Wahlman. "We believe Vyyo's success in 3 GHz design wins will likely make it into an acquisition target by many of the larger players."

— Alan Breznick, Site Editor, Cable Digital News