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Cable/Video

Telcos Tackle Triple Play

ATLANTA -- Supercomm 2003 -- Equipment players and carriers appear to be getting increasingly serious about the push toward so-called “triple play” services, whereby telecom carriers deliver voice, data, and video services through one pipe.

The key catalyst to making it all happen is likely to come from the details in the Federal Communications Commission (FCC)’s coming rules following its Triennial Review (see New FCC Rules: 600 Pages? and Poll: The FCC Fouled Up). In the meantime, major telecom carriers -- even the RBOCs -- appear to be stepping up their technology efforts in the face of competition for voice services from the cable industry.

So what’s happened? First of all, FTTH (fiber to the home) technology has plummeted in price, and carriers suddenly appear to have taken interest (see Fiber Access Plans Proliferate and RBOCs Hungry for Fiber). Secondly, there’s a new wave of DSL, Ethernet-over-copper, and video compression technology coming down the pike that will yield more bandwidth on existing copper access networks, making triple-play services more realistic.

Ralph Ballart, vice president of broadband for SBC Communications Inc. (NYSE: SBC), says his technology lab has been looking at a variety of video, FTTH, and DSL services, and that the technology has leaped forward in the past year.

“MPEG-4, the next generation of video encoding, can reduce the bandwidth necessary for definition broadcast television down to 1 Mbit/s. The capabilities of DSL become interesting at these rates,” says Ballart. “Clearly, we have a lot of copper, so we have a vested interest in video over DSL.”

Ballart also lauds the progress in fiber access technology. "I'm excited about fiber to the premises," he enthuses. "The technology is mature and it's ready."

High-speed access has emerged as a major theme at Supercomm 2003. A barrage of access announcements are touting video, DSL, and PON technology that could help enable triple-play services:

Infineon Technologies AG (NYSE/Frankfurt: IFX), which has announced several signficant chip and subsystems for the DSL markets (see above), is making big bets on this market. The company hosted a Supercomm demonstration in which it showed voice, data, and three video streams being delivered over a single vDSL system.

Infineon is claiming that the telcos are ready to take advantage of cheaper integrated access gear that allows them to combine voice, data, and video on a single line card.

"The next trend in telecom is the replacement of telecom cards, which typically comes every 15 years," says Cyrus Namazi, senior director of marketing and application engineering for Infineon's access products. "A lot of stuff is coming up for replacement."

Infineon's IPVD (Integrated Packet Voice and Data) platform looks to be an important product in that area. Targeted at the market for Digital Loop Carriers (DLCs) -- and specifically Alcatel SA's (NYSE: ALA; Paris: CGEP:PA) leading Lightspan product -- the IPVD is a new line card that will permit all older POTS cards to be replaced with integrated cards that combine POTS voice and ADSL capabilities. At the same time as DSL technology allows carriers to deliver more bandwidth at lower prices, strides are also being made in the video compression and delivery market.

Carl Furgusson, director of business development, Americas, with Tandberg Data ASA, says most triple-play services are being deployed by independent and rural telcos, but larger telecom carriers are looking at the services.

Tandberg, a Norwegian video company visiting Supercomm for the first time, was demonstrating its iTTV platform, which allows telecom companies to deploy video services over DSL and fiber.

“RBOCs are in the study phase," said Furgusson. “The recent changes in the FCC rules means there could be a protected investment -- that’s giving RBOCs new impetus to deploy video.

Indeed, the coming FCC rules are much discussed here. There is the rising sense that carriers are awaiting the final rules before they pull the trigger on new investments (see No Big Changes to FCC Ruling).

Ed Kennedy, president of North America operations at Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), says the large carriers are now in the position where they have cut capital spending so much, they can start thinking about investing in next-generation services, including both triple play and corporate data services such as VPNs and Ethernet. But he says the FCC will play a crucial role in making this happen.

“They bottom line is that carriers need to figure out how to make money on invested capital," says Kennedy. “To build their next generation of services they will need to build new platforms.” — R. Scott Raynovich, US Editor, Light Reading

rjmcmahon 12/4/2012 | 11:57:27 PM
re: Telcos Tackle Triple Play http://video.c-span.org:8080/ramgen/odrive/e060403_mediahearing.rm

There are some lessons to be learned from viewing Wednesday's FCC testimony to the Senate Commerce Committee. In my opinion, the wisdom and experience from both Senator Holllings and Commissioner Copps shouldn't be ignored by the youth of today. Remember, Rockefeller used onwership of oil refineries to monopolize, and ultimately, control the RRs. The content refineries seem to have a similar strategic plan, but the lesson to be wary of is that Rockefeller didn't control the media, which is more powerful than oil. (If we'll go to war for oil what will a people do for media control?)

PS. During a recent Hannity&Colmes, Sean Hannity effectively censored a black congressman when he was attempting to ask questions about the poor intelligence and the location of Iraq's WMDs -- of which none have been found. Whose public interest does that serve?
rjmcmahon 12/4/2012 | 11:57:37 PM
re: Telcos Tackle Triple Play So, one has to wonder what is their real motivation with this FTTP spin...must have some regulatory motivation down the road, as all their moves do.

Let's hope they don't have a Wall Street pump and dump scheme motivating them. Anybody investing in this space will want to watch these guys like a hawk. Many are still playing "pyramid" where characteristics of honesty and integrity are of little concern.

Especially beware when the stakeholders' so-called profit motives are unrelated to GDP improvements. At best, that's a sign of a dying institution, and worse, can be an indicator of overall industry contraction. (A lesson MBA Dubya and Murdoch's FCC needs to learn quickly so maybe they can stop being part of the problem and start being part of the solution.)
Ramu3 12/4/2012 | 11:57:40 PM
re: Telcos Tackle Triple Play Telcos and triple play? That's a funny one. It took them 5 years just to get to a level of "mediocre" at delivering DSL, and they still provide an inferior connection at too high a price, and have poor take rates (not to mention just spending billions on it, and it is far from paid off yet). Strike 1.

They need triple play to halt defections of phone service to cable? Maybe they should try lowering their prices and putting out a competitive offering. It's pretty pathetic that cable phone service is cheaper than their "bread and butter" that they have optimized over decades. Strike 2.

As for video, that is the biggest farce of all. It will take them 10 years to achieve the level of service and experience that matches the cable MSOs. Being a video provider is an immensely more difficult business than being a data service provider. The RBOCS have no video skills. Not in delivery, not in operations, not in content realtionships, not in personnel, and the list goes on. The only thing that's changed since the last time they claimed they'd deliver video is that:

1. equipment costs have come down.
2. cable providers have become even more entrenched and have learned a ton more on running a video business the only way it can be learned (via the school of hard knocks)
3. Satellite now has about 10% market share.
4. COntent costs have gone up.

The decline in equipment costs is miniscule compared to the overall deployment and start up costs of a new triple play network. The next question to ask is why would any customer switch to telco triple play? Strike 3. They'll have an empty video network, just like their DSL.

The RBOCS will have hopelessly low market shares and profit margins across the board if they build new networks to do this, and they'll have to eat the install and switching costs (hundreds of dollars per subscriber) to have any hopes of attracting customers away from cable. Even then it is questionable.

I hope the desperate supplier-vendors out there don't tie their futures to either the success of RBOC triple play, or the issue of whether they will really deploy on any scale. The telcos will squeeze you until you have no margin, to minimize their CapEx (even though that is not even 20% of the total costs they will incur in this), but they won't be successful anyway. They don't care if they kill you. This RBOC triple play nonesense is the next dot-com bust. The business case is all vapor, relying on a completely unrealistic ability to take customers away from cable and satellite, and completely unrealistic expectations in their abilities.

The RBOCS know this. They have to. So, one has to wonder what is their real motivation with this FTTP spin...must have some regulatory motivation down the road, as all their moves do.
iometro 12/4/2012 | 11:57:57 PM
re: Telcos Tackle Triple Play Diller and Turner both were right about what it takes for new entrants to enter the field. And the FCC's RBOCs don't have what it takes.


What did Diller and Turner say?

-iometro
rjmcmahon 12/4/2012 | 11:58:07 PM
re: Telcos Tackle Triple Play If the FCC and RBOCs couldn't provide the services required to support email/web, how in the world do they think they can support video?

Also, the recent FCC rulings on media consolidation has made the RBOCs position much weaker. Will the upcoming media consolidation really choose the RBOCs for bit distribution? Seems highly unlikely to me.

Diller and Turner both were right about what it takes for new entrants to enter the field. And the FCC's RBOCs don't have what it takes.
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