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Cable Has Plenty of Capacity

Michael Harris
LR Cable Opinion
Michael Harris
10/5/2006
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A new report from Sanford C. Bernstein & Co. Inc. squashes speculation on Wall Street that MSOs lack sufficient network capacity to compete with telco fiber services. This differs from an alarmist analysis issued early this month from Merriman Curhan Ford & Co. (See Cable's Looming Bandwidth Crisis?)

Indirectly, Sanford Bernstein Senior Analyst Craig Moffett argues the crux of cable's challenge is not the capacity of their HFC networks. Rather, it is the legacy contracts with programmers that lock up the majority of their spectrum with analog cable TV channels.

By reclaiming much of that analog spectrum, splitting fiber nodes, and employing switched broadcast video (SBV) techniques, Sanford sees plenty of headroom for cable's service offerings, including HDTV and VOD.

The report argues that this three-pronged approach offers:

    ...a low-cost path to capacity expansion that keeps cable fully competitive with even the most fiber-rich next generation networks (including Verizon’s FiOS network) without a costly rebuild.
Sanford is particularly bullish on SBV. It's common sense, of course. Many of the hundreds of digital broadcast TV channels a cable operator delivers are not being watched at any given time. It is a network inefficiency that can be remedied by simply switching off those channels that are not being watched.

The report notes:

    If the idea of an all switched network sounds familiar, it should be. SBV is simply cable’s more spectrum-efficient equivalent of the telco model of IPTV, only delivered over a plant with vastly higher capacity than a telco’s legacy copper infrastructure, and with a logical and low-cost migration path to get there.
SBV is how MSOs can best use the bandwidth they recapture from analog, the report contends:

    Each analog channel consumes 6 MHz of capacity (or roughly 1/125th of the total capacity of an upgraded cable plant). Re-claiming that channel slot frees up enough capacity to launch 2½ more channels in HDTV (each of which consumes about 2.4 MHz), or ten more digital channels (each of which consumes about 0.6 MHz), another ten QAMs, each capable of delivering an additional VOD stream, or another doubling of broadband [Internet] capacity (which today operates out of a single 6 MHz channel slot).
Sanford says Comcast Corp. (Nasdaq: CMCSA, CMCSK) has an aggressive plan to cut the average number of analog channels it carries in half over the next five years, from 70 to 35. That means moving some three dozen basic cable networks from analog to digital-only carriage.

This is where things get interesting:

    Until digital penetration reaches 100% – being left off the analog tier means reduced distribution. And that means lower affiliate fees, and lower advertising revenue.
In other words, programmers will fight this tooth and nail. Ironically, it is SBV that may well help prove their case is built on a house of cards. Cable TV programming networks sell themselves to advertisers based on their total distribution footprint – say 40, 60, or 80 million homes. The metric is bogus, as only a small fraction of homes are viewing it. With SBV, MSOs will have all the details, and eventually, so will advertisers.

— Michael Harris, Chief Analyst, Cable Digital News

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degsyw
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degsyw,
User Rank: Light Beer
12/5/2012 | 3:38:26 AM
re: Cable Has Plenty of Capacity
The flaw in the plan that is not mentioned here is how much bandwidth and where is it?

Downstream shared capacities up to 1Ghz are great assuming you can get rid of analog broadcast. However upstream is a different matter altogether reverse path filters in the ground by the million and set at an unfortunate frequency of around 20-45Mhz shared.

Here is a serious infrastructure issue, i.e. a change requires an unprecedented technology change and equipment swapout, modems, settops and network hardware.

This is a degree of asymmetry, lack of capacity and potential upgrade cost not many in the industry like to talk about, though every Cable CTO has known it is coming their way for many years.

If Cable segment this down to a 1:1 level the logic of a shared cable network becomes untenable. Especially when you consider Cable already pays a premium on equipment because of volume, vs dsl houses, or technology complexity vs metro ethernet

Cable networks are broadcast neworks by design with interactivity bolted on as an afterthought. When 20 active subscribers want 512k/1M upstream it can cope. When all homes start pushing video/voip/telework/p2p into the the network day in day out will this start to creak? if you are on one of those busy cable network segments you will already know the answer to that question.

When broadcast advertising revenues are in decline, dsl2, wireless and metro ethernet on our doorstep. Who will fund the investment required for cable to change its infrastructure?

hopefully not my pension fund ;)

roybean
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roybean,
User Rank: Light Beer
12/5/2012 | 3:38:23 AM
re: Cable Has Plenty of Capacity
Peer to Peer Video ?

I think that the video clips that I view from CNN are at a 256 kbps (bits). Small screen. With all the high-def TV's, new techology, I could see video phones - or peer to peer video taking off. Increase the screen by x4, that's a 1 mbps rate.

What other applications. I am not that smart to predict. I did not predict the personnal computer boom in the 80's; the internet boom in the 90's. Anyone posting here is not that smart to predict & profit from forward application knowledge. But if you build it, something will use it.

If Vendor A - B offers data service, about the same price, Vendor B has the higher upstream rate; throws in a nifty application that Vendor A can not match, Vendor B wins.

I wish that I had more upstream capacity. I am waiting for Fios; getting real close in my area. Fios is actually being offered for less than Cable Data Internet; go figure.
alchemy
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alchemy,
User Rank: Light Beer
12/5/2012 | 3:38:23 AM
re: Cable Has Plenty of Capacity
degsyw writes:
Cable networks are broadcast neworks by design with interactivity bolted on as an afterthought. When 20 active subscribers want 512k/1M upstream it can cope. When all homes start pushing video/voip/telework/p2p into the the network day in day out will this start to creak? if you are on one of those busy cable network segments you will already know the answer to that question.

What makes you think the MSOs want to do anything to enable high speed upstreams? Users only use high speed upstreams to steal content. Today, a big chunk of upstream bandwidth is consumed by 24x7 BitTorrent peer to peer traffic. It's going to get worse as people start using Slingbox to steal video feed. The MSOs make money by selling content. The last thing they want to do is offer bigger upstream pipes. Quite on the contrary, as they run into contention on the upstream, they have no choice but to start enacting better traffic shaping on the upstream. To date, they have not done so for fear of annoying the FCC and Congress. When their data network screeches to a halt with content theft clogging the upstream, they'll be able to use the 'crisis' to start shaping traffic.
Michael Harris
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Michael Harris,
User Rank: Light Beer
12/5/2012 | 3:38:21 AM
re: Cable Has Plenty of Capacity
Indeed, the upstream is cable's network Achilles heel. Even so, it may not prove to be a major issue in the near term. As MSOs split nodes, they gain more upstream capacity per subscriber too, as the same bandwidth is shared among fewer subscribers. Additionally, with smaller coaxial segments from node splits, it may be possible for MSOs to increasingly run higher-order modulation within their upstream spectrum, further increasing bandwidth.

All of this said, cable's upstream is not a disadvantage versus any asymmetric DSL provider, only against FTTP players like Verizon. And, it is interesting to note that even though VZ has tremendous capacity with FiOS, they are still selling asymmetric residential data services. Why? Because increasing upstream bandwidth would tax their aggregation and metro networks from the corresponding growth in P2P traffic. In a sense, VZ's asymmetric offering is being used to throttle down P2P traffic, improving their bottom line. Seems unlikely they will change the approach any time soon. If they do, there are counter-strategies MSOs can employ like block upconversion at the node or spectrum overlay to gain more upstream capacity on their networks.
alchemy
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alchemy,
User Rank: Light Beer
12/5/2012 | 3:38:19 AM
re: Cable Has Plenty of Capacity
Michael Harris writes:
Indeed, the upstream is cable's network Achilles heel. Even so, it may not prove to be a major issue in the near term. As MSOs split nodes, they gain more upstream capacity per subscriber too, as the same bandwidth is shared among fewer subscribers. Additionally, with smaller coaxial segments from node splits, it may be possible for MSOs to increasingly run higher-order modulation within their upstream spectrum, further increasing bandwidth.

Of course, the issue is that much of the plant is still DOCSIS 1.0/1.1 and can't take advantage of the modulation added to DOCSIS 2.0. I don't see MSOs fork lift upgrading all those Cisco VXRs any time soon. I also wouldn't hold my breath for DOCSIS 3.0 silicon in cable modems with upstream channel bonding. The profit margins are so lousy that nobody is in any huge hurry to expend all that NRE.

That said, node splits are going to keep happening. The rule that 80% of the cost of the network is in the last 100 meters still holds. They're not going to have to touch that last 100 meters. They have lots of dark fiber up on the phone pole and a fiber node shared among 100 homes isn't going to break the bank.
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:38:18 AM
re: Cable Has Plenty of Capacity
re:Indeed, the upstream is cable's network Achilles heel.

From a broader perspective so is downstream.

http://www.lightreading.com/bo...

"Ignoring the technical and economic, they will not provide any more than a few megabits best case to residences, since any more than that would allow customers to essentially bypass them and get their video content directly from the source. Their primary purpose in life as a video middleman content re-seller would be cannibalized by this. Since most people only watch 10 or so of the 200 channels of junk, but still have to pay their fair share for all 200, it would be cheaper for the typical customer to do this, even if they paid slightly higher rate per month than MSO can get due to their volume. MSOs will cite the fragility of their network as reason for not providing more than this anyway. They may do superficial open access experiments to appease the FCC but they will contain that openness to a few megabits max, since they'd be scripting their own death by providing people a path to bypass them, and their primary line of business as a middleman for video content."
degsyw
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degsyw,
User Rank: Light Beer
12/5/2012 | 3:38:13 AM
re: Cable Has Plenty of Capacity
Alchemy

As you say MSOs need to limit capacity as the latest applications would ruin their network. Why? because there is so little of it, need I say more.

traffic shaping .... fooey ... traffic shaping policy is throw away valuable customer data when he has already sent it down the wire .... as you say they need a crisis so they can throw more traffic away.

there are very very few msos making any money from media over IP, as another link in this thread points to more bandwindth means either their competitors can distribute content or the customers themselves can broadcast, both applications of the future and both hit cable square between the eyes.

They cannot meet the demand unless they change the way they do business, if you told me they were going to use the fibre and duct in their network to push ethernet switches close to the customer premises and open up bandwidth to meet demand you would get my agreement, telling me that a failing broadcast industry is going to restrict capacity of new applications to save their necks, think again.

Michael Harris
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Michael Harris,
User Rank: Light Beer
12/5/2012 | 3:37:38 AM
re: Cable Has Plenty of Capacity
Alchemy, are you suggesting MSOs are disadvantaged versus DSL-based architectures, i.e. that which is being deployed by every major U.S. telco except Verizon?

Yes, few MSOs are making money from media over IP, but they are making billions delivering it. That's their business. The same is true in video, even in their traditional cable business, MSOs are primarily distributors of content.

either their competitors can distribute content or the customers themselves can broadcast, both applications of the future and both hit cable square between the eyes.

What competitors are better positioned to *deliver* broadcast and on-demand video content? Satellite? AT&T? Not. VZ? Maybe.

Customer broadcast content is going to defeat ESPN in HDTV? Not likely.



rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:37:37 AM
re: Cable Has Plenty of Capacity
re: "What competitors are better positioned to *deliver* broadcast and on-demand video content? Satellite? AT&T? Not. VZ? Maybe."

I think you're missing the point. If MSO's open a wide pipe to MSO households in a nondiscriminatory manner they will be bypassed. They wouldn't be able to sell video as an application anymore. For example, if HBO had access to a nondiscriminate, 1 Gbps, pipe which reached every MSO household, HBO would move their content over to that network, charge the customer direct, and the MSO would no longer be able to bill customers monthly for HBO.

On upstream from MSOs households, nobody wants to widen the pipe because technically it's expensive and it is seen as enabling pirating. MSOs don't want to do that either as HBO would get upset that all their content is being pirated over an MSO network. MSOs lose money that way too.

Don't hold your breath on MSOs transitioning over to a nondiscriminatory, high bw IP access network. You'll turn blue and people will wonder what you're doing.
paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 3:37:36 AM
re: Cable Has Plenty of Capacity

Actually, HBO would NOT bypass cable. Right now they force the cable companies to buy programming that they do not want to offer. Then, they make them deal with consumers who do things like not paying their bills. They also make cable companies deploy protection systems so that their content can not be replicated.

Given they get all the cash and none of the hassle, why would HBO bypass its paying customer? Why would they want to offer a la carte programming except at a price MUCH higher than what current costs are?

seven
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