Video services

Cox Makes 1 GHz Moves

Cox Communications Inc. is reportedly in the midst of a big upgrade to 1 GHz, adding headroom for voracious bandwidth-eaters like high-definition television.

If anything, this proves how nice it must be to be in a position where Wall Street can't dictate one's technology strategy. Cox, which went private in December 2004, can discuss these plans openly without worrying about its stock being dinged over worries about how it's spending capital.

But that doesn't mean it can spend like a drunken sailor, either. They're still running a business, so how capex is applied has to make financial sense.

Because Cox is private, it's more difficult now to know whether it's spending more on R&D and new products than it did in its days as a publicly traded company. In fact, the most recent, available capex figures show flat growth in this area. For all of 2004, Cox reported capex of $1.4 billion, versus $1.5 billion in 2005.

But it certainly rose in the following year. In a 10-K filed March 29, 2006, Cox noted that "capital expenditures for that year are likely to be somewhat greater than capital expenditures made in 2005 driven by customer demand and investement in plant technolgy." Cox, which cited a rebuild of the New Orleans cable system (ravaged by Hurricane Katrina), did not provide a specific capex figure. The company has yet to respond to a call seeking further details on the 1 GHz upgrade or its capex expectations.

However, the company is certainly much freer to apply dollars where it thinks it needs to most – and adding bandwidth across the board appears to be relatively high on the list. And it can do so without having to worry too much about a potential backlash from the investment community.

So it's therefore no surprise that a private cable company is the first among major MSOs to openly talk about upgrading systems beyond 750 MHz or 860 MHz. Cox has already expanded to 1 GHz in 70 percent of its markets, according to One Touch Intelligence , citing Cox SVP of engineering and CTO Chris Bowick, who highlighted the MSO's Extendable Optical Network (EON) initiative at a media event in Rhode Island last week.

By 2010, Cox also plans to reclaim as many as six analog channels. It's also starting to deploy switched digital video (SDV), but nowhere near the scale of its 1 GHz efforts. (See Cox Flips BigBand's DV Switch .)

Cox is also the first (and only, so far) domestic MSO to confirm its use of Vyyo Inc. (Nasdaq: VYYO)'s 3 GHz technology for business services. But Vyyo could confirm the addition of at least one MSO to that list before 2008. (See Vyyo Seeks 3 GHz Breakthrough.)

Other MSOs, including some public ones, are certainly starting to expand bandwidth, too, but you'll be hard pressed to get them to admit it. Sure, they'll talk about bandwidth "tools" such as SDV, more efficient compression schemes, and node splits (they cost money, too, don’t they?), but any word of an "upgrade," even if it doesn't mean tearing up the streets again, could draw an unfavorable reaction from analysts as well as investors, which already have been ripping cable valuations to shreds in recent weeks.

Like Cox, Insight Communications Co. Inc. has taken the route to privatization. Cablevision Systems Corp. (NYSE: CVC) has tried multiple times, but was stymied yet again last month. (See Cablevision Shareholders Reject Dolan Bid.)

They, also like Cox, might enjoy having at least the option to add spectrum for an MPEG-4 HD tier or for Docsis 3.0, which bonds multiple channels to produce shared Internet speeds in excess of 100 Mbit/s.

Cable Digital News chief analyst Michael Harris suggested more than a year ago that "going private may prove to be cable's latest competitive weapon." (See Going Private, Cable's New Competitive Weapon.)

Cox's tech strategies appear to confirm that. I imagine there are a good number of cable execs who are feeling a tad envious. They might like to have the 1 GHz arrow in their quivver right about now.

— Jeff Baumgartner, Site Editor, Cable Digital News

Interested in learning more on this topic? Then come to The Future of Cable Business Services, a conference that will explore the swiftly expanding U.S. business services market. To be staged in New York City, December 6, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.

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