In separate pronouncements, CableOne , Comcast Corp. (Nasdaq: CMCSA, CMCSK), Mediacom Communications Corp. , and other MSOs have all shown far more interest in deploying low-cost DTAs to reclaim analog channels for HD than in using SDV to save digital spectrum. In fact, Comcast, which has installed about 2 million DTAs in 11 markets so far, intends to cover one third of its roughly 50 million-home footprint with the $35 adapters by the end of the year, as part of its "Project Cavalry" all-digital initiative.
On the vendor side, BigBand Networks Inc. (Nasdaq: BBND) – still SDV's leading champion – reported slumping second-quarter revenues last week because of slowing orders from big cable operators and Verizon Communications Inc. (NYSE: VZ). More ominously, BigBand warned investors that it expects its third-quarter sales to plunge nearly 50 percent, mainly because of lower capital spending by its major customers.
BigBand, which remains a fervent advocate of switched digital technology, also reported that it closed out the first half of the year with an SDV footprint of 25 million homes globally, up from 24 million households at the end of March. But its growth rate has slowed considerably from the previous two quarters, when it picked up 4 million and 3 million households, respectively.
Virtually nobody disputes the bandwidth-savings potential of SDV. Indeed, during Comcast's second-quarter earnings call last week, COO Steve Burke insisted that the giant MSO has not given up on the technology's benefits. "I think our vision of the future is, you want to be all-digital and you want to switch," he said, citing the progress Motorola Inc. (NYSE: MOT) has made in scaling SDV. "I don't think they are mutually exclusive."
But SDV, formerly the industry's hot video technology, has definitely taken a backseat to the once-lowly DTAs these days. There are many reasons for this switch in fortunes, including the relatively low cost of the one-way adapters, the speed with which they can be installed by MSOs, the vast bandwidth savings that they immediately offer, and â€“ last but not least â€“ the software integration, video quality, and other technical headaches that have plagued some of SDV's early rollouts.
As a result, Heavy Reading has just pared back its bullish forecast for SDV deployments by North American MSOs over the next couple of years. In the latest edition of our Cable Next-Gen Technology Quarterly Market Tracker, we now project that the U.S. and Canadian switched digital universe will grow from 25 million homes passed last year to just 35 million at the end of this year, down from 50 million households in our earlier forecast. Similarly, we see the number of SDV homes passed rising to 50 million at the end of 2010, down from 70 million in the previous forecast.
Yet we still believe that cable operators will eventually deploy SDV throughout their systems, because of the 50 percent to 60 percent savings in digital bandwidth that it promises. Cable providers will also embrace SDV for its unique targeted advertising capabilities. It's just going to take a little longer than anybody once thought.
— Alan Breznick, Senior Analyst, Heavy Reading
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- Lee Salem
Sales Director â€“ Custom Research, Heavy Reading