Digital TV Stalls Stateside
The reason, experts say, is that incumbent local exchange carriers aren't interested in video-over-DSL the way some international companies are. And alternative carriers stateside who are interested haven't quite ramped up to buy yet.
There's a solid technical reason, some say. The ILECs have older DSLAM gear that doesn't support IP or multicast, both features required to run video in a DSL service bundle. To upgrade their networks requires them to deploy headend gear from the likes of Minerva Networks Inc., SkyStream Networks Inc., or VideoTele.com Inc., along with IP-capable DSLAMs from the likes of Catena Networks Inc., Calix Networks, New Edge Networks Inc., or Occam Networks Inc. (OTC: OCCM.OB), to name just a few.
The incumbents aren't eager to make these kinds of upgrades, given their capex constraints. Alcatel SA (NYSE: ALA; Paris: CGEP:PA), the largest DSL supplier to the regional Bells, confirms that, while it has its own DSLAM enhancements to handle video over DSL, the RBOCs aren't biting.
"The problem the ILECs have is longer loop lengths," says Peter Merriman, Alcatel's director of broadband entertainment business development. In Europe, the distance between homes and the carrier's point of presence isn't as long, making it easier for carriers to get higher bandwidths. (Typically, at least 2.5 Mbit/s is the basic speed required to support video over DSL, he says.) Recent news from Alcatel touts its sales in Italy and in London (see DSL Growth Explodes in 2003, TV Over DSL Over Italy , and Alcatel Wins Digital Video Deals).
Other suppliers also are focused on the international market, for the time being, at least. VideoTele.com, for instance, just announced the second of its two largest contract wins, with Hong Kong's PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) (see PCCW Picks VideoTele Headend). The company's other big customer is Norway's Telenor ASA (Nasdaq: TELN) (see Digital TV: Who'll Tune In?).
"We expect growth among alternative carriers in the U.S.," says Craig Bender, VideoTele.com's VP of marketing. But that will take a little time, because large alternative providers such as CenturyTel Inc. (NYSE: CTL), Citizens Communications, and Sprint Corp. (NYSE: FON) are still evaluating their options as the economy -- perhaps -- stabilizes a bit.
The RBOCs themselves continue to crow about DSL (see SBC Ratchets Up PON Politics), but most seem intent on offering video services through alliances with satellite TV providers. Case in point: the deal recently announced between BellSouth Corp. (NYSE: BLS) and DirecTV (see Bells Embrace the Dishes).
SBC Communications Inc. (NYSE: SBC) has an arrangement with EchoStar Communications Corp. for bundling satellite TV with various services such as Internet access. Today, the deal requires customers to order video separately through EchoStar even if it's part of their SBC service. In early 2004, a spokesman says, the two will be integrated as the SBC Dish Network, with a single source for billing and service.
Verizon hasn't stated its plans for video yet, says spokesman Mark Marchand.
One supplier isn't ready to throw in the towel on RBOC video-over-DSL. "I think the large U.S. incumbents are interested in IP video, it's just a matter of time," says Ramin Farassat, director of marketing for hardware platforms at SkyStream. His company is involved with partners in many trials that include incumbents (though he can't say which ones). He says the limitations of offering a separate satellite service may compel these carriers to look seriously at how they can offer everything on one network.
But at least one analyst says video-over-DSL won't cut the mustard for video services in the U.S. -- ever. Unless folk live very close to the central office, or higher compression technology is used (alternative standards continue to be bandied about; see QAM vs DMT Battle Lingers On), there's a physical inability for DSL to carry video for more than a couple of channels, contends Alan Bezoza, senior VP at Friedman Billings Ramsey & Co. Inc. He sees the cable companies' triple-play voice/video/data services, offered over hybrid fiber/coax, as a real threat to the RBOCs.
"It's much easier for cable guys to go into telephony than it is for RBOCs to go into video," he says.
— Mary Jander, Senior Editor, Light Reading