Digital TV Stalls Stateside

There's plenty of activity in IP video lately. And there's lots of growth in DSL, too. But the two aren't making music together in the U.S.

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

lastmile 12/4/2012 | 11:25:10 PM
re: Digital TV Stalls Stateside These are excerpts from the main article:
1."The problem the ILECs have is longer loop lengths," .
2.The RBOCs themselves continue to crow about DSL , but most seem intent on offering video services through alliances with satellite TV providers.
3.But at least one analyst says video-over-DSL won't cut the mustard for video services in the U.S.

It will take a long time for the RBOC's to realize that Copper will no longer give them their bread and butter. VOIP and Mobile communication has just about started to mess up their life and that growth is exponential.

No rocket science here! The RBOC's need to be brave to start the upgrade to fiber. A Lion in a cage is ferocious only as long as someone feeds it.
rjmcmahon 12/4/2012 | 11:25:12 PM
re: Digital TV Stalls Stateside Today, SBC is trying to preserve its failing audio business by serving up the piracy market. Notice the articles in mainstream press where SBC claims to be looking out for citizen rights. The reality is this is just a convenient arguement which SBC can hide behind. They offer no meaningful fraudband services and most resort to enabling theft. They'll do the same thing w/video. Think of it like DEA personel waiting on the arrest until after the drugs have been sold in order to confiscate useable assets.

PS. Check out folks like Harmonic and World Wide Packets for fiber access networks technologies. Much better than PON. These technologies can enable content production rather than its theft.
Y2KickIT 12/4/2012 | 11:25:12 PM
re: Digital TV Stalls Stateside DSL is not a good option when you have to rebuild the OSP just to get it to your customers.

PON is the best solution. It looks like the ILECs are considering using the technology they know, DSL, and deploy remote DSLAMs. PON may be used to connect them. It seems there is a debate on whether to target video as a service at all.

Most of this is likely to hinge on whether the FCC sticks to the FTTP requirement for exclusive control of the new network by the ILEC, or caves and allows FTTC or FITL.

If video does get offered it is likely to have an RF video element. It is more cost effective and doesn't require a set top box. BPON/GPON can do that with a separate broadcast wavelength. EPON solutions don't appear to use that approach.
mu-law 12/4/2012 | 11:25:30 PM
re: Digital TV Stalls Stateside Now since when is new edge networks an equipment company? Are we regressing to the pre-divestiture era?

Come on, Mary...
Spade 12/4/2012 | 11:25:30 PM
re: Digital TV Stalls Stateside by the way FSAN GPON also provides an adequate means for deploying SDV.

Spade 12/4/2012 | 11:25:31 PM
re: Digital TV Stalls Stateside The business model for SDV (switched digital video)has up until recently (3-6 months) been unfavorable to incumbent providers for investment. When comparing both RF video and SDV delivery mechanisms, short of the access transport, SDV has proven to be expensive.

Incumbents are frugal by nature and tend to invest in solutions that work for a reasonable investment. When they can build an RF headend that will delivery 150+ channels of analog, digital, and music for 250-400K why would they invest in a headend that averages $4500.oo per channel for headend and middleware. That same channel line up just cost him almost twice as much.

Complicate the headend cost with DSL loops that need to be conditioned, a STB on each TV, potential inside wiring issues, and pretty soon your business model starts to look impossible.

Where some light is beginning to shine are those providers who have put in SDV headends, not only with the intent to serve their existing subscriber base but then also intend to sell content to other providers thereby offsetting some of the intial costs. This model has been chosen by some statewide networks as well for distribution of digital content.

The STB issue has been focused on for the past 2 years and cost effective solutions are now showing up for either mutlistream boxes from a single feed or low cost, i.e. $110.00/stream boxes that will begin to close the overall gap. A year ago simlar STB's were 2-3 times this amount.

The cost points for SDV are still not the same as RF when viewing the business model in the same sense as one would view an RF model, but then again, what can an incumbent deploy without rebuilding their entire plant or having to overlay an additional plant, and still be able to serve their entire subscriber base of DSL and FTTH customers?

SDV is off to a slow start in the US but this vendor sees the activity rising as the cost points continue to fall. Consolidation in the SDV market to address the cost points of headend, middleware, and STB continues which allows the solution to become more feasible. Defering more of the middleware cost to recovery over time versus upfront is also helping the SDV players.

rjmcmahon 12/4/2012 | 11:25:34 PM
re: Digital TV Stalls Stateside EPON will allow RBOCS to level the playing field with the cable guys.

Try leap ahead instead of the never ending chase from behind. People want to participate in their communities. Broadcast TV models offered by cable guys don't enable us as students, entertainers or citizens. Full duplex gigabit is a better starting point for that.
glasvezel 12/4/2012 | 11:25:35 PM
re: Digital TV Stalls Stateside Large scale broadcast IP Video is where DSL clearly falls short - but where EPON really shines. A Gbps EPON based FTTP system can easily and efficiently carry 100's of TV channels.

EPON will allow RBOCS to level the playing field with the cable guys.
desikar 12/4/2012 | 11:25:36 PM
re: Digital TV Stalls Stateside Mary,
Should this not read "Digital TV over DSL Stalls Stateside"? Digital TV over cable is definitely not stalled stateside, is it?
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