To gigabit or not to gigabit, that is the question. After considerable debate over whether to offer gigabit Internet service, most cable providers have reached their answer: to gigabit.
But how? Cable providers are rising to meet the latest gigabit salvos by Google Fiber Inc. , AT&T Inc. (NYSE: T) and other competitors, but they must invest wisely in the latest Internet technologies. Jumping in before there is significant market demand could jeopardize their return on investment. Jumping in too late could cost them their competitive advantage.
In a new report, Heavy Reading identifies four paths that US cable companies are taking to counter the competition, throttle up Internet speeds and prepare for larger gigabit deployments. According to the report, "What Is Cable's Right Path to Gigabit Internet?" those who are taking the gigabit plunge are embracing the following key strategies:
- Surgical strikes: Use DOCSIS 2.0 and 3.0 to provide high Mbit/s or even Gbit/s speeds in competitive markets
- Prepare for Docsis 3.1 (D3.1): Get plant ready for gigabit speeds offered by the next DOCSIS version
- Fiber up: Similar to "man up," take fiber deeper into the network or build fiber-to-the-home (FTTH)
- Business first: Target business and institutional users that can best utilize gigabit speeds
Heavy Reading says cable multiple system operators (MSOs) already are employing each of the four strategies. For example:
- Comcast Corp. (Nasdaq: CMCSA, CMCSK), while preparing for D3.1, has announced 2Gbit/s Gigabit Pro all-fiber service, starting in Atlanta and rolling out to more markets with connections being made on a "demand-driven" basis for homes within a third of a mile of its fiber plant.
- Time Warner Cable Inc. (NYSE: TWC), which is being acquired by Charter Communications Inc. , is conducting surgical strikes by using current DOCSIS capability to ramp up to 300 Mbit/s in its TWC Maxx package.
- Cox Communications Inc. , which plans to offer G1GABLAST 1Gbit/s residential service in all its markets by the end of 2016, is taking a "micro-segmentation" approach to using fiber and DOCSIS, segmented by individual headends or even nodes.
- Mediacom Communications Corp. offers its Gigabit+ branded service to businesses and other institutions through dedicated connections to its fiber backbone.
In the near term, MSOs will rely on hybrid or blended approaches that mix elements of each strategy, according to the report. Since the MSOs still operate regional or local systems with varying technological capabilities and market conditions, there is no easy "one-size-fits-all" solution.
Companies will ramp up speeds based upon several criteria, including technical readiness, competitive pressure, upgrade costs and customer demand. This selective approach will help to manage technology costs and target top-tier customers, the report says.
The regulatory climate also is playing a role. Internet service providers, newly minted by the Federal Communications Commission (FCC) as Title II providers, are consolidating at a time when government leaders are advocating Gigabit Cities and higher US broadband speeds. AT&T, as part of its deal to acquire DirecTV Group Inc. (NYSE: DTV), promised an extensive rollout of gigabit Internet service through fiber buildouts over the next four years. Charter, which is acquiring TWC and Bright House Networks , and Altice , which is buying Suddenlink Communications and Cablevision Systems Corp. (NYSE: CVC), have not made similar concessions, though both publicly have voiced support for higher speed Internet.
The Heavy Reading report provides an update on gigabit Internet, the competition between cable and other providers and analysis of the four strategies that cable operators are employing. It includes profiles of seven suppliers that are supporting cable gigabit Internet services with DOCSIS, fiber and related products.
— Craig Leddy, Contributing Analyst