Euro-DOCSIS Successes Fuel New Momentum in Europe

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By Fred Dawson

Fred Dawson is principal, Dawson Communications. Dawson Communications publishes the newsletter ScreenPlays and provides consulting and writing services to service providers, suppliers and publications in the broadband sector.

The European cable engineering community's dogged commitment to pursuit of cable modem standards through a wrenching period of financial upheaval has set the stage for what could be a significant improvement in industry fortunes.

Nobody is prepared to say the bad times are at an end, but European cable interests are beginning to feel the worst is behind them on the financial front. Major MSOs are making headway in financial restructuring, some under protection of bankruptcy proceedings, and there has been progress on key cable property sales in Germany and elsewhere. At the same time, an expanding supply of certified Euro-DOCSIS 1.0 and 1.1 equipment and, soon, equipment compliant with the IPCablecom standard as well, provides operators a potent means of achieving payback on the billions spent on network upgrades and build outs over the past five years.

High Demand

The cornerstone to the improving prospects is consumer demand for broadband services. As of year-end 2002 there were approximately 12 million subscribers to broadband Internet services of all types in Europe, representing 7.5 percent of all households, according to Boston-based Strategy Analytics. This number closely tracks the findings of London-based research firm Baskerville, which says the sub count more than doubled over the course of the year.

Raw number, though not percentage, growth should be even greater in 2003. Strategy Analytics predicts the broadband DSL and cable subscriber base will reach 19.1 million by year-end, representing a penetration rate of 11.9 percent of European households.

But, for cable, the surging demand for broadband also presents a significant challenge. According to these research firms, suppliers of broadband via DSL built on an already sizeable lead over cable during the past year and now can claim in the neighborhood of 75 percent of the total broadband market in Europe. DSL accounted for 76.1 percent of all new broadband customers signing on in 2002, up from 72.3 percent in 2001, according to Strategy Analytics.

Can cable turn the tide and begin gaining ground on DSL this year? Strategy Analytics thinks so, having predicted cable's share of new broadband subscribers will climb to 25 percent from 22.6 percent in 2002 while DSL's share of new subs will fall to 71 percent. Many people in cable share this view. In fact, they note, the picture is already better than the stats suggest.

"The situation in Germany significantly skews the overall numbers for Europe," says David Whitehead, director of engineering at Motorola's Broadband Communications Systems unit. "There's a healthy take-up of broadband in that country, and it's mostly DSL because there are a limited number of two-way cable systems." Indeed, if one takes Germany's broadband subscriber totals off the table - approximately three million, of which fewer than 10,000 are on cable - cable's share of broadband penetration throughout the rest of Europe jumps to about 33 percent.

And the situation in Germany is about to improve. Until January cable systems serving some ten million households in that country were under the control of Deutsche Telekom, which had no incentive to upgrade them to broadband capabilities. Now, with those systems sold to a consortium of financial interests, observers anticipate the German cable sector will help to drive growth in cable's broadband footprint.

"Everybody believes this sale will have a positive impact on cable in Europe," says Dirk Jaeger, technical director at the European Cable Communications Association. "It should definitely help stimulate the market for broadband equipment."

The Euro-DOCSIS Factor

The market is already getting a powerful boost from the emergence of next-generation Euro-DOCSIS gear, Jaeger adds, noting that availability of certified 1.1 cable modems and CMTSs (cable modem termination systems) is fueling demand from cable companies who prefer to offer a quality-of-service component with their broadband services. "Dutch and Scandinavian cable companies are especially innovative companies, and they are responding to the cost benefits that come with a standardized approach to supporting QoS," he says.

Market response to the availability of Euro-DOCSIS modems in general, including 1.0 as well as 1.1, has been a major boost to sales during a time when cable operators representing about 80 percent of the European market were either in bankruptcy or up for sale, Whitehead notes. "We're still seeing quarter-over-quarter increases in quantities shipped, despite these problems," he says. "The ROI is so quick with cable modems, people who have upgraded their plants really can't afford not to offer the service."

Industry players say nearly all the European cable modem base is now either DOCSISÔ or Euro-DOCSIS compliant. Cable operators in the U.K. moved ahead with aggressive deployment of DOCSIS equipment before Euro-DOCSIS gear was certified, which didn't happen until late 2000, but, elsewhere, the Euro-DOCSIS platform predominates. The primary difference between the two standards is the fact that Euro-DOCSIS modems are pegged to the 8 MHz channel spacing used in Europe versus 6 MHz in North America, and the European models exploit the higher capacity of the region's upstream band, which extends from 5 to 65 MHz as opposed to 5-42 MHz in North America.

"Many operators waited for Euro-DOCSIS before offering broadband services because they wanted to take advantage of the wider bandwidth," says Mitch Matteau, vice president of international engineering and operations for ARRIS. With achievement of certification for its Euro-DOCSIS 1.1 CMTSs as of last summer, the company is also seeing a brisk demand for the advanced version, even among operators who aren't planning to move into QoS-based services in the near term, Matteau adds.

"It's hard to keep up with demand," he says. "We're not seeing massively huge purchase orders, but the activity is very broad across the industry." Reasons for ordering 1.1 CMTSs vary from company to company, he adds. "Some just want to offer plane Jane cable modem services now but want to be ready for advanced services two years down the road, and others are looking at moving to advanced services in the near term."

Aggressive Migration

Adding to the Euro-DOCSIS momentum is the fact that many operators who already had broadband service running on proprietary systems are pushing transition to Euro-DOCSIS, especially now that 1.1 systems are available and 2.0 is on the horizon. For example, UPC, notwithstanding the burdens of an ongoing Chapter 11 restructuring, has pushed its overall penetration of cable modem service to more than 630,000 households or 12 percent of homes passed by two-way plant, and the Euro-DOCSIS share of that footprint is now over 30 percent.

"UPC continues to aggressively position itself to be predominantly EuroDOCSIS in our footprint," says Sudhir Ispahani, CTO and chairman of the Technology Board at UPC. This includes "making preparations for field deployment of EuroDOCSIS 1.1/2.0," he adds. "The ability to help our users get a better high-speed data experience via bandwidth usage monitoring with 1.1- and, eventually, 2.0-enabled tools is a key driver for achieving greater profitability and customer satisfaction ratings for us," Sudhir says. "In addition, CableHome is an important initiative for us, and its basic support with EuroDOCSIS 1.0 as an optional revenue enhancer is something we are analyzing very aggressively from an incremental revenue perspective."

In other words, moving to Euro-DOCSIS isn't about implementing a platform just for the sake of being standardized. "MSOs should understand that EuroDOCSIS may be a standard; however, it is very clearly, immediately a cost-containment and cost-saving mechanism and evolving to an ARPU (average revenue per unit) enhancer (as 1.1)," Sudhir says. With regard to the revenue-enhancing capabilities, he adds, "the security and privacy aspects are particularly important to us here in Europe."

But MSOs hoping to take advantage of these benefits should understand it takes a pro-active top-down push to get the job done, Sudhir notes. "Educating your board of management on the advantages of EuroDOCSIS is key to its possible acceptance," he advises. "A policy-based procurement approach is also key in deployment to affiliate properties. At the end of the day, I have had to make tough technology decisions to enforce strict procurement policies in conjunction with our operations teams within our affiliates." Sudhir also notes it helps to have input from people with deep experience in broadband operations. "I have been fortunate in having key industry leaders like Rouzbeh Yassini, Dave Fellows, Tony Werner and Arjang Zadeh serve on our advisory technology board to help us collectively evaluate the course and navigation of deployment of these emerging technologies and their complexities," he says.

IPCablecom Breakthrough

Nothing has been more challenging to the cable technical community, in Europe or North America, than efforts to get IP voice and related communications services off the ground using the power of the IPCablecom platform, also known as PacketCableÔ. This has been an especially daunting task in Europe where operators have had to cope not only with the uncertainties of financial hardships but also with the complexities of multiple national telecommunications standards and a standards-setting environment dominated by the competing interests of incumbent telecoms.

Nonetheless, with the Euro-DOCSIS Certification Board having certified four 1.1 modems and seven 1.1 CMTSs as of the conclusion of Wave 9 in the certification process at tComLabs in Ghent, Belgium, cable interests report the stage is set for multiple trials and eventual roll out of IPCablecom services in the year ahead. "This is the year I think we'll see voice over IP move to commercial reality," Matteau says." No one in Europe has yet launched VoIP, but there are some significant market trials now getting underway that should get us there."

A big step in that direction was taken at tComLabs in early January with the completion of the first in a series of interoperability tests that should lead to the first IPCablecom certification wave later this year. While no formal announcement of tComLabs' selection for what is now called the Euro-PacketCable Certification Project had been made at press time, Bart Acke, director of operations at the labs, says the choice is official. The five days of interoperability testing, involving 25 different products in five product categories, demonstrated that vendors have made considerable progress toward a workable solution for the European cable industry, Acke says.

"By the end of the week we saw that interoperability with almost everybody's products was pretty okay," he says. "There were some initial problems with the set-ups for the tests, but once those were fixed things went very well. It doesn't look like there's going to be a need for any radical changes in how people are interpreting the specs."

Dennis Rauschmayer, director of product marketing at Texas Instruments and a witness to the testing, says he was "pleasantly surprised" at how well things went. While many vendors had worked with each other to ensure interoperability in previous tests and trials, others were encountering each other for the first time in a test environment, and even those that had worked together were bringing new iterations of their platforms to the tComLabs event, Rauschmayer notes. "We got a lot accomplished and showed IPCablecom is definitely where it needs to be," he says.

Another vote of confidence in the state of the platform comes from a source at ISH, the German cable operation of Callahan Associates that was to have launched VoIP commercially last year. While a longer-than-expected market trial in North Rhine had some serious problems, including a two-day-long system crash across all 600 users in September, vendors were eventually able to demonstrate to the company's satisfaction that the system was up to carrier-class standards, a Callahan official says, speaking on background. "We were convinced the technology is ready but decided not to proceed with commercial launch for other reasons, including uncertainty about market demand," he adds.

It's been a long hard pull to get to where European operators have a standardized platform to work with that can provide them the support they need for virtually every type of broadband service imaginable. But, by all appearances, it's been worth the effort. Telcos might have DSL and a significant lead in basic broadband Internet access, but, from now on, the cable industry will be in a position to go them one better with a range of service options that greatly enhance the consumer benefits of broadband.

"There's a timeframe where the gap between DSL and cable will persist," says Mitch Matteau. "But cable operators are getting back on their feet financially, and, as they do, they'll be cranking out a lot of new compelling services. It's not a matter of years. Assuming the economy keeps improving, it's not going to take them too long before they catch up and pass their competition."