September October 1995 -- Volume 7 Number 7
CableLabs presented a side-by-side demonstration illustrating the speed and power of cable television technology for data transmission at a recent NCTA technology event in Washington, D.C. The event, part of the industry's public affairs program "The Future Is On Cable," was billed as "A Tour of Advanced Cable Technology." The event featured exhibits by Comcast, Jones, TCI, Time Warner, and a number of other companies.
The CableLabs demonstration was featured as part of the opening presentation for each of eight tour groups over two days. Visitors included members of Congress and their staff advisors, as well as high-level FCC and other Administration officials. A total of 300 people attended the event.
NCTA's President and CEO Decker Anstrom delivered opening remarks, and then drew the audience's attention to the CableLabs demonstration. CableLabs' demo showed three computers connected to a remote information server. Each computer was connected by a different technology:
One computer was connected via a telephone modem running at a speed of 14.4 kbps over regular phone lines. This is widely available technology now being used by some consumers to access the Internet and online services. Most consumers still utilize 9.6 kbps or slower connections.
The second computer was connected via integrated services digital network (ISDN), a phone company-provided service running at a speed of 56 kbps over regular phone lines. ISDN is not yet widely available to residential consumers.
The third computer was connected via a cable modem, running over coaxial cable at a speed of 10 Mbps. Cable data transmission is 1,000 times faster than most existing telephone modems.
Andy White, CableLabs' senior information systems specialist, started all three computers on a retrieval of a complex, digitized photograph of the Space Shuttle cockpit, a very large file from NASA's Internet site. The speed and efficiency of the cable connection vividly drove home the advantage of cable television technology in delivering practical, high-speed data applications to homes, schools, and businesses. Guests remarked that cable's advantages had not been clear until they saw this live demonstration.
After viewing the CableLabs demonstration, guests were ushered into the exhibit hall, where cable operators and cable programmers presented a range of services that are being delivered over cable plant, ranging from high-speed on-line and Internet access to interactive educational programs and competitive telephone service. CableLabs also contributed its computer-based interactive multimedia product that explains cable's ability to provide Internet access and the range of high-speed data services associated with cable technology.
CableLabs' participation in the NCTA technology tour is one of several CableLabs initiatives to coordinate with other cable industry membership organizations and integrate marketing and public policy perspectives with its own mission.
CableLabs President and CEO Dr. Richard R. Green serves on the Cable TV Science and Technology Policy Caucus, formed to promote industry consensus on important technology policy issues. Mike Schwartz, CableLabs vice president of communications, was a charter member of NCTA's Public Affairs Working Group on technology, the group that helped plan the technology tour. He also is coordinating the CableNET '95 demonstration that is co-sponsored by the California Cable TV Association at the Western Cable Show.
CableLabs' annual summer conference featured two presentations by Cable Telecommunications Administration and Marketing Society (CTAM) Vice President of Research Grace Ascolese, pertaining to DBS competition and customer attitudes toward in-home technology. Her discussion was important in rounding out member company attendees' strategic understanding of technology deployment issues by offering a marketing and customer research perspective. Decisions about technology deployment increasingly implicate marketing and customer care issues. Further, the expertise of CTAM dovetails with CableLabs' increasing focus on strategic and competitive assessment.
Don Dulchinos, CableLabs senior analyst, technology transfer, spoke on a panel at the recent Urban Markets seminar sponsored by the National Association of Minorities in Cable about how new technology might be used to provide new or improved service to urban markets and minority consumers. And finally, CableLabs maintains a dialogue with Cable in the Classroom as that industry collaboration has begun to hear of interest from educators in making the Internet and high-speed data services available to schools.
Economics of an Advanced Cable Network in the U.K. (Back to Top of Page)
Editor's Note: As technology advances, operators puzzle over the economics of ATM network deployment. Here, we present a report on the hard questions of cost, benefit and migration strategy from Hugo Davenport, chairman of Cambridge Cable (Cambridge, U.K.). Comcast recently agreed to acquire an equity stake in Cambridge Cable. The views are those of Davenport, not CableLabs.
When British Telecom began to run small-scale trials of so-called 'information superhighway' services in 1994, we thought we could kill several birds with one stone by our own video-on-demand trial with several local partners. Our goals were to:
The idea of a trial did not come out of the blue. For some years we had been discussing the possibility of a broadband metropolitan area network; in fact the idea had first surfaced before Cambridge Cable was incorporated in 1988 and was, indeed, one of the forces motivating us to form the company.
We officially launched the trial on 30 September 1994. The trial consortium included Anglia Television, ATM Ltd, Cambridge Cable, Online Media, and SJ Research, a builder of access switches for our cluster tap cabinets.
The Network
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The network Cambridge Cable is deploying for the trial comprises a fiber-optic
overlay network which delivers, via asynchronous transfer mode (ATM) switches
in streetside cabinets, ATM packets to the existing cluster tap cabinets. At
each cluster tap cabinet there is (or will be) an ATM access switch which is
connected to the network via a 100-Mbps bidirectional fiber link and from which
ATM packets are diplexed onto the existing coaxial drop cables to customers'
homes.
Despite the small size of our cluster tap cabinets (each of which serves between 20 and 64 homes) we have been able to fit an 8-port access switch into the standard cabinet. The architecture is thus fiber-to-the-curb. This probably reflects the most cost-effective approach for Cambridge Cable at present, given that it has pre-existing drop cables less than five years old.
A significant feature of the system is that it provides symmetrical bandwidth allocation (i.e., there is as much reverse-path bandwidth as forward bandwidth). This is not particularly important as far as entertainment TV services are concerned, but is extremely important as far as other, non-entertainment, services are concerned.
There are other layers of switches farther up the network, which has an irregular tree structure. In a full-blown service network, we would make use of ring structures to provide redundancy.
In summary, the advantages of this type of network are:
It is a general-purpose network in the sense that ATM packets can carry different types of information - video, voice and data. It is not application-specific. It provides substantial reverse-path bandwidth. And it has the advantage that the bandwidth is dynamically allocated, unlike most systems which allocate bandwidth on a fixed basis per user or per TV channel. This means that if a user is logged into a low-bandwidth application the bandwidth not used can be used by someone else. Finally, the network is an overlay on the existing cable TV and telephony networks, sharing only duct, cabinets and the final drop cable.
Network Costs
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Disregarding customer premises equipment, the cost of such a network is high
at present equipment cost levels. A network overlay to provide video bandwidths
to 25% of homes would cost about sterling.3,500 ($5,495 US) per subscriber
port. This cost can be expected to decline steeply over the next five years as
ATM switch chips fall in price, so that by the year 2000, a cost of about
sterling.700 ($1,099 US) per subscriber, or less, is projected. Thus at
present, such a network would have to generate sterling.300 ($471 US) of
gross margin per subscriber merely to cover the cost of capital. At present in
the U.K., the entertainment services on a cable network yield revenues of
about sterling.18 ($28 US) per month, or sterling.216 ($339 US) per
year per subscriber. Telephony yields about sterling.260 ($408 US) per year
on average, so that, in a dual-service household, the operator can expect to
receive about sterling.472 ($741 US) per annum with a gross margin of some
55%, i.e., sterling.260 ($408 US) per annum.
It would appear that this type of ATM network can at present be justified only if it carries services that cannot be provided in any other way. It cannot be justified by the migration of existing services to ATM networks. If one assumes that some information commands a high value per Gbyte and some does not, the highest revenue and margin services can be provided over a network with limited bandwidth, and hence limited cost, compared with a full service ATM network.
Migration Paths
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In the U.K., typical operators have installed two separate networks. One is a
conventional cable television network (albeit with extensive use of fiber
optics). The other is a telecoms network which uses hierarchical digital
multiplexers. The reason: to save duct space, and hence cut the civil
engineering costs associated with underground cable networks.
This rules out asymmetric digital subscriber line (ADSL) as a viable delivery technology; there is not a continuous dedicated subscriber drop from headend to subscriber.
Operators planning to offer video on demand services (VOD) thus have a problem. Their existing network bandwidth is already dedicated to existing services. Upgrading the existing telecoms overlay is prohibitively expensive. The cable network offers, or appears to offer, a much better prospect of providing interactive digital services because digital compression could potentially allow a large number of digital TV channels to be carried over existing networks. The snag is that legacy services must be maintained during the transition phase. There are a number of ways to do this.
In 600-MHz systems, the whole bandwidth of the cable network is already used. Here, the operator will have to upgrade the network trunk by trunk, and will have to provide all users with new or upgraded set-top boxes whether they take the new services or not. Even excluding headend upgrade costs, this is likely to be an expensive business and one fraught with operational nightmares.
Those lucky operators with 750-MHz systems have, on the face of it, an easier option. With the extra bandwidth, they can provide all-digital services in parallel with legacy services; perhaps 150 compressed digital channels. Some of these (say 50 channels) will be used to duplicate the existing fare in digital form, thus eliminating the need for any subscriber to have two set-tops. This leaves 100 channels free for new services. But this is not enough to provide true VOD for more than 100 subscribers per trunk. With U.K. architectures, a single trunk may serve several thousand homes, so the maximum VOD penetration possible will be of the order of only a few percent, hardly worth the upgrade cost. In effect, the upgrade will only allow near video on demand (NVOD) services plus some narrowband interactive services. In fact, even if the whole forward trunk bandwidth were available, a typical network could support only 20% VOD penetration.
It seems that only by providing a third network overlay will the operator be able to offer VOD and other high bandwidth services to a substantial proportion of the subscriber base without major operational problems.
Cross-Capture
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Since cable companies already offer entertainment services over their existing
networks, they have little to gain from enhancing these services - the
additional revenue and margin so generated will be very low. As an example,
NVOD movies might sell at sterling.3 ($4.71 US) per view and the average
household might take four movies per month at this rate. However, the margin is
unlikely to be more than about 50% - about sterling.6 ($9.42 US) per month
in all - and this is likely to be at the expense of premium movie channel
subscriptions. The average revenue per subscriber (ARPS) from a typical
subscriber might actually fall. The net benefit of a network upgrade for
entertainment TV is likely to be low or non-existent, since there is as yet no
evidence that there will be any significant take-up of home shopping and other
"interactive" services even when they become available (which they are not at
present). It will probably take at least five years before significant
quantities of interactive content become available.
Telecoms companies are in a different position because any entertainment revenue is truly additional, with no cross-capture. A telecoms company can look forward to a completely new entertainment revenue stream, plus any additional revenue from any "advanced" services. Although ADSL technology (likely to be favored by any telecoms operator with an existing copper local loop) has a limited forward bandwidth and a very limited reverse path bandwidth, it would be sufficient to provide VOD and other advanced services to a majority of the homes on such a local loop. It would not, however, allow sensible remote file server working.
What is required by cable companies is a number of new revenue streams and, in particular, revenue streams provided by products and services that cannot easily be provided by satellite or over twisted pairs. Network connectivity services for business purposes look extremely attractive from this point of view since the early penetration will be low, but revenues and margins will be high. In the U.K., where local phone calls are relatively expensive and travel costs are high, this type of service might command an annual revenue of sterling.500 to sterling.700 (785 -$1099 US), most of which would be margin.
Conclusions
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All the preceding comments are based on the U.K. experience to date. In
particular local phone calls are not free in the U.K., and the attitude of the
public to TV in the U.K. is very different than that in the US. It seems
unlikely that full service ATM networks will provide a cost-effective route to
VOD entertainment services for some time to come, but it is difficult to see
any other way of providing such services to a significant percentage of homes
passed. This suggests a strategy for rolling out ATM service networks, which is
to start out with reduced-bandwidth networks designed for low penetration (up
to 10-14%) for commercial, professional, and semi-professional users.
In the early years of rollout, this maximizes the unique revenue opportunity available from connectivity services while minimizing capital requirements. This does not preclude offering entertainment and other services to early subscribers in addition. When network costs come down to a low enough level, further entertainment services can be added and the network upgraded to provide enough bandwidth for continuous video applications to be run for a large number of simultaneous users.
In new-build situations, it seems likely that full service ATM networks could become cost competitive with the existing dual cable/telecoms networks within the next five years, not least because duct space requirements are less and hence civil engineering costs will be proportionately reduced.
Here, as in the US, much has been made of cable's role in the information superhighway. But I know of no instance in the world where freeways came before footpaths. Only when we build the Superpathway will the Superhighway become viable.
CableLabs Licenses PCS Technology to Ericsson (Back to Top of Page)
CableLabs has licensed Ericsson to use remote antenna driver (RAD) technology in a distributed antenna system called Ericsson Cablecell which has been introduced for the personal communications services (PCS) market.
Ericsson is making and distributing the cable-based distributed antenna. It will conduct a field trial during the first quarter of 1996 and the antenna will be available to the market in the second quarter of 1996, Ericsson said.
"Ericsson welcomes the opportunity to work with CableLabs. We are affording cable TV companies an economical vehicle to participate in the nationwide deployment of PCS," said Jan-Anders Dalenstam, executive vice president and general manager, Ericsson Inc. Radio Systems.
Copyright © 1995 Cable Television Laboratories, Inc. All Rights Reserved.