Ah, the fickle finger of fate. During the last decade and a half in the cable industry, that finger has been pointing all over the map, and back again, a number of times. Remember the 500-channel universe? Interactive television? Digital television? High-definition television?
How about cable telephony? According to some industry observers (both informed and uninformed), the fickle finger of fate has transformed itself into a thumbs-down position on this once high-flying service/revenue hopeful.
But, a recent series of interviews conducted by the CED staff with a variety of operators and vendors tells a different story. Part of the story seems to be that the competitive free-for-all many predicted after passage of the 1996 Telecommunications Act has failed to materialize in the blood-letting many predicted, and some may have even hoped for.
Another overlooked chapter is that HFC telephony technology, while far from perfect, has come a heck of a long way in the last 12 to 18 months. Meanwhile, the deep-pocketed RBOCs seem to have done a Howard Hughes-like disappearing act after having experienced a rough, rumbling takeoff followed by an even faster splashdown in trying to launch their video, voice and data convergence behemoth. (Has the Spruce Goose been superseded by the DSL Duck?)
While cable telephony may have disappeared from some radar screens, it's far from obscure on others. In fact, some predict the last few years of the 20th century will see telephony deployment trajectories heading straight toward RBOC air space.HFC telephony: follow the leader
While a few may say HFC telephony is progressing quite well indeed both here and abroad, others acknowledge there are some problems. Some feel there are a variety of reasons cable telephony seems to be in some sort of holding pattern. Others believe just one or two roadblocks need to be overcome before deployments begin in a serious way.
For some, there's a clear difference between those who truly believe in telephony and those who are somewhat more agnostic in their approach. The way Ken Craft, director of marketing for Tellabs' Cablespan product line, tells it, everything is coming up roll-outs. "On the telephony side of things," says Craft, "most major MSOs are saying that they are going to deploy cable telephony this year in anywhere between one to three cities. Almost all are going for at least one. Contrary to what you hear, what we are involved in is, we are getting orders and we are deploying equipment in these cities."
Others have a slightly different take on the situation.
"We really see a split," says John Frederick, director of ADC Telecommunications Inc. 's telephone business unit. "We see a couple of operators that are still aggressively moving forward. And we see a number of other major operators pretty much sitting on the sidelines. And I think some of this has to do with their balance sheets and how quickly they feel they can do stuff, given the technology."
Douglas Howell, group product manager for advanced access services at Philips Broadband Networks Inc., thinks the apparent temporary cessation of hostilities between operators and RBOCs will also ultimately work to cable's advantage. "I think, defensively, the pressure is off because the phone companies have backed off," says Howell. "And I think this is giving people a chance to build their infrastructure and wait for that first guinea pig who will really prove you can make money doing telephony.
"Our assumption is that the RBOCs are going to use some kind of DSL technology. And I assume they think that in five, 10 or 100 years, or whenever DSL technology is real and cost-effective, they can always come back to video. That's a guess.
"So, we're seeing some operators that are very committed to going forward (with telephony) and others seem to have slowed. My suspicion is they're in a wait-and-see posture."
Others note that market pressures seem to be diverting cable resources that could be used to develop telephony. "Considering the competition that's hitting all of the MSOs in their base business, for example, from DBS," explains Ron Smith, vice president of operations for Motorola Corporation's Multimedia Group, "I think they're having to retrench and really strengthen up their base business by putting in the digital services that are going to effectively compete against the competition. That aspect of it, I think, is competing for the capital expenditure dollars that they would normally spend to upgrade their plant and start putting in telephony. So I think that has kind of slowed up the (HFC telephony) market in the United States. But it certainly isn't dead."Praise the HFC, and pass the NIUs
Any conversation about cable telephony these days almost immediately focuses on a core group of true believers. One of the most vocal, phone book-thumping proselytizers for HFC telephony is Cox Communications Inc. While others (most notably TCI) have fallen to the wayside or have decided to keep their plans to themselves (e.g., Comcast, which declined to comment for this story), Cox is one of those operators that is keeping the faith, daring to lead the way to the convergence promised land of voice, video and data delivery.
Chuck McElroy, Cox' vice president for residential broadband services, isn't shy about ticking off the varied telephone related projects the company is undertaking. He notes that after having just completed a successful HFC telephony trial in Hartford, Conn., the company is conducting additional trials in San Diego and Orange County, Calif. For the past three years, Cox has also been providing non-switched access services through Cox Fibernet in Hampton Roads, Va., Oklahoma City, Okla., and New Orleans, La.
Yet, the company refuses to put all its eggs in a wireline basket. McElroy points out that the company is a majority owner of the Sprint Spectrum PCS business in southern California, which launched in December 1996. Cox also holds a 15 percent equity stake in Sprint Spectrum, which has launched service in a number of cities throughout the United States.
As far as Cox is concerned, says McElroy, the case for cable telephony is self-evident."Cox believes there is a clear case for providing residential and business customers a competitive alternative to the local telco's offerings," explains McElroy. "Research indicates a willingness among consumers to purchase telephone services from other providers, and there appears to be a strong interest among consumers to purchase all communications services (video, voice and data) from a single provider.
"We plan to provide multiple dwelling, single dwelling, and commercial video, data and telephone services. Cox is currently planning on being a facilities-based, retail provider of telephony services."
To further that goal, McElroy points out that in its nine major clusters the company is "upgrading its architecture to be 750 MHz, ring-in-ring, two-way networks with 1,000 homes per node." Those clusters, he notes, represent 82 percent of the company's customer base, giving the company a unique advantage over MSOs who have systems scattered across the country.
Another pioneer in cable telephony, Time Warner Communications, is apparently holding back on expanding into other telephony markets, at least when it comes to residential service. "We are going to limit our efforts in residential telephony to Rochester," says Michael Luftman, vice president of corporate communications for Time Warner Cable. "(But) we are going to expand within that market, because we have only marketed to about 10 percent of the Rochester area that is capable of receiving service. Regulations are simply not at a point where we are comfortable." (See "Winning over Rochester," CED, March 1996.)
While the company continues to cite a muddled regulatory picture as one of its primary reasons for reining in its residential service effort, other industry observers speculate otherwise. Some wonder if the company's oft-rumored divestiture of its cable holdings and the resulting hesitancy to sink more money into an admittedly expensive venture may be the actual trigger for its residential telephony retrenchment.
Nevertheless, Luftman points out the company will continue its rollout of switched business service (as a competitive access provider or CAP) in 18 locations around the country. The locations, which cover 10 states from coast-to-coast, include: Texas (Austin, Houston and San Antonio); Ohio (Cincinnati, Columbus and Lima); New York (New York City and Rochester); North Carolina (Charlotte, Greensboro and Raleigh); Florida (Orlando and Tampa); Honolulu, Hawaii; Indianapolis, Ind.; Memphis, Tenn.; Milwaukee, Wis.; and San Diego, Calif.
US West's Continental Cablevision, a current partner in the Rochester effort, is leveraging its newly acquired telco connections (along with its inherent financial strength) in a couple of trials in the South. "We have two trials currently underway," reports Greg Braden, vice president of telephony for Continental. "One in Atlanta and a smaller trial down in Pompano Beach, Fla. The Atlanta trial is taking place in MDUs and will be expanded to include single family residences using full HFC-based telephony. In Pompano, we're in the very early stages of a trial for telephony in MDUs using more traditional telephony platforms, like subscriber loop carriers, as opposed to full HFC-based systems."
Braden says current plans for the four-month-old Atlanta trial would be to come out of the trial stage and begin rolling into phased commercial deployment mid to late third quarter this year. He describes the Atlanta architecture as "a classic hybrid fiber/coax network architecture where...we are building nodes in the 500-home node sizes, which is a kind of targeted average node size. And we're putting in 90V gas generator back-up powering schemes to ensure network reliability for supporting life-line services."
This model (i.e., MDU-to-residential service rollout), says Braden, is not necessarily the one the company will use in other areas. "I think, once we are confident that we have a stable technology platform and that we've got, more importantly, all the operational support systems in place, then I don't think that you would see us necessarily drawing a distinction between rolling out MDUs first and then single family residences second.
"It will be a phased approach in that, of course, we'll be offering the services across those portions of our network that are upgraded to 750 MHz, two-way capability. And those network build plans will continue for a couple more years. But, in a given area where that network upgrade has taken place, we will be pursuing MDUs and single family residences alike."Over there, over there
The World War II tune, "Over There" could easily be used today to describe how the Yanks are going overseas to develop cable telephony technology as a viable alternative in many developed and underdeveloped countries. Many believe these trials and deployments will help take up some of the developmental slack that's currently being experienced here in the United States because of operator hesitancy about telephony.
Tellabs' Craft believes conditions overseas are more conducive to a quicker rollout of cable telephony. The faster it rolls out overseas, the logic goes, the faster it will become a reality in North America.
"There are different business and market factors overseas," explains Craft. "The sense of urgency to provide telephony is much higher than in the United States either because of poor service, or in some of these markets, because of no service at all."
Many believe the severe shortage or total lack of telephone service in many developing countries, or "green field" situations as they're called, is fertile ground for cable telephony. GADline Ltd., an Israel-based company, recently announced it's serving as the key equipment supplier to an Israeli-Chinese joint venture that has been formed to provide the installation and management of an expansive public cable telephony system for the northern Chinese city of Tianjin (pronounced 'Ting-ching').
"As we see it," says Laurence Rubin, CEO at GADline, "there are tremendous opportunities for telephony-over-cable in areas where there's a need for telephone service. You take places like India or China, where in many cases, they have a more advanced infrastructure for cable television than they do for providing telephone service. That's what they're doing where we are in China. They're putting in the cable TV infrastructure, both for the short- and long-term, (because) it's cheaper to provide the telephone over HFC than it is to put in the twisted-pair copper."Back in the U.S. of A.
Meanwhile, back in North America, there seems a fairly broad consensus about what's holding the service back at this particular time.
Time Warner and Cox both site the regulation morass and the resulting interconnection disputes raging around the country. "The biggest obstacle is probably securing sensible and stable regulatory rules and regulations," says McElroy. "The local exchange carriers (LECs) have effective lobbying power over state regulators and that makes the future of telephony regulatory rules unpredictable at best. In addition, the LECs can delay competitive entry through the negotiations and construction of facilities for network interconnection."
McElroy, as well as other operators and vendors, are fairly upbeat about the technology coming around sooner, rather than later. It's what's going on behind the scenes that's got their attention.
"I'd say the biggest (hurdle) is really the backroom functions," explains Continental's Braden. "We think that the kind of new technology aspect of cable telephony—the host digital terminals (HDTs), the network interface units (NIUs)—those are going through the technology curve that any new technology does. But, we're seeing that begin to stabilize and fully expect it will stabilize like everything else does over time.
"Where the real challenges are, are in making sure we have the operational support systems, the backroom operations and the methods and procedures that you need in place to offer this type of service in a high-quality fashion and on an integrated basis with our core business and other new services that we're beginning to offer. And that takes a lot of very detailed thinking, planning and execution. And that all takes time. Those are the things that we focus and work on daily to make sure we've prepared ourselves to operate in that intricate environment."
Many see data as a useful stepping-stone for telephony service, both from a technology/infrastructure standpoint, as well as getting a handle on the vexing back room/OSS issues. "When you go into telephony," says Howell, "you've got billing issues, interexchange agreements, operational characteristics, and you've got to have people on call all the time. It's a mindset change. It's an operations change. It's negotiated agreements all over the place. You just can't provide it all by yourself.
"Whereas, when you do data, it's kind of a nice stepping-stone, because you're getting your reverse path set up and your infrastructure in place. The amount of technology you have to learn yourself is relatively small. For example, you may have to learn about modems and servers, which is relatively easy to outsource if you want. It also has some less demanding operational requirements. So to me, it's a nice stepping-stone to provide telephony."
Rick Haube, Philips' director of marketing, concurs. "In addition to the return path experience," he says, "data requires that you set up additional resources in-house, like help desk or enhanced customer service and provisioning. These customer service issues, as you expand your initial customer service base, may share some similarities from data to telephony."The technology tango
The HFC telephony solutions circulating in the industry offer a variety of approaches and unique capabilities. While most of the vendors have a tendency to say their particular solution is the best for all concerned (and competitively priced, too), the final decision rests with the operators and the peculiarities of their systems and markets.
ADC believes its modulation scheme and a unique leveraging capability set it apart. "Right now," says Frederick, "I think we're one of the few in the industry using OFDM (orthogonal frequency division multiplexing) at 32 QAM. Most of the industry is using TDMA, QPSK or 4 QAM. And what that roughly translates to is, in 6 MHz, for example, a QPSK system would get maybe somewhere between 72 and 90 DS-0s. We get 240 in that same 6 MHz. So, we have at least double the spectrum efficiency of other systems. And OFDM offers superior voice ingress immunity.
"The other thing that we're doing is that we're able to leverage our Homeworx equipment not only for telephony applications, but also high-speed data. We can take our home unit and supply both data and telephony simultaneously out of that device (estimated cost per line: $200–$500). It's a non-shared type service. We also leverage an operator's investment by integrating both of those services back at the host digital terminal. So you have one piece of headend equipment vs. many."
Philips' new Crystal Line access platform (estimated cost per line: under $350) also touts an ability to offer simultaneous delivery of different services, as well as a unique maintenance capability. "We have a configurable time-out," says Howell, "where if the circuit is actually physically broken, we will hold the call up. This gives the opportunity for somebody to do some very quick maintenance. Obviously, there's no transmission if the circuit's been broken. But it gives you the opportunity to cut in something new without disrupting telephone calls. It's entirely configurable through our element management system.
"We've also spent a lot of time working on our ability to withstand noise in the reverse path. You can actually put a noise carrier right on top of our signal, and we can still maintain the call."
Tellabs' Cablespan product line, according to Craft, offers a number of useful capabilities. "We offer an integrated HFC/DLC solution," says Craft, "that allows operators to provide multiple market segments or multiple applications segments in one unit. We also offer scalable RF path concentration, as well as a singular traffic statistic capability. We have a menu item in the network management system that allows you to get information on call loading, blocking, and you can set alarms as well. You can do this on a system, node or individual modem level."
Jack Mann, Scientific-Atlanta 's director of marketing, cable telephony systems, thinks S-A's CoAxiom line and its FDMA single carrier per channel solution provides some benefits as well. "The key point," says Mann, " is that it avoids a lot of different types of ingress and interference because it's narrow. Also, if there is any interference, you potentially don't have to move that many channels. If you have a wide-carrier approach, with say, 24 channels, you have to move 24 voice circuits instantaneously. And that's not easy to do."
Other companies, like Motorola and its CableComm system, continue to refine their technology in trials in the United States and overseas. "Well, basically," says Smith, "we've got commercial systems deployed with Optus in Australia, with TCI in the Arlington Heights/Mt. Prospect area, and (Motorola is) about to go commercial in Malaysia."The crystal ball, please...
Where's all this leading to? Is it just more technology-in-the-sky hype from the cable industry? For those in the telephony trenches, the forecasts for its widespread debut are surprisingly similar. Most agree that while the RBOCs mull over their convergence technology and strategies (once again), operators are focusing on the more immediate areas of concern like enhanced video delivery (remember DBS?) and the rollout of high-speed data access services. But they believe these preoccupations will pass relatively soon.
Continental's Braden sums up the crystal ball consensus on HFC telephony for like-minded operators and vendors."I think that by mid to late 1998, many of the issues which we kind of wrestle with daily will have stabilized a lot. We will have gone through the learning curve on a variety of important issues. I think it will become more mainstream beginning in 1998, and we'll ramp up from that point in time as MSOs gain greater confidence in it and there's a greater critical mass of upgraded plant that you need to offer these services."