Will new content push HFC's limit?
The cable industry will soon be confronted with a paradigm shift in interactive television that could drastically affect how operators design their networks and even how they make money.
In a nutshell, the new challenge arises from the fact that, contrary to previous assumptions, consumers are likely to have a wide range of sources to choose from for access to long-form, on-demand television via their high-speed data channels. A bevy of startups, some with major financial clout, are positioning themselves to use IP (Internet Protocol) technology in conjunction with high-speed backbones and local points of caching and distribution to offer customers direct access to movies, time-shifted TV programming and the full range of other options commonly associated with IPTV over telco xDSL (digital subscriber line), cable modem and wireless broadband access links.
"Our notion is to build a presence in the top 60 markets in this country, delivering not only entertainment on demand but providing a video-enhanced platform for e-commerce and advertising," says Jonathan Taplin, chairman and co-founder of Intertainer Inc., a Santa Monica, Calif.-based firm created by Hollywood executives with extensive experience in program production. Unlike some of the IPTV startups, Intertainer has taken a cable-friendly stance in an effort to persuade operators to allocate separate data channels to accommodate its programming, rather than trying to pump TV fare through the ebb and flow of packet traffic over cable's PC-oriented high-speed data links.
But Taplin acknowledges that Intertainer, like its competitors, could offer services directly to end users with high-speed data pipes without having to strike separate deals with cable operators. "Our goal is to be access neutral while putting together the content and e-commerce product offerings that make us the central store that people come to for what they want," Taplin says. And, he adds, while Intertainer is positioned initially to deliver its programming to PCs, it anticipates the implementation of intelligent set-top devices, such as the OpenCable terminal, will provide users direct access to the service through their TV sets.
Intertainer's service, which is undergoing market tests with Comcast Cable in Willow Grove, Pa. and with US West starting in the fourth quarter in Denver, operates from locally positioned servers accessing storage disk arrays holding 500 hours worth of content that it refreshes at a rate of 20 percent per month from its production facilities in Culver City, Calif., Taplin says. With investment backing from NBC, Comcast, US West, Intel Corp. and Sony Corp., the company has secured programming support from all the major studios except Paramount as part of a strategy to make its services widely available over cable and telco links, he adds.
There are many other entities moving into this IPTV space, notes Tom Rogers, president of NBC Cable and Business Development. NBC, with still-incomplete plans to supply Intertainer with programming content, chose the Santa Monica company as "the lead horse to ride," he says. But, he adds, at this early stage of ITV development, NBC's focus is not so much on providing access to its content as it is on learning more about the market as it develops its long-range strategies.
"This gives us a seat at the table to see how this type of service relates to the traditional broadcast and cable service environments," Rogers says. "We want to know more about viewer habits, the impact on advertising and e-commerce, the importance of personalized media and many other factors that will drive our decision making in this area."
While the new IP-based TV model may very well take much of the control over interactive programming away from operators, cable will still have a vital role to play and an advantage against its competitors through its ability to market, localize and personalize services, Rogers notes. He declines to speculate on what the business impact might be long-term under the scenario represented by Intertainer, but he suggests cable has little to fear.
"You have to have the ability to personalize choice," Rogers says. "My own view is that cable has a huge headstart."
The cable industry has labored through much of this year to define a standard set of APIs (applications program interfaces) that would enable cable operators to control access to interactive TV through the proprietary side of their digital distribution networks. At the same time, OpenCable strategists have included cable modems as part of the set-top design along with IP-to-NTSC format conversion capabilities for TV display of Web graphics, believing that, offering customers the ability to surf the 'Net via TV will be an important market driver to OpenCable box penetration, as well as serving as a protection against inroads by independent Web set-top purveyors, such as Microsoft Corp.'s Web TV and its allies.
"There are two dangers here," says a source close to the OpenCable process, asking not to be named. "You have the prospects of customers choosing to get their interactive TV services from providers over the Web who don't have a direct fee-sharing relationship with the cable operator, which would tend to cannibalize the operator's proprietary ITV offerings.
"And you have the problem of IP television clogging the data channel, which could force operators to add more data channels," he adds. "But that would only facilitate access to the outside providers, possibly creating even more customers for them."
Sources say uncertainties over where the OpenCable box is taking the industry have added to the difficulties of reaching agreement on standards. Some strategists believe a "thin client" paradigm, where the cable operator can use centralized computer processing to assure themselves greater control over the data as well as TV revenues, is the answer, while others are pushing for high-processing capability as a means of ensuring the highest levels of interactivity are at the premises to accommodate the growing convergence of various appliances and their applications in the home.
"We're trying to define a very complex set of APIs without anointing any particular set-top OS (operating system)," says Don Dulchinos, director of business development at Cable Television Laboratories Inc., which is spearheading the OpenCable protocol process.
"It remains to be seen where the pedal will hit the metal on the issue of thin clients vs. computing-intensive set-tops," Dulchinos adds. "We're in discussions with Sun (Microsystems Inc.) on the question of how we can take advantage of Java to support applications across the network that can run on limited computing power at the set-top."
The emergence of purveyors of long-form TV mapped to the IP format represents a challenge to cable's strategies that wasn't there when the OpenCable plans were first formulated nearly one year ago. Then the Internet was deemed ill-suited to supporting any business plan that envisioned delivery of movies or other TV programming other than short, streamed clips. But the opening of high-speed access routes to the home via not only cable modems but also high-speed DSL technology and wireless broadband, combined with the creation of ever more high-speed long distance data networking bypasses of the Internet backbone is changing the business perspective.
Another sign of what is to come — and the financial market's support for the idea — can be found in the recent changes at Dallas-based Broadcast.com Inc., formerly AudioNet Inc., the leading supplier of audio services over the Web. Officials at the company, now in a quiet period following a highly successful initial stock offering, decline to discuss details of their plans, but the company has already created a spot on its Web site for people who have high-speed access to receive broadband data-quality video, which typically runs at frame rates and resolution levels below standard TV but substantially above the levels that are possible in dial-up mode.
"Our plan is to offer movies, old TV shows and other material on-demand over our broadband video channel," says a company source, asking not to be named. Like other firms in this category, including Los Angeles-based Alternate Entertainment Network Television Inc. and New York-based Pseudo Programs Inc., Broadcast.com is using IP multicasting over specially prepared network facilities to achieve more efficient distribution of its content from local caching centers.
Some cable operators have taken comfort in the difficulties such entities face in putting together the end-to-end high-speed distribution system that would be necessary to make them formidable challengers to cable's headend-based distribution system. But these new entities are exploiting new implementations of IP multicasting, directory management and other protocols in routers and switches in conjunction with high-speed fiber links to overcome the traditional bottlenecks.
"Twelve months ago, people were looking at (IP multicast) trying to figure out what it was and what it meant to them and their networks," says Martin Hall, CTO of Stardust Forums, a consortium of about 100 vendors, service providers and enterprise users devoted to fostering multicast development. "This year people understand what it means to their networks and are moving to fullscale deployment plans."
In multicast mode, routers distribute a given file to all hosts that have signaled they want to receive the material, using the Class D addresses of the IP addressing hierarchy. This summer, participants in Stardust began what Hall expects will be a series of interoperability tests of products employing version 2 of the multicast protocol stack and various techniques now under consideration for the next generation of the multicast standard. The goal of these ongoing developments is to provide support for very large multicast operations dedicated to video and other bandwidth-intensive applications, Hall notes.
Server as well as router vendors are implementing various solutions to these requirements, including the hooks that allow for premium pricing of multicast services, says Rod Murchison, product manager for IP multicast at Newbridge Networks. Efforts underway within an ad hoc group known as the "Directory Enabled Networks" initiative, spearheaded by Microsoft Corp. and Cisco Systems Inc., are key to turning multicast into a distribution medium with mass-market potential, Murchison adds. "What the DEN initiative says is that we'll create a common scheme for all the policy questions, where we'll be able to determine the priorities and authorizations associated with each user," he says.
Other new activities adding flexibility and scale to multicasting involve techniques such as "IGMP Snooping," where the InterGroup Management Protocol that is central to multicasting is enhanced to allow layer 2 devices such as ATM (asynchronous transfer mode) switches to segment traffic on a port-by-port basis, thereby limiting the saturation effects of multicasting. "New switches are coming out with multicast containment protocols built in, but existing switches may require hardware or software upgrades, depending on the vendor," Murchison says.
Along with support for multicasting, the Directory Enabled Networks initiative is also promoting development of OSS (operations support system) solutions that will give service providers the means to run their businesses efficiently on a nationwide basis, with centralized control over provisioning of services, billing and network management. A key player in this domain is Bedford, Mass.-based American Internet Corp., which has just released a new version of its software that makes use of the increasingly popular Internet directory system known as Lightweight Directory Access Protocol (LDAP) to simplify linkage of information across several applications fields.
With LDAP now nearly ubiquitously available to provide the means for gaining access to server directories throughout the IP domain, the Internet industry has been able to add more applications through the LDAP APIs in a way that enables service providers to take a standardized approach to managing their networks, says AIC founder and board member Throop Wilder. Cisco has adapted AIC's technology to its new line of router switches, providing a built-in means by which providers can implement these capabilities, he notes.
"We've made a strategic decision to invest in broadband in order to address the need for an OSS that provides the command, control and integration that is associated with OSS in the telephony world," Wilder says. "The great thing about IP is that you can capture a ton of information by being an element in the network."
AIC's system provides the linkages between the basic IP address information of each user and virtually any type of application, starting with the initial installation and registration of a customer and extending to provisioning of specific services, billing and the customer care process, Wilder says. This integration allows service providers to more thoroughly automate operations and to scale their systems as the customer base grows, he notes.
These developments, of course, are not lost on the leading providers of high-speed cable data services. MediaOne's data service unit has been using a first-generation version of AIC's system in rollouts during the past year and is now moving to put the newly-released second generation to work, says Tom Axbey, vice president of marketing and business development at AIC. "We've also been working with (the Time Warner side of) Road Runner, @Home and Adelphia (Cable Communications)," Axbey notes.
In addition, 3Com Corp. is making use of the software to tie together the operations and features capabilities of modems conforming to the new DOCSIS (Data-Over-Cable Service Interface Specification) standard, notes Niraj Jain, director of strategic alliances for cable access products at 3Com. "Our customers have found that Network Registrar provides the robustness, scalability and flexibility necessary for commercial data services," Jain says.
Adding further to the momentum in the IPTV space is a new generation of media streaming software that enables content developers to create video and audio files that will stream data at rates suited to the access speeds of end users. Moreover, these tools make use of the new SMIL (Synchronous Multimedia Integration Language) protocol recently endorsed as an Internet standard by the the World Wide Web Content Group (W3C). SMIL permits developers to mix text, animation and still pictures along with audio and video in streamed media segments, greatly enhancing the role of streaming in defining the nature of content on a Web site.
These capabilities are key components of the second-generation Real Networks Inc. system, which was recently released for beta test in preparations for commercial rollout, probably later this year. Other suppliers of streaming software, including Microsoft, through its NetShow product line, are said to be preparing to introduce similar capabilities with the next versions of their tools.
What these capabilities add up to in terms of the transformation of content on the Web was hinted at in some initial applications that were available for viewing from RN's server at the time of its "Generation 2" beta release in July. For example, the Sony Music Entertainment unit of Sony Corp. now offers users who have downloaded the G2 RealPlayer plug-in access to streamed music videos which also include information about the artist and the song that changes, along with relevant hyperlinks, as the song progresses.
Most compellingly, from a broadband access standpoint, users on high-speed links automatically receive the streamed package at frame and resolution rates far beyond what dialup users can access.
"There's a lot more flexibility to create interesting content with these new tools than we've ever had before," says Jeff Garrard, senior executive editor for CNN Interactive, which is one of about 70 entities participating as "channels" on RN's RealPlayer Web page.
Such developments have many implications for cable providers of high-speed access services, starting with the fact that the SMIL-enhanced media presentation via streaming that CNN and others are developing is in many instances superior to the custom-made, non-streamed enhanced content that some of the same as well as other entities are supplying to the cable providers. Very soon, as CNN goes to higher rates and integrates SMIL more thoroughly, cable data subscribers who download the G2 RealPlayer will have a more compelling version of the network's online services via its Web site or the CNN channel on the RealPlayer than they can get through the proprietary CNN content component offered over the branded @Home product.
@Home Network, which is providing broadband-enhanced versions of CNN and other material using large file downloads and playback via Apple Computer Corp.'s Quicktime multimedia software, is likely to switch over to streaming once CNN Interactive begins offering a high-speed version of its files to anyone with high-speed access, whether they're @Home subscribers or not, Garrard says. "@Home has had issues with using streamed media, especially for short-form content, because of their need to manage their network as efficiently as possible, especially on the access side, but the new streaming environment probably changes some of the underlying operational assumptions," Garrard notes. "Whether they'll go to RN or Netshow or both remains to be seen."
If, as seems inevitable, content suppliers using RN's G2 and other streaming systems as well routinely add a high-speed delivery option to their streaming files, cable operators can expect users to be pushing bandwidth contention levels well past the levels underlying the current design parameters assigned to the typical HFC (hybrid fiber/coax) network. Such problems, representing as they do the availability of content with the power to draw subscribers to high-speed services, are the kinds of problems operators should like to have, argues Kelly Ruebel, director for marketing and sales at MediaOne Group's Express unit.
"We're very focused on content," she says, "but, I have to say, what's happening over the Internet at large is that there are a whole lot of things people want to access which you can't really appreciate unless you have high-speed service, either because of the long waits to download files or, in the case of streaming, the limited quality of video delivered over dialup lines."
Indeed, the expanding use of broadband-enhanced streamed media, combined with the launch of companies devoted to long-form IPTV, suggests cable operators can look forward to escalating consumer demand for high-speed data links, irrespective of whether the cable companies themselves are creating compelling high-speed data and ITV content. The question for cable operators is whether they will come up with the network designs and business plans that can turn this rising tide to their advantage.