Tapping the Braintrust
The cable industry's chief technologists are under immense pressure to lay the foundation that will allow their companies to roll out myriad new services, including digital TV, interactive services, high-speed data and telephony. But as deployments move ever closer, new issues and obstacles crop up.
CED Editorial Director Roger Brown, Multichannel News Technology Editor Jeff Baumgartner and industry analyst Leslie Ellis recently convened a roundtable to explore these issues.
On the call were Mark Coblitz, VP of Strategic Planning at Comcast Corp.; Nick Hamilton-Piercy, CTO at Rogers Cablesystems; Greg Braden, executive vice president of engineering and telephony operations at AT&T Broadband; Chris Bowick, senior vice president of technology development at Cox Communications; and Jim Chiddix, CTO of Time Warner Cable.
What follows is an edited transcript of the conversation.
CED: Digital television, which today consists of primarily more channels and an electronic program guide, is pretty stable. Can each of you discuss what you'd like to phase in, in terms of interactive applications going forward?
Coblitz: Our focus right now is (video-on-demand).
CED: And then what happens after that?
Coblitz: We are looking at a number of different things, but most of the time in our company (we) try and focus on something you can understand where the business is and drive that forward, and so next year that focus is on VOD. There will be other things that we will experiment with and look at that have to do with advanced services and interactive advertising, and some other things, but they are more in the experimentation phase as opposed to the "let's get out and deploy it." And for the "let's go deploy it," that's VOD.
CED: How is the work you are doing with Intertainer going in terms of an IP platform versus an MPEG platform?
Coblitz: In the trial work we are doing with them, although they are doing a lot of IP work, we are doing an MPEG trial.
Hamilton-Piercy: About three or four weeks ago, we commercially launched WebTV on the Explorer 2000 as a commercial service to our customers. We've overpriced it at $19.95, not expecting too many people to (sign up), and we haven't marketed it other than by word-of-mouth, and already we've got about 1,000 customers. It's available throughout our Ontario systems. It's a WebTV classic service, so it's got e-mail and walled garden specialized stuff and a back door where you can go out to the Internet. It's causing no technical problems.
Braden: Our emphasis is fairly similar to the one that Mark outlined. Our primary goal is to move ahead with video-on-demand. As you are probably aware, we are working with Diva, and we have, or will be, launching VOD services in several of our markets this year and next year, and then (we will) follow that (with) a move into interactive TV. We are currently working with Liberate. We'll have a trial beginning with them toward the latter part of this year, and we are planning to move into a trial with Microsoft TV the early part of next year.
CED: Greg, some observers might argue that everything you've tried to do so far has been great, but it was probably too much all at once. Would that be fair to say?
Braden: No, I don't think so. We've had a lot of different activities underway, aimed at how to integrate these services together. That's a challenge—there's a lot of moving parts on these things, there's no question about that—but I think our focus is clear in terms of VOD, then ITV. Now there are piece parts of both of those that we are continuing to work before we go commercial with them, but I think they are coming along well. Tony (Werner, former CTO) did a great job, I think, of getting our focus and getting the right activities in place. I'm delighted to have the opportunity to pick up where he left off, but he certainly has put us down the right strategic path and I'm pleased that we have the opportunity to keep pushing them forward.
Bowick: You guys know, I'm sure, that we've actually announced (VOD trials) in a couple of our markets (and) we've got a full-scale rollout going on in San Diego right now. We've announced a trial in Phoenix, which is currently up and running to employees, and we will take that further.
CED: Is that also with Concurrent?
Bowick: We've got both with Concurrent. We've also announced an interactive television trial with Liberate on the S-A platform in San Diego, which is currently up and running with employees. We haven't taken it out to consumers yet because Greg hit the nail right on the head—it's a very, very complex environment and we want to make sure it's up and running, and running well, before we do that. I hate to sound like a broken record, but the order of priority, if you look at those two, is video-on-demand and then interactive television.
CED: In the Liberate tests, is that Liberate on top of PowerTV on top of S-A?
Bowick: Yes, it is.
Chiddix: I don't think you can overemphasize the magnitude of rolling out any of these services. Just rolling out digital—on this call you've got people who represent cable systems that serve the great majority of the country—and there are tens of thousands of employees who actually have to implement all this stuff, so getting the processes in place to first roll out digital, and once that is stable to roll out video-on-demand, those are enormous tasks. We're down the road on that. We've got digital launched in most of our systems; we've launched VOD to a couple hundred thousand subscribers in three of our systems with a lot more to come. Interactive TV is certainly an interesting future area, but the nature of the business is really unknown right now, so that takes lower priority than getting this basic platform and this first interactive application that really does generate substantial revenue, VOD, in place.
Hamilton-Piercy: I like VOD better (than WebTV), but it has a lot of challenges. Content, capital outlay, because you have extremely expensive QAM modulators sprinkled all over the place. (WebTV) doesn't need any of that capital outlay. It has operational issues of course, so you have to have customer service people fully trained to be able to support it. There are challenges like the French-English language in Canada, which took a little bit of extra software time. But frankly, looking in hindsight, it was the least stressful and least intense of any of our new-service launches.
CED: Doesn't that make you feel good, Greg?
Braden: It certainly does.
CED: Jim, have you found any points of harmony between AOL TV and what your plans beyond VOD are, seeing as how it's at least hoping to be your new parent (the merger was not complete at press time)?
Chiddix: Well there certainly is something there, and we've had preliminary discussions, but I'm sure that we will eventually find AOL applications to run on our set-top box, but again, the focus for me is VOD for now.
CED: One more interactive question for all of you: With the electronic guide as the primary resident application in the set-top box, there are varying opinions about whether or not it makes sense to interactive-enable the guide. For example, TV Guide's slant is to put three "clickable" things on the screen, and (the MSO) gets some percentage of the ad revenues. Can each of you discuss what you are doing with the guide?
Chiddix: Our guide is very straightforward. It is not encumbered with lots of advertising and other distractions. It's a guide that is supplied to us by set-top box vendors. Both Pioneer and S-A have supplied us with guides that our customers like a great deal. In these guides, the active picture shrinks into the upper corner of the screen and then is surrounded by guide information which lets people navigate through the services. Exactly how we will go from there to interactive services remains to be worked out.
CED: Chris, what are you thinking on that, especially with what you are doing with WorldGate?
Bowick: It's really a very complex issue when you look at our marketplace. We've got the S-A guide deployed in about 40 percent of our markets, so ditto the comments Jim made on that. And we've probably got 40 percent StarSight guide on the GI platform, and the other 20 percent or so are TV Guide national addressable control. TV Guide has been out proposing its business case to all the various MSOs, and we just haven't liked the business relationship being proposed at this point, hence the announcement of moving forward with other MSOs to work on our own guide independently. I don't know exactly where that's going to lead yet; we don't currently have it in trial, but we do have plans to put it in trial sometime next year, and I don't have any specific timing for that.
Braden: I think everyone knows we are moving toward a DCT-5000 type of platform as quickly as we can, and in that environment we think it makes a lot of sense to have a presentation engine as well as an execution engine, so embedding interactivity in the guide itself is not something that we would necessarily advocate. (In some of the) boxes that we are using today, the DCT-2000s, etc., doing some of that makes sense because of the memory capacity differences, etc. But where you have the memory capability to operate those things independently, that's really where we are headed in our strategy.
CED: Is everybody galvanizing around the thick client approach versus maybe something that's more of a thin client approach for interactive applications?
Coblitz: It depends on what you mean by "thin client." If you look at the DCT-2000 as being certainly not a thick client, and then come back to the statement that I made that interactivity (is) a very specific set of revenue-generating interactive services that can be implemented and make money for us now, then the DCT-2000 and the Explorer 2000 are something that we are all pushing for a lot of applications on. So there's what Greg said, which is looking toward the thick client, where that doesn't take away from the millions of thin clients that we all have out there that can do interactive applications. I think you are going to see a mixed world.
CED: This all comes back to what kind of resource you are putting in the box, and one of the things that keeps coming up is the amount of memory. Can you guys talk about how you plan to populate the box with memory next year?
Bowick: I'm not so sure I can answer that. What I can tell you is, I haven't yet (purchased) DCT-5000s in any quantity, yet. So I don't know exactly what that's going to look like. I will tell you that I will be putting out an RFQ for set-tops for the next two to three years, and in that process, we will be spelling out what our needs are.
Hamilton-Piercy: WebTV just about fits in a 2000. It fits a little better on a 2010, and it works better and faster on a 3000. But it's still on a svelte client, I guess you'd call it. It's running on the Power TV operating system, not Windows CE.
CED: Let's talk about high-speed data. What's the current status of your roll-out plans?
Hamilton-Piercy: We are one of the unusual operators that doesn't run DOCSIS 1.0 yet. We have 300,000 high-speed customers. We've been using a proprietary LANcity (modem) for about 130,000 customers and Terayon for the rest, and we are adding thousands more. We plan to launch DOCSIS using 1.1, and not go through 1.0.
CED: Was that simply because when you started there was no 1.0?
Hamilton-Piercy: Yes (and because the goal was to) get market share and not let technology get in the way. We thought that the local telephone company Bell Canada would have been far more aggressive with ADSL. Luckily, they've stumbled, as you'd expect, and we've just kept going.
CED: What kind of competition are you guys beginning to feel from DSL in the various systems in which you've launched data?
Chiddix: Certainly there's competition, but we are still in a position where it's all we can do to keep up with demand for additional installs. Even in Portland, Maine, where we got an early start and have a market share in excess of 20 percent, our connect levels are as high as they've ever been. Right now, the demand is still really unmet in aggregate by both of us.
Braden: We ended the third quarter with about 888,000 high-speed Internet access customers. Those are both @Home as well as Roadrunner customers in our footprint. We're aiming to hit 1.1 million (by the end of the year). We are doing about 3,700 net adds per day, and did almost 200,000 net adds in the quarter. We are seeing tremendous growth in this business—we are running hard to keep up with the demand. But we are seeing very aggressive efforts by Qwest in some of the markets in which we operate.
Hamilton-Piercy: We've got 13 percent average penetration across the whole country now and there's absolutely no sign of it dropping off. In fact, it's hockey sticking the other way. So this is probably a 30-percent-plus phenomena when we are through.
CED: Does the presence of DSL as a competitor just create more awareness of the category?
Hamilton-Piercy: In Canada, the DSL is identical in price to us. There's a marketing campaign where they talk about shared service and how useless it is, and we talk about living far away from the central office, so you slam each other in the marketplace, but the net result is that more customers come on. So I think its actually adding to the awareness.
Bowick: Nick was talking earlier about proprietary modems, and we've got the whole range of proprietary modems out there too, so we're simulcasting both DOCSIS and proprietary modems and will for the foreseeable future. We're still growing, but we haven't announced our third quarter numbers yet. (Since then, Cox announced that it had 399,000 high-speed data customers, or roughly seven percent penetration, as of the end of September.)
CED: What about the transition to 1.1? How painful will that be? Is it really just a software upgrade?
Coblitz: It's never as simple as "it's just a software upgrade." But, in general, we have planned as much as one can possibly plan for that to happen. We had a number of proprietary markets, but everything we have been launching this year has been DOCSIS 1.0 with the plan to go to 1.1 as soon as there are certified modems and qualified CMTSs. The modems that we have been supporting are the kind that could be shifted to 1.1. We have also been simulcasting.
Braden: Our path is very similar to the one that Mark outlined. We have an embedded base of proprietary, we will have DOCSIS in all of our markets by the end of this year and we are looking forward to being able to migrate to 1.1 via software upgrades.
Chiddix: We have DOCSIS everywhere, but we've also launched a voice-over-IP trial in Portland, and it's been interesting that the bugs we've worked out there largely have to do with the gateway, and its functionality, rather than DOCSIS itself.
Coblitz: We've all got a modified DOCSIS that allows us, in trials, to have quality of service on top of 1.0. That isn't really DOCSIS anything, because it hasn't been certified or qualified, but it allows us to see how that's really going to work. It's been our experience that it is working fine.
Hamilton-Piercy: With IP telephony as a driver, CMTSs have to be a much more rugged part of the telecommunications system. The other thing that one has to consider, is that when we started launching data services, we had very high asymmetry between the downstream/upstream paths. Recent research shows that's getting much more symmetrical because of applications like Napster. So one has to say, if I'm going to 1.1, shouldn't I also use these so-called "turbocharging" technologies like Digital Furnace to get myself more upstream capacity.
Braden: I would add to that the (need for) OSS support when you put the 1.1 platforms in place to do voice-over-IP and other applications. Understanding how that will work from an OSS perspective is also critical for all of us.
Coblitz: I want to add to what Nick said because I think people tend to look at what we are doing as just best-effort data. We are building robust IP platforms for a series of services that need higher data rates in aggregate but also need (high) availability because people are going to depend on us for an awful lot of things, including telephony. I would say we need to get to (higher levels of service) availability because people (will) become more dependent on things that are presented to them by us.
CED: When you talk about voice-over-IP, are you thinking in terms of second line or teen line, or are you thinking in terms of lifeline?
Braden: Our whole broadband strategy is based on doing whatever we can to displace an ILEC that may be the incumbent in the particular home. So we believe the platforms that will allow us to provide VoIP have to have a degree of robustness and ruggedness so that we can match up with first-line quality requirements. But, we'll see some second-line applications, or voice-over-data type applications, which we are also going to be pursuing, but our strategy will not be built and is not built around a second line only type of view.
Bowick: We are in the switched camp at this point, and are moving down that path with quite a lot of growth (Cox had more than 205,000 telephone customers at the end of the third quarter). That's not to say we are keeping our heads in the sand. In the last several weeks, we've had every (voice-over-IP) vendor known in here to see what the state of the fleet looks like, so that we can better understand what our migration path (might) be from switched to voice-over-IP. We, too, are feeling that you need a carrier-class type capability, 911-capable service with all the operational support systems behind it. But you've got to start somewhere with voice-over-IP, and that would certainly bring up the second line initially as a possible launching point.
CED: Chris, if you've had all those people in there talking to you about VoIP, what's its status?
Bowick: I don't think it's ready for prime time yet, and I don't know that anybody would tell you it's ready for prime time yet. When will it be ready for prime time? I don't exactly know that answer yet. We are getting various points of view from the vendor community. But I think you will continue to see trials through the first half to three quarters of next year before you see any real serious voice-over-IP launches.
Hamilton-Piercy: With voice-over-IP, are you talking about end-to-end throughout? Or are you saying, if someone has a 5ESS (switch) and a GR-303 interface and IP in the access network?
Coblitz: It depends on if you've got switches, or you don't have switches and then what your strategy is. Chris used the term "ready for prime time," and that of course brings a lot with it. If the question is, is it ready to be the primary line telephony solution, then I certainly wouldn't disagree with Chris. If it's, can we get this stuff working so that you could deliver real product to people, it depends on what your definition of product is. I know we use the term "second line," but that's not actually what it is. In other words, voice-over-data is not a second line. You don't hear the players in the marketplace today saying "I'm selling you a second line," and there's a reason for that. Because the second line you get from the LEC has all the characteristics of the primary line.
Braden: I'd add a couple of points. Like Chris, we have a large base of circuit-switched, and we announced that we just passed our four hundred thousandth telephone customer. All of those customers in the broadband arena are circuit-switched customers, and we'll continue to grow on circuit-switched. There are probably three paths of migration to IP that we think will come into play for us, and we will use a mix of those three paths. One path is (to use) a full end-to-end IP solution that uses a soft switch versus a gateway, (and) we will deploy that type of foundation in markets where we may not have launched circuit-switched previously. We will also use what we call our IPDT solution which we are testing up in Boulder, Colo., which is IP as the access technology through a gateway, and then handing off through a GR-303 interface into a 5E. The other piece will be migration of the circuit-switched HDT backplane to support both IP originated calls as well as circuit-switched originated calls. We think that we can do that in a logical fashion, in a fairly elegant fashion. That's one of the advantages with the broadband networks that we have. The risk of stranding capital in your circuit-switched environment is minimal to none.
Bowick: Exactly. That's exactly what our plan is.
CED: Regarding network power versus battery back-up, what do you as operators do when the power grid goes down? What's the latest thinking on that?
Hamilton-Piercy: We have a slightly unique situation. Because we have a national cellular operator which we own as well, (we could have) a cellular chip as part of the modem terminal adaptor, so should the power disappear or the signals disappear, immediately there is a cellular connection giving you at leastlife line services to that home. Incremental costs to do that seem to be quite moderate, and as long as it's maybe only incoming calls, the traffic on the cellular network isn't too bad.
Braden: We do network powering today. That is our standard and we will continue to move forward with network powering both in the circuit switched as well as IP arena. We do have some phone customers that operate off of an LPSU, or a battery pack at the house, and we are working over time to eliminate that and put them on network power. The work that we have done clearly indicates that lifecycle costs of network power are much better and performance is much better than battery power.
CED: Jim, what are Time Warner's latest thoughts on telephony?
Chiddix: We've got an IP telephony trial up, and we think that that's in our future. I think we are perhaps more skeptical than the rest of the industry about the economics of what is called lifeline telephony, which we think has very expensive cost structures. And given the unknown characteristics of the voice market in the future, putting a lot of capital against a voice product seems imprudent. We'd much rather have a voice product on a low-cost basis, and then regardless of what happens with voice, with all the competitive factors of IP from various sources and wireless, we can still have something that adds little incremental cost and still can be marketed at whatever the market will pay.
CED: Regarding home networking, what are the concerns and what are the challenges?
Coblitz: We have to think about home networking from two different perspectives. The first perspective is the one that I think many of us are already doing, which is hooking PCs together and helping our customers make a high-speed data connection more valuable. What it doesn't do is create ongoing revenue streams. So there's another world when all kinds of things are connected to an always-on IP network. If that's home networking, then the basic challenge there is defining what's really interesting to a customer and then taking the work we've done in DOCSIS and in Packetcable, and extending that kind of capability through the home networks. That might result in things like quality of service, and various forms of signaling among devices, and how those networks are monitored, which are going to take time to develop. Lots of challenges there.
CED: We've been hearing a lot from companies that are developing so-called residential gateways. Where do you see that going? Where will this device reside, once all those different services are flowing through it?
Braden: I don't think we have a strong opinion on where it is. Given the fact that our strategy is built around a full suite of voice, video and data services, and knowing that some of those services will require things such as lifeline capability, if we are going to displace the incumbents, that tends to say that we are going to have to have at least some part of the functionality on the side of the house. Whether it's all there and then you have a different type of gateway approach inside the house, I don't think we fully understand yet.
Chiddix: But one of the points of home networking is that perhaps it doesn't matter where it is.
Braden: I absolutely agree with that, Jim.
Bowick: You know our customers are doing it (creating home networks), and they are going to do it with us or without us. I think Mark asked earlier, "How do you make money at this?" That's something that I think we're all struggling with, trying to figure (it) out. Internally, (we) have a group that's tasked with trying to figure it out from a business modeling standpoint and to try and figure out how we help our customers right now with their current home networking needs, and then how we evolve that into a business longer term with a so-called residential gateway.
CED: So it really sounds to me then that this is more of a business issue than it is really a technical issue?
Coblitz: Well, there's clearly a business issue overlay. There are a lot of people who are building technology and there are going to be lots of choices as to how to hook things together, but some of them provide positioning within a business model that might work, and some of them do not. There are gateways that are little tiny boxes that can sit somewhere and do a certain set of applications. Then there are gateways that are complicated servers. So it depends on what you are trying to do. One of the issues will be, where is stuff stored? In the home on a separate device? In a gateway? In our headend? On the Internet? If there's an application running, who makes sure that that application actually works? All of those issues are significant challenges.
CED: Could each of you step through your rebuild/upgrade progress you've made to date and how that compares to what your goals have been? Is there a time coming shortly when the spending spigot is turned off?
Chiddix: We are essentially done with the properties that we owned when we announced our upgrade project. In the last year or two, we have acquired new properties through trades and partnerships, and those are all in one stage or another of upgrade. But our 20 percent of the country is by and large upgraded and we are mopping up the remains. Having said that, we do have work going forward both in terms of expansion and in terms of this mopping up process next year. But our spending on the plant itself is going to taper off beyond that and shift over to the terminals that go at the end of the plant, and help us (deploy) the businesses that this all enables: modems, set-top boxes, and so forth.
Bowick: We'll be about 70 percent completed by the end of this year, and we are shooting for something upwards of 80 percent completed by the end of next year. In our top 15 markets which represent 70 percent of our customers, then those numbers increase by about 10 percent each. I don't see a significant decrease in capital spending next year.
Coblitz: We're going to end this year with almost 8 million of the 12 million homes passed that we have being fully upgraded, and an additional group that have been upgraded to a slightly lesser degree. The target for 2001 is that 11 million of the 12 million homes passed will be done and then you will start to see some tapering off.
Braden: As of the end of third quarter, about 78 percent of all of our plant had been upgraded to 550 MHz or higher. The vast majority of that is 750 MHz. About 73 percent of our total plant is two-way activated. We will push next year to complete most of the balance of that. In the third quarter, we added an incremental 600,000 revenue-generating units, which covers digital cable customers, high-speed Internet access customers, and telephony customers. (Spending) will begin to taper off in 2002.
Hamilton-Piercy: Obviously our system is smaller than the big guys there, but the stuff we've acquired in the swap with Shaw hasn't been rebuilt, so we've got that issue. I think our money's going to go into getting further segmentation of traffic, putting servers and maybe QAM modulators for VOD out into hubs.
CED: Then it all goes to software integration and software, right?
Braden: Yeah, which we all know will go flawlessly.
Coblitz: And be totally inexpensive. But it's going to be less than the hardware that we've been putting on the outside plant. Certainly all the analysts have been forecasting greater free cash flow, and that's really where we're headed.
Bowick: That's where we hope we are headed.