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The digital transition – a (bandwidth) losing proposition?

Sun, 09/30/2007 - 9:30pm
Brian Santo, Editor

Most cable operators will have to transmit two versions of every
must-carry channel, one analog and one digital. That’s not the worst thing that
could’ve happened – in fact, it might be a good thing.

As recently as 2005, operators were eagerly anticipating the mandated broadcast TV digital transition. Operators’ natural assumption was that since there would no longer be any terrestrial analog transmissions, they would be able to take the bandwidth used to transmit 60 to 80 analog channels – a vast allocation of spectrum 450 MHz to 550 MHz wide – and re-purpose it for any number of things. The day analog terrestrial TV went away – Feb. 9, 2009 – couldn’t get here fast enough.

The Digital Transition...Yeah, well, so much for that. In the intervening months, events and circumstance have conspired to make it so that not only will MSOs not be able to fully reclaim that spectrum until 2012, but the digital transition is actually going to cost bandwidth until then.

There is some silver lining in the situation, to be sure, but it’s meager compensation for the big, dark cloud.

A big chunk of the good news is that the bad news isn’t as bad as it could have been.

On Sept. 11, the Federal Communications Commission (FCC) issued a decree that, in practical effect, obligates cable operators to transmit two copies of must-carry channels – the primary digital signal and an analog signal (see “FCC puts dual-carriage onus on cable,” Click Here). The same order says the cable industry has to carry analog signals through 2012.

So, instead of dedicating only about 3 MHz for the compressed digital version of each must-carry channel (that’s for a high-definition signal; it could be less for a standard-definition signal), cable operators will have to devote up to 9 MHz – the 3 MHz or so for the digital signal, plus 6 MHz for the analog version they had hoped to drop.

Cable operators who aren’t already simulcasting must-carry channels should expect to have to find, on average, an additional 42 MHz of spectrum somewhere to honor dual-carriage obligations.

From an objective standpoint, the dual-carriage decree was a bit odd. It appears to be a setback, but it was actually a reprieve. In fact, it was two reprieves wrapped up into one – for some.

As of June, there were approximately 65.5 million cable subscribers, according to the National Cable & Telecommunications Association (NCTA). Of those, the NCTA says about 35 million are digital subscribers, which leaves about 30 million analog subs. (The FCC calculates there are approximately 40 million analog cable households.)

Ostensibly, the FCC’s purpose with the dual-carriage decree is to ensure that cable operators do not leave their analog subscribers stranded without a usable signal.

But it’s inconceivable that the cable industry would abandon and alienate any of its analog customers.

The cable industry long ago realized it actually wants the option to simulcast analog and digital signals for many channels after the digital transition, for reasons we’ll get into shortly.

The FCC decision on Sept. 11 was less about protecting analog cable subscribers and more a negotiated settlement allowing cable operators to avoid triple carriage.

The FCC was actually considering dictating that for each must-carry channel provided in both standard definition (SD) digital, and HD digital, cable operators would have to transmit those two, plus the analog signal.

The NCTA got the FCC to back off of triple carriage as both an onerous and unnecessary burden. Now operators need only carry one digital version of any must-carry channel – the broadcaster’s primary signal. If a broadcaster has both an HD and SD stream, it gets to designate which is its primary.

That was the first element of the reprieve. The second is the three-year extension that allows cable to keep analog customers through 2012. Explaining why requires a bit of backtracking in time.

When first proposed, the digital transition was popularly presumed to be for the entire TV industry, not just broadcasters. In fact, some cable operators were thinking about beating broadcasters to the punch, and going all digital well in advance of the deadline date.

Charter Communications led the charge in 2004 with an experiment in which it converted all of its customers in Long Beach, Calif., to digital – installing a digital set-top box (STB) with each – and ceased transmitting analog signals. Charter said it was satisfied with the technological aspect of the experiment, but did not replicate the transition through the rest of its systems.

What happened?

New technology combined with a proposed regulation that cable operators hoped to delay until it became moot, but which ended up being imposed after all.

There are several new STB technologies, but the most pertinent one in this context is the OpenCable Application Platform. OCAP, lately referred to simply as OpenCable, is a means of making all STBs – no matter who the maker, no matter who the user – appear to behave the same. It also requires more memory and indicates more processing power, both of which increase the cost of a set-top.

Then there is the CableCard. The FCC insisted that as of last July, every new set-top deployed would have to have a separable security module, which added even more expense.

Suddenly, digital set-tops became much more expensive. Prohibitively so.

It was easy to imagine giving every subscriber a digital box when the price of digital STBs was going to remain modest, explains Wayne Davis, now the CEO of Vyyo but in 2004 the man at Charter Communications who pulled the trigger on the Long Beach experiment.

The transition to all-digital...
The transition to all-digital
will ultimately free up more than 450 MHz.

“‘Let’s put digital boxes everywhere’ is an easy plan to have when they were all going to be $50 each. Now there’s CableCard, OCAP stacks, more processing power, and they’re more like $150,” says Davis. “If, in half my market, I have to go from no digital set-top boxes to thousands at $150 each, plus $30 to $50 to install them, and another $30 to $50 any time you have to take them out – cable is a high-churn business – it becomes onerous.”

Now multiply those numbers by the 30 million analog subscribers in the U.S. that have yet to be converted to digital. The cost of the boxes alone could reach $4.5 billion.

The fact is the cable industry actually can’t afford for analog to go away in little more than a year. So the FCC’s three-year extension compelling operators to continue with analog signals is both a reprieve and a deadline. It gives operators that much more time to convert to digital themselves, and do so more gradually, in three years rather than one.

In an odd twist, carrying analog signals for an additional three years may actually become a competitive advantage versus the direct broadcast satellite (DBS) providers and perhaps the telcos.

There are about 21 million households with analog TVs getting their signals over the air, according to a two-year-old report from the Government Accountability Office (GAO), the investigative arm of Congress.

What happens to them? The plan is that the government will give everyone two coupons, each worth $40, to buy a digital-to-analog converter box that will translate terrestrial broadcast digital signals to make them comprehensible to legacy analog TVs.

It’s one coupon per box. Aside from questions about whether the coupon program is adequately funded (and there are those questions), the other question is about those people who have more than two TVs.

There is an average of well over two TVs per U.S. household, which means there are plenty of homes that may have more TVs than they’ll get converter coupons for.

Might some of those TV viewers convert to cable if doing so allows them to keep their existing TVs up and running?

If a cable operator has an analog feed, “you don’t need a set-top for the second, third, and fourth TV in the home,” says Marc Tayer, Imagine Communications’ SVP of marketing and business development. “And some analog subs don’t want a set-top box. So having a core analog tier is advantageous.”

But cable’s dispensation to continue to offer analog channels is certain to last only until 2012. What then? Convert everyone to digital? Or petition to keep offering analog signals? What cable’s options are at that point remain to be seen.

So the cable industry would no doubt prefer to carry only one signal from each must-carry broadcaster, but that issue is now completely decoupled from whether or not cable operators will continue to carry analog signals or not.

The FCC did provide for another option – a cable operator can carry only a digital signal only if every single customer can get the signal.

Given the economics of deploying digital set-tops, that’s unlikely for many, but it is certainly within the realm of possibility for one major operator, Cablevision, which has a digital penetration rate exceeding 80 percent, far outstripping any other vendor.

That said, chip vendor BroadLogic is offering an interesting option. The company is developing a chip that can be put in the heart of a box (yet to be defined; it could be a set-top, a gateway, or something else) that will take up to 80 MPEG-2 streams and convert them all to analog at subscribers’ homes.

So while the situation is not optimal, the cable industry has time to make its own digital transition, and meanwhile, by virtue of having several options for an analog tier, cable may be in the best position to attract many of the viewers who are now getting their signals over the air.

This is all true of the biggest cable operators, who may be squeezed hard by circumstances, but nonetheless have the resources to still negotiate the situation. There may be true peril for the thousands of small operators who count their customers in hundreds.

The American Cable Association, which represents 10,000 small operators, said the cost in equipment and labor required for some of its members to carry broadcasters’ signals in multiple formats “could exceed $150,000 for systems that provide broadband, video, and voice services. The new carriage obligations now make it more difficult for operators of small systems to stay in business. If forced to comply with this order, small operators will have less capital to invest in broadband because they need to purchase costly equipment to provide the same must-carry channels in more than one format. Some very small systems will have no choice but to shut down because their small subscriber bases cannot support the costly equipment mandated by this order.”

The FCC offered the potential for exemptions, but it’s not clear how many small operators will qualify, nor how many will be able to afford to petition to qualify. And beyond that, the chance to get a waiver is just that: a chance, not a certainty.

Meanwhile, vendors are providing operators a multiplicity of options for managing bandwidth, including adding spectrum to reach 870 MHz or – though few have taken this option yet – 1 GHz, and node splits.

Imagine Communications is offering a novel system for variable bit rate (VBR) statistical multiplexing – a means of optimizing the bandwidth a company already has.

Vyyo has its “spectrum overlay” approach. It has designed its UltraBand RF products to double downstream bandwidth and increase upstream bandwidth by a factor of up to four, allowing operators to deploy new bandwidth on a targeted basis for less (approximately $125 per home passed) than its $1,500 per home estimated cost for telco fiber builds.

Switched digital video has been a popular way to buy bandwidth. BigBand Networks has been notable finding success in that endeavor (see “Cox adds third feather...,” Click Here).

Of course, vendors such as Cisco/Scientific Atlanta and Motorola have a variety of approaches for increasing bandwidth and managing it better.

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