All-digital: How to get there from here
Developing a roadmap includes evaluating content, costs, competition.
There are many drivers pushing cable operators to an all-digital environment, but no matter what the reason is for the transition, cable operators would be well advised to start working on the roadmaps that will take them down the all-digital roadway.
There are clear benefits to making the transition, according to In-Stat principal analyst Gerry Kaufhold. With the capacity savings of an all-digital environment, cable operators will be able to offer more HD programming services and have more bandwidth to increase high-speed data services with DOCSIS 3.0 wideband as well as for VOD and other personalized services. Their customers also benefit from a simplified user experience by being able to use one remote for all of the TVs in their homes, Kaufhold said.
All-digital will also help cable operators deliver local advertising opportunities and enable the deployment of other advanced services through technologies such as tru2way, but MSOs will also benefit from incremental revenues that come with all-digital.
“Even the smaller (cable) systems need to be aware of some of the growth opportunities for addressable advertising, and not just on your TV set, but also connecting to computers in homes,” Kaufhold said. “There are incremental revenue opportunities that will flow behind going all-digital, but if you go all-digital, you need to think all-digital. Customers need to be encouraged to upgrade not just to HD and high-speed data services, but also niche programming.”
Figure 1: All-digital grows incremental revenues.
OPERATIONAL CONSIDERATIONS, BENEFITS OF ALL-DIGITAL
Mark Nicastro, Comcast Media Center’s director, business development and marketing strategy, digital video systems, said two-thirds of the cable systems in smaller towns have less than 550 MHz plant, but even cable operators with 330 MHz can do a lot in an all-digital environment, including: 348 SD or 87 HD channels (that use 174 MHz); 156 switched digital video channels (48 MHz); data and voice services (18 MHz); 2,000 VOD titles with up to 160 in HD (24 MHz); and interactive television and tru2way (12 MHz).
Nicastro said cable operators need to look at programming, content management, conditional access and advanced services when planning for all-digital.
“When you’re developing a roadmap, consider how different programming types can complement each other,” he said. “Linear is your most popular content, VOD for HD and pay-per-view, switched digital video for long tail content and a separate tier for MPEG-4. Content protection is extremely important in the digital environment and you want to look at IPTV for future growth.”
Motorola’s Dave Brown, director of business development, video access solutions said cable operators need to look at the overall cost of going all-digital and not just at the cost of set-top boxes.
He also said cable operators should make sure they understand the Federal Communications Commission’s separable security requirements that were implemented in July of last year before making any decisions on access control.
Brown said that aside from increasing customer satisfaction with new services and technologies such as more HD channels and VOD offerings, cable operators need to consider all-digital for competitive reasons as well.
“The competition is advertising extensive HD offerings as well as more choices, so you need to have an answer for that,” he said.
Brown agreed with In-Stat’s Kaufhold that all-digital can increase cable operators’ revenue per subscriber through more programming choices and profitable services such as HD programming, VOD and high-speed data.
EAGLE COMMUNICATIONS: ALMOST ALL-DIGITAL
Eagle Communications’ Travis Kohlrus, director of operations, spoke about how his company approached an all-digital deployment in Minneapolis, Kan. Eagle, based in Hays, Kan., bought the Minneapolis system in 2006.
“It had been ignored due to a lack of capital investments for such a small town,” Kohlrus said. “There were no advanced services, including Internet. It was a 330 MHz plant and we were using more capacity than we had. We were using 39 of 36 channels with all 39 analog channels.”
Kohlrus said the Minneapolis plant is “almost all-digital” because Eagle chose to keep the basic lineup in analog for now, with the first phase of the expanded basic tier in all-digital.
Eagle weighed its options before deciding how to implement all-digital. Kohlrus said they wanted to come up with an all-digital system that could be easily replicated in the company’s 35 other headends, while also looking at future bandwidth requirements, but the first decision was whether to do anything in the small town of Minneapolis.
“When you talk about the risks and rewards, it’s all about finding the right balance,” he said. “Looking at the demographics, was it a town with a large retirement community where they would struggle with digital boxes and remote controls? The other risk and reward we looked at was churn. What happens if we don’t do anything, as opposed to if we deploy an all-digital solution?”
Eagle also considered whether Minneapolis needed to be fiber-connected to another system, but due to its remote location, it wasn’t. Eagle did put fiber optics into the town in order to take advantage of any future benefits that IPTV might offer and to increase bandwidth down the road.
Eagle solved the cost of the set-top boxes by re-using boxes from another system, and upgraded the plant to 550 MHz by also using gear from another system.
The end result of going all-digital was that Eagle’s services grew by 197 percent in Minneapolis, while it increased its customers by 35 percent.
“Now we have the ability to deploy DVRs and HD programming relatively inexpensively,” he said. “We have leftover bandwidth and over 40 channels for future flexibility. It also gave us time to let other technologies mature and to get ready to improve our offerings for our customers.”
Presentations from Kaufhold, Nicastro, Brown, and Kohlrus can be reviewed in the archive of a Webcast hosted by CED and sponsored by the Comcast Media Center and Motorola. To listen, visit www.CEDmagazine.com/All-Digital.aspx, or go to the “Webcast” section of the CED Web site at www.CEDmagazine.com.