Historically, wireless cable service (known as MMDS) hasn't posed enough of a competitive threat to keep wireline cable operators up at night—but that's about to change. Soon, MSO execs may be haunted by nightmares of giant microwave towers, sporting coats-of-arms with the letters RBOC, as they trample everything in their path. Breathing new life into the service that Multichannel Multipoint Distribution Service (MMDS) operators offer are two major factors: the conversion to digital technology, and backing from an unexpected source, Regional Bell Operating Companies.
Case in point: In fulfillment of a deal with Nynex and Bell Atlantic, CAI Wireless Systems Inc., an MMDS operator focused on the mid-Atlantic and northeastern United States, recently finished construction of the first digital wireless cable system on the Eastern seaboard, in Hampton Roads, Va., and has turned over that system to its partners for testing, as well as the core transmission facilities for a system in Boston.
The agreement covers 13 markets, encompassing 12 million line-of-sight homes, where CAI Wireless will design, construct and maintain the digital networks, while leasing the spectrum it holds licenses for to its telco partners. For their part, Bell Atlantic and Nynex are developing the marketing strategies for those same markets, packaging the services, setting price points, and handling the servicing of their customers, including customer premise equipment installation and service.
Consider how quickly the digital MMDS systems can be constructed. For the Hampton Roads system, CAI officials report that it took only three months to build the system from scratch, reaching 550,000 households. In Boston, it took the operator about six months to go from ground zero to a network that covers in excess of one million households.
Meanwhile, down south, BellSouth Corp. announced in late May that the company had purchased the rights to wireless cable licenses in the New Orleans market, licenses that were formerly owned by Continental Wireless Cable Television Inc., a San Diego-based company. BellSouth bought the rights to use the licenses at auction for $12 million.
According to a statement issued by the company, BellSouth will begin delivery of digital MMDS to customers in that market sometime in the middle of 1997, and will provide more than 100 channels. Programming will be provided by the Americast joint venture, composed of The Walt Disney Company, GTE, Ameritech, SBC Communications and BellSouth.
BellSouth will be taking on incumbent cable operator Cox Communications in New Orleans.
But digital MMDS is only one of the technologies the company is looking into for video delivery. "Looking several years down the road, at what we have done in our nine-state region, it will be something of a mosaic," says BellSouth spokesperson Kevin Doyle, a pattern which may include DBS, in addition to the company's HFC networks which are under construction.
Meanwhile, on the West Coast, Pacific Telesis has also thrown its hat in the MMDS ring: PacTel has purchased one wireless operator outright, and is in the process of purchasing two more. The company purchased Cross Country Wireless Inc. to gain access to the company's spectrum in the counties of Los Angeles and Orange, as well as in Riverside and San Diego. To gain access to MMDS licenses and rights in northern California, Pacific Telesis has announced it will acquire V*TV, an operator which is composed of Bay Area Cablevision Inc. and Wireless Holdings Inc. Between the two of them, Bay Area and Wireless actually have licenses not only in San Francisco, but also in San Diego, in Victorville, Calif., and in Seattle and Spokane, Wash., as well as Tampa, Fla. and Greenville, S.C. Once the acquisitions are completed, PacTel will have access to about 9 million line-of-sight homes, according to corporate spokesperson Craig Watts.
"Wireless cable gives us a much faster entry into the video marketplace, at a time when we need to diversify our revenue stream," explains Watts, "because of the full bore competition that is stirring up California on a number of telecom fronts." In the L.A./Orange County market alone, there are already more than 15 video providers (see Figure 2). And while PacTel is proceeding with the buildout of a hybrid fiber/coax network in California, which currently passes about 350,000 homes, there is still a great deal of work that needs to be done in that arena, as, for mainly "political" reasons, the network is taking a lot longer to build than the company had anticipated, says Watts. Of the 350,000 homes passed, only about 1,300 have actually been connected for a technology trial in San Jose.
When PacTel's wireless video systems go commercial, projected to be sometime in early 1997, the company says that it will be able to offer more than 100 channels of digital television to, initially, about 5 million homes in California.
Currently, the operator is testing digital MMDS service at a newly-constructed headend in a community within the greater Los Angeles area. Plans call for adding customers on to the digital wireless service in a beta test this fall, and then rolling out commercial service in the first quarter of 1997 in the Los Angeles/Orange County area. To cover the L.A. basin, the operator has constructed its headend on the floor of the valley, where the content is digitally encoded and then sent, utilizing ATM switching, over fiber optic cable to a transmitter at the top of Mt. Wilson, which in turn sends the transmission via microwave carrier back down to the valley's floor.
PacTel expects to begin receiving its portion of the TeleTV set-tops, produced by Thomson Consumer Electronics, in August, which will enable the full beta test of the system this fall. "The total cost per home of antennas, downconvertors, wiring, etc., we expect to be about $125 initially," notes Watts, plus about $300 for each set-top.
American Telecasting, the nation's largest MMDS provider, plans to begin a digital MMDS test late this summer or early this fall in Lakeland, Fla. with 50 homes, after it demonstrates the end-to-end system at the Wireless Cable Show this month in Denver.
Originally, the test was slated to begin in the fourth quarter of last year; however, like so many other digital trials, it was delayed.
The Lakeland trial will mark the company's first deployment of a digital wireless set-top, developed by Zenith in conjunction with Divicom.
On another front, American Telecasting has plans to turn up a digital system in Fresno, Calif. within the next couple of months, which will utilize equipment supplied by Decathlon, including a real-time encoding system to solve some educational programming challenges.
Many of the telcos have publicly stated that wireless cable will enable them to get into the video marketplace quickly, to put their faces in front of consumers to build brand recognition.
As for digital MMDS, the technology will offer CD-quality audio, digital-quality pictures, and a greater number of channels to choose from, all of which should appeal to so-called early adopters. As Zenith Network Systems president William Luehrs puts it, "It's a system that allows you to skim. You can go into a market and knock off the most attractive 10 percent of subscribers, and once you have established a video entertainment foothold, then you can go into certain pockets of that market and wire them up... I remember one guy using an expression: `I can rob a few gas stations on my way to the bank'."
But what happens long-term, when the telcos' high-capacity, broadband networks are ready? There has been some speculation in the industry that these wireless networks are simply a stop-gap measure for the telcos, to be abandoned in favor of their full service, hybrid fiber/coax networks, once they are built out.
But the rise of one technology won't signal the demise of the other, says PacTel spokesperson Craig Watts. "We don't think that this is a short-term solution that will then become obsolete when you get the wired network built out," says Watts. "We anticipate that the wireless network will be up and running in the same communities where we have built our wired network, or HFC network. There may be differences in pricing structure; there may be differences in packaging... If you have both networks operating in the same community, you can tailor the services to one technology or another."
In fact, PacTel is evaluating different combinations of both wired and wireless technologies to serve the same market. Because interactive MMDS on a two-way microwave platform is still off in the future, the telco is toying with using a phone line augmented with ISDN, or even XDSL, for the upstream path, and plans to conduct a field test late this summer using XDSL.
That anyone would use the words "interim strategy" to describe the telcos' dealings in MMDS makes CAI Wireless president John Prisco cringe. "I define interim as 15 years to permanent," he notes, "because there will be a portion of the market that DBS serves, a portion that switched digital video serves, and a larger portion of the market that wireless cable serves... In most markets, you can't argue with a business that has low entry costs, and capital that tracks with revenue, and that is what MMDS does."
MMDS operators are eyeing services beyond digital video, though. On its own initiative, CAI Wireless is developing an Internet strategy, says Prisco. The operator has already started testing an Internet-access product in Washington, D.C. in conjunction with National Digital Network, an Internet provider holding MMDS channels in the top 25 markets. Hybrid Networks is supplying the modems for the service, which is capable of a data rate of 10 Mbps; by the end of the year, according to CAI, the data rate should triple, hitting 27 Mbps as the modem technology matures. By comparison, current T-1 modems deliver data at 1.5 Mbps.
For the upstream, CAI's system utilizes the telephone return.
Trial participants include both government and educational entities: The Navy Computer and Telecommunications Station in Washington; Churchill Elementary School of McLean, Va., and a number of other area schools; and the law firm of Rini, Coarn & Lancellota. The transmitter is located at George Washington University.
"The value in our company is in the spectrum, and there are many different revenue opportunities associated with having control of that spectrum," says Prisco. "The key to the company's competitive advantage is the cost of our infrastructure. In order for us to cover upwards of 75 to 80 percent of any market, we will spend about $10 for each line-of-sight household."
As for whether its telco partners are interested in its Internet strategy, Prisco says, "It will be deployed in our market. It may be deployed in theirs, but that's their decision." Prices for a commercial data service will be competitive with ISDN, he says.Not created equally
Wireless cable service has had a reputation, deserved or not, of being vulnerable to weather, as well as propagation problems in areas of dense foliage and hilly terrain. Most MMDS systems operate at 2.5 GHz, which is relatively immune to rain fade: the wavelength at 2.5 GHz is much larger than a raindrop. Regardless, digital technology will enhance the coverage of MMDS systems, even in areas of dense foliage.
In addition, because some digital systems are built around a main transmitter and a number of boosters (see Figure 1) which regenerate the signal and rebroadcast it, customers no longer have to be in a direct line-of-sight to that main transmitter—there are many boosters to choose from. That means that the large antennas of analog systems can be replaced by smaller ones.
But digital is a double-edged sword: quality is great, but unlike an analog picture, which can be viewed until it reaches a high level of degradation, digital signals drop off entirely, once they get below the threshold. "You want to have a robust transmission medium," says Luehrs, "so our most important work took place in modulation. It's why we pioneered VSB. We have also done considerable testing in QAM, as the market will be interested in having QAM solutions. (We) have to make sure the modulation is scalable."
In addition, the FCC has yet to approve standards for digital MMDS operations.
On the two-way front, equipment providers and operators are already thinking about technologies to prepare for the day when they may want to provide full-blown wireless interactivity.
Stanford Telecommunications Inc. is hinting that the company would like to leverage the technology it is developing for an interactive, all-digital platform for LMDS (Local Multipoint Distribution Service), in conjunction with Hewlett-Packard, into an interactive offering for MMDS as well. (See "Cover Story," page 40.) That offering would be pending regulatory approval of standards for digital MMDS.
Stanford Telecom's Horen Chen, vice president of wireless broadband products, explains that the LMDS package contains a MAC layer (medium access control) protocol which has been accepted by DAVIC. That protocol, which is required to manage network entry for two-way LMDS, could be used for MMDS as well.
So it seems that cable operators have yet another serious market competitor to deal with, as they prepare to launch digital service. Maybe those nightmares will propel them toward digital service a little faster.