It's often said that necessity is the mother of invention. Similarly, it can be said that competition is the mother of innovation. When it comes to technological innovation, this certainly seems evident in the system architectural concepts pursued by a spate of overbuilders around the country.
The various ramifications of all the proposed overbuild activity in the cable services market was a hot topic of conversation at a recent gathering of local government telecommunications officials at the annual NATOA (National Association of Telecommunications Officers and Advisors) conference in Los Angeles. Interestingly, it was discussed that true competition for cable services may not really emerge until four or five providers were viable in a marketplace. At the same time, though, there is some credible market research that suggests that four or five may not be able to survive in the cable services marketplace. This leaves either a two provider scenario (a duopoly) or three (an oligopoly). Consumers will see some price and service benefits under these scenarios, but, under classic economic theory, the true benefits of competition may only be achieved if four or more providers are present in the market.
While it remains to be seen how many cable providers will be able to be viable in any given market, our review of system architectures proposed by competitive cable systems and open video system (OVS) providers around the country indicates that even under the two provider scenario, the new entrant is pursuing technological innovation as part of its push to differentiate itself from the incumbent. For example, the node sizes in cable system overbuild architectures continue to decrease to 150 homes passed or smaller, with the capability of dividing nodes even further in the future. This indicates, in part, a significant focus of competitive cable systems on the need for bandwidth to and from homes and small businesses within the area served by the node, to provide the advanced services that require such bandwidth, like video-on-demand, cable modem-based data communications and telephony. Essentially, by initially deploying smaller node sizes, the new entrant may be able to quickly differentiate itself from the incumbent concerning the levels and types of services offered.
Consistent with smaller node sizes is the need to drive fiber deeper into the neighborhoods, which the majority of competitive overbuilders are doing. The amount of fiber varies, depending upon each provider's perspective on how much is enough to satisfy both the current and expected consumer demand for various services. For example, some providers indicate a preference for a traditional six fiber per node topology, while others are employing twice that number plus dense wavelength division multiplexing (DWDM). It is clear that the operators in this instance are concerned about putting enough infrastructure in at the outset, with the ability to "grow into it" over time.
While this is certainly capital infrastructure intensive, it is also eminently scalable and flexible. Additionally, since the cost of the glass is relatively inexpensive compared with the cost of construction, there is a philosophy that suggests that "over building" the overbuild is the best long term strategy since the high initial construction cost won't have to be repeated, at least not for many years to come.
Competitive cable system architectures, especially those designed to facilitate video, voice and data services to both residential and business consumers, also have a significantly strong focus on status monitoring and network management. This includes interplay between local, regional and national NOCs (Network Operation Centers) for effective 24x7 monitoring of a variety of different types of services, as well as efficiently implementing both preventive response to degrading conditions and quick response to outage conditions. At the system level, this includes monitoring through to the node, distribution system power supplies and a host of network interface and subscriber terminal devices at the customer location.
Most of these architectures still, however, don't get at monitoring the RF amplifiers on the "C" side of the HFC plant. Many competitive cable system engineers, when queried, indicate that the ability to monitor at the node and then at the subscriber's residence helps pinpoint problems so that they can be quickly resolved. This may be correct when it's a fiber to the curb (FTTC) architecture, where there is no active device after the node until you get to the subscriber's home. However, in some designs there are still significant numbers of amplifiers in the coaxial side of the plant. Until these are effectively monitored, there continues to be a question about the ability in those types of HFC systems to diagnose problems so quickly and effectively that such systems truly can achieve four nines or five nines network availability.
Some overbuilders have gone the FTTC route in their planned deployments, and there has been a proposed fiber to the home (FTTH) architecture or two. In fact, one overbuilder out West is building a fiber to the home system that provides signals in a complete digital fashion that are ultimately routed through residences using Category 5 (CAT5) internal distribution. The rollout of this type of system is initially targeted at high density and multiple dwelling unit areas. It will be interesting to see if this system further translates into the single family home market. As an increasing number of households begin to seek LAN connectivity between a growing number of PCs within the household, this type of concept could conceivably have tremendous utility down the road.
Maybe, in the classic sense, a duopoly or oligopoly doesn't constitute true competition. However, if it gets fiber to my home and data communications wiring inside, I think I'll be satisfied.
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