Here’s how cable will hit gigabit speeds and create a tricky business problem in the process<http://gigaom.com/2013/06/11/heres-how-cable-will-hit-gigabit-speeds-and-create-a-tricky-business-problem-in-the-process/> By Stacey Higginbotham GigaOm.com
Jun. 11, 2013 - 10:12 AM PDT http://gigaom.com/2013/06/11/heres-how-cable-will-hit-gigabit-speeds-and-create-a-tricky-business-problem-in-the-process/ [image: Michael Powell, NCTA President and CEO, delivered the first keynote address to open The Cable Show 2013.] photo: NCTA Summary: Executives at this year’s annual Cable Show are trying to figure out their industry’s future. The technology for delivering faster broadband is ready, but the business model of the future isn’t. The Cable Show <http://2013.thecableshow.com/> began on Monday, and as the industry executives gathered in Washington D.C. they faced two big threats to their core lines of business. One involves the nature of pay television in an age of over-the-top content, and the other, the rise of gigabit networks. In many ways it would seem that the rise of gigabit networks would crush the business of providing pay TV, but in fact, if cable companies play it smart, they may find a way to walk the line as their industry transitions to all-IP content delivery over broadband networks. They may even find new sources of revenue by offering IP services such as home security and automation. To understand what cable firms are dealing with, I spoke with Phil McKinney, the president of CableLabs, the industry standards setting body that is responsible for pushing cable’s access technologies. CableLabs is the organization behind the DOCSIS 3.0 standard, which has helped cable companies roll out 100 Mbps and faster speeds. Unfortunately, those speeds have a practical limit<http://gigaom.com/2013/06/11/comcast-shows-off-a-3-gigabit-broadband-connection-thats-fast/>that won’t help cable providers like Comcast or Time Warner Cable compete with Google’s gigabit networks. And if AT&T or municipalities get aggressive about deploying such networks, cable providers might find themselves selling the equivalent of feature phones in a smartphone world. Getting cable to a gig Enter DOCSIS 3.1, the next generation of the cable access technologies. The new standard will allow cable firms deploying D3.1 equipment to deliver up to 10 gigabits per second down and 1 gigabit up. The technology uses OFDM technologies familiar to the wireless industry to cram more bits into a single megahertz of available spectrum used in the cable plants<http://gigaom.com/2008/10/21/time-warner-cable-talks-last-mile-and-bandwidth-caps/>(it’s 11 bits per hertz if you care). Thus, cable providers can then deliver more bandwidth using their existing radio frequencies. These RF channels<http://www.cablelabs.com/news/primers/cable_system_primer.html>are part of cable’s legacy of delivering analog television signals over coaxial cable. In today’s hybrid fiber and coax networks some of the overall transmission is digital, but the coaxial and RF frequency limits remain in some parts of the network. Cable firms still haven’t gone all-IP, which means that most cable companies are dedicating some of their spectrum to their pay television business and some to delivering broadband. One technology uses IP and the other uses QAMs. But as people demand more bandwidth and higher definition TV channels, cable operators must decide where to allocate their limited spectrum, or lose market share they have gained in the broadband market. [image: USbroadbandsubscribersQ12013]<http://gigaom2.files.wordpress.com/2013/05/usbroadbandsubscribersq12013.jpg> McKinney is also touting new compression codecs like HEVC<http://en.wikipedia.org/wiki/HEVC>that help lower the number of bits in a stream but still deliver high-definition quality. It uses half the information that MPEG-4, the current standard, uses. That gives cable companies a little more room on their spectrum to allocate for more broadband channels or more TV channels. McKinney notes that CableLabs is moving faster than it has ever moved in order to get DOCSIS 3.1 out to constituents — achieving in two and half years what it took five to do for previous standards. Comcast says it expects to start deploying DOCSIS 3.1 in 2015. But what about the business model? And speed is important, because widespread access to high-speed broadband is threatening the cable industry’s core business — packaging a bunch of channels together and selling it to end consumers, as well as selling some advertising against those channels. On one side there are people cutting the cord — canceling their subscriptions and relying on content from Netflix, Hulu or even just over-the-air broadcasts. On the other side are content companies pushing for higher fees from cable operators, especially for things like live sports, which many analysts believe are the main reason people don’t dump their cable packages altogether. [image: npdtv] <http://gigaom2.files.wordpress.com/2012/04/npdtv.jpg> But the cost of cable is rising<http://www.theatlanticwire.com/technology/2013/02/how-much-more-expensive-can-tv-get/61870/>, something consumers are fighting as they become more accustomed to picking and choosing their own content on demand. To satisfy those consumers cable companies are offering their own IP-delivered services that bring on-demand content to subscribers’ tablets and phones, even when they are outside their home. That embrace of technology though, can require tradeoffs for cable providers. For example, Comcast now delivers all of its video on demand content via IP, which means it divides its available spectrum into three chunks. One is for the traditional cable TV that’s broadcast, one is for broadband and one is for delivering the bandwidth for its IP-based Xfinity VoD service. AT&T has done this with its U-Verse services on its copper lines, but Comcast got in trouble for it last year when people questioned if that practice violated network neutrality<http://gigaom.com/2012/05/17/comcast-capitulates-on-cap-but-dodges-the-net-neutrality-issue/>, since Comcast doesn’t count its Xfinity content<http://gigaom.com/2012/05/15/he-said-she-said-is-comcast-prioritizing-traffic-or-not/>as part of its bandwidth cap. Recouping lost revenue in an all-IP world With DOCSIS 3.1, Comcast may have more headroom to raise its caps if its network is truly congested at the cable plant, but the business challenge remains. It must also figure out how to keep customers from dumping a $200 monthly charge for both TV and broadband and choosing instead a $50 broadband package. Adding faster speeds and charging more for those speeds might be one way to keep revenue up. And despite cable industry fear-mongering about upgrade costs, McKinney estimates that the upgrade to DOCSIS 3.1 gear should cost cable companies less than the upgrade to DOCSIS 3.0, which analysts put at roughly $100 per home<http://gigaom.com/2009/04/30/docsis-30-coming-soon-to-an-isp-near-you/>. [image: Chart courtesy of Stifel.]<http://gigaom2.files.wordpress.com/2013/06/paytvmarketshare.png> Chart courtesy of Stifel. But aside from charging more for better broadband, cable companies shouldn’t have to give up on pay TV. Already companies like Time Warner Cable are experimenting with cheaper programming bundles in additional to concessions like allowing customers to watch any show, anywhere, on any device. The pay TV providers already have relationships with the content companies, and while they may not be the only path to mass market anymore for the Disneys and HBOs of the world, they still are an important channel. Cable companies have tools they can use to protect content, they still have relationships with more than 80 percent of the U.S. households and they are aggressive about offering content in a way that consumers want. So, if they can transition to more of an a la carte option, using IP to deliver those choices on demand, they could still provide a service that consumers are willing to pay for. And thanks to new standards described above, the bandwidth is there to do this. So cable providers just need to walk the line between cannibalizing their traditional pay TV business with IP-delivered services, while upgrading their networks to ensure they can still deliver a quality experience while maintaining their revenue and profits. The big telcos walked this line a few years back when they had to transition people from wireline networks to cellular service without hurting their own profits and revenue. The cable business is a little tougher because they have the content companies in there demanding more money and seeing new avenues for distribution, but as disruptive as this shift is, I think in a few years we might see an even bigger one once pay TV providers realize they can take all of their content and deliver it over the top. Maybe the internet won’t eat the cable company<http://paidcontent.org/2013/05/29/barry-diller-the-internet-is-eating-the-cable-company/>after all.
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