Cable Takes Its 'Lumps'

Cable World, March 10, 2003

Byline: ANTHONY CRUPI

Cable could use a little comedy right now, given the unrelenting bleakness the industry seems to be mired in of late. And while the Kagan World Media conferences tend to skew well away from the jocular, last week's VOD Summit had its moments of levity. Watching a panel of techies try - and fail - to turn the ringer off an errant cell phone was rich, and in its own little way, provided a tidy metaphor for the state of the industry.

The technology that fuels cable's engine and allows for the implementation of advanced services is in place, but harnessing that technology is another matter altogether. "There's no shortage of ideas in this business," said Ed Forman, ICTV's project manager for advanced product development. "In fact, there are probably too many ideas floating around out there."

Forman's tongue was pressed so far in his cheek that he could barely talk around it, but his point was clear. The PVR/DVR panel ("Is There Revenue in Them Thar Hard Drives?") began with an informal survey of TiVo/Replay usage - about a third of the assembled own one of the digital recording devices - but quickly devolved into a discussion on the coming era of set-tops with integrated PVR and HD functionality.

While it's all very well to look down the road a bit, it's hard to imagine that such a thick-as-a-brick box will actually find its way into consumers' homes any time soon. Both Motorola and Pace have integrated PVR/HD boxes in the works, but panelist Richard Jorgenson, Maxtor's VP of strategic markets, didn't bite. "These boxes are going to be incredibly expensive," Jorgenson said. "The only way I can see them gaining traction is if [manufacturers] were to offer a base amount of capacity and then add additional storage as an option."

Getting consumers' feet wet and gradually offering upgrades works for the PC crowd, and should prove valuable to MSOs as well. But the capacity demands of a full-blown DVR/HD box are Brobdingnagian (the hard drive would have to have at least 330 gigs of storage), and that comes at a cost. Scientific-Atlanta director of subscriber networks David Davies said that his DVR box (the Explorer 8000) prices out at around $500. If you're checking the sticker price, an Explorer 2000 goes for half that amount.

Bernadette Vernon, Motorola's director of strategic marketing, said that integrated boxes are gaining acceptance. "People are responding well to the boxes, and we're having much success in our MSO trials," Vernon said. But she didn't address the cost issue. "Our integrated product will come out this summer," she said, adding that the unit will require "five to six times the storage for handling HD." In other words, ca-ching!

Some of the ideas floating around the summit were more attuned to the here and now. Manticom Networks president and CEO Timothy Cahall suggested that operators need to embrace a new paradigm if they are to see a robust ROI from VOD or DVR. MSOs have to look past the traditional cost-per-stream metric and examine the costs generated by each provisioned customer.

"In a point-to-point solution, most MSOs wind up installing up to five times the amount of network they need," Cahall said. "This is why it's so hard to see an ROI on VOD."

Cahall characterized VOD service as "lumpy," which is to say that ops tend to see pockets of high usage at certain hours and then none at all. By spreading the Ethernet switches across the geography of the network, ops can smooth out those lumps.

Lumps: Heaven knows cable's taken more than its fair share.

THE NEXT QUESTION:

*If cable settles on the thin-client model, what kind of additional engineering will have to go into the network to compensate?