Telco video: why it will be different this time. The cable triple threat, combined with advances in compression and standardization around IP, are driving new business models

America's Network, Dec 1, 2003 by Kirk Laughlin

TIER-THREE TRIUMPHS

The nation's independent operators have made it clear that video is the way to go. Their forward progress offers practical guidance to larger incumbents who may eventually share the same ambitions.

"They [the IOCs] are taking the lead in deploying video," says Russ Sharer, vice president of marketing at Occam Networks, a supplier of broadband loop carrier equipment. The company claims to have the first all-IP broadband loop carrier that integrates Gigabit Ethernet transport and eliminates the need for DSLAMs and Ethernet switches.

Such efficiencies are clearly getting the attention cost-conscious IOCs.

"Architectures including next-gen DLC and new SONET/ATM are capable of supporting bandwidth intensive services but a new Ethernet/IP architecture using distributed intelligence can provide these services much more flexibly and at a dramatically lower total cost-of-ownership," says Michael Kennedy, managing partner at Network Strategy Partners, which recently completed a study that examined the costs around Ethernet/IP loop carrier architectures.

Virginia-based independent Citizens Telephone Cooperative; FairPoint Communications, a rural provider; and SureWest Communications of Northern California are among providers who have announced support for Occam's BLC 6000 system.

Pure Ethernet-based DSL solutions, from the likes of Net to Net Technologies, offer advantages over ATM platforms, which can be costly and hard to provision. "We've seen the whole market shift away from ATM and toward IP-based solutions," says Matthew Byrd, vice president of marketing at Net to Net, who points out that IOCs are not equipped with the levels of technical staff proficiency seen at the larger incumbents. "Telco TV is going to come out of the IOC space. They are smaller, and they don't have to worry about millions of subscribers. They have to address tens of thousands, which is easier to tackle," he says.

Another supplier making clear strides is Catena. The company's CN1000 BLC system, which provides POTS and scalable video-over-DSL, is drawing considerable interest from the larger carriers, according to Gary Bolton, Catena's vice president of marketing. The company works with about a dozen carriers in the U.S., and Bolton says three of those carriers produce 80% of the company's revenue. The company's BLC system supports open-standards and interfaces.

ACCESS MIXING

Cable companies have ratcheted up the urgency--telcos have to be in the video game one way or another. That became very clear this year as after incumbents linked up with major DBS providers to protect their video vulnerabilities.

Bundling has become a critically important component for incumbents, and until video is delivered across their infrastructure, there is a high degree of certainty that they will maintain their relationships with satellite providers.

Cable operators have been among the most proficient in demonstrating the gains of bundling. In recent research by UBS Warburg, an investment and research firm, the company found that in the case of Cox Communications, customer churn continued to decline as more customers accepted more services.