Keeping costs in check: as consumer broadband expectations grow, managing network upgrades is critical

Telecommunications Americas, July-August, 2004 by Mary Shacklett

Homes and businesses are becoming more equipped for resource-intensive broadband services like VOD (video on demand) and VoIP. Meanwhile, cable and telco operators scramble in a highly competitive market to upgrade their existing broadband communications facilities. Industry market researcher Dell'Oro Group estimated that, at the end of 2003 alone, worldwide equipment shipments of cable modems and DSL increased 17 percent quarter over quarter to 22.9 million office ports and customer premises units combined. Much of this demand was in North America.

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The goal for many operators is to upgrade existing 450-MHz-strength cable to 550, 750 and even 870 MHz. The universal question for operators is, how do you keep pace with demand and competition to do this, yet work within existing capital equipment budgets?

Brian Dietz, spokesperson for the National Cable and Telecommunications Association, notes that the cable industry has already invested more than $85 billion to upgrade nationwide networks for the coming of new services such as VOD, digital cable, HDTV, high-speed Internet and telephony. "This significant capital expenditure on new network upgrades has gone on over the past eight years," says Dietz.

Jay Fausch, senior director of strategic marketing at Alcatel, agrees that cable operators have already spent heavily on network infrastructure and facilities--but adds that many of today's remaining issues rest with evolving interface standards in the cable industry.

"Many cable modem systems are built around the DOCSIS (data over cable service interface specification) standards," explains Fausch. "While early systems were at the 1.0 level of DOCSIS software, the DOCSIS standard has undergone steady evolution." According to Fausch, DOCSIS standard revisions were devised for two-way digital communications needed for interactive television when the Internet took root in the mid-1990s as a cost-efficient method for delivering broadband services. Initially, cable operators upgraded their plants for two-way digital, but associated video services did not develop in the consumer market as expected. When the Internet boom hit in the '90s, a different use was found for this infrastructure. Now, consumer interest in expanded broadband capabilities is taking root--and companies are responding by making DOCSIS-compliant hardware and software.

One principle area of upgrade is the need to comply with the DOCSIS standard itself. The DOCSIS standard has evolved from its baseline 1.0 software to a 1.1 and a soon-to-be-issued 2.0 release. Minimally, cable operators need DOCSIS 1.1 to provide all the broadband capabilities their customers are now demanding. When the DOCSIS software upgrade occurs, existing hardware and software must also be swapped out or upgraded.

Chipset Changeouts

The upgrade situation for telco operators is a little different because of their embedded base of copper lines. The strategy is to upgrade chipsets that can work with the existing copper wire infrastructure, allowing a copper wire that traditionally supported a 56-kbps dial-up service to deliver 50-Mbps broadband service. This bandwidth leap is achieved through the insertion of new generation chipsets such as ADSL (8 Mbps), ADSL2, ADSL2 (24 Mbps), and VDSL (very high bit-rate DSL--50 Mbps).

With chipset upgrades, telcos can continue to use their underlying hardware and simply change out line cards in the CO DSLAM and in each customer's modem. CO power supplies and common control equipment remain the same. This eliminates fork-lift upgrades and expensive retraining of operator technicians.

Choosing to Upgrade

Most operators look at the market demand to determine when there is sufficient reason to upgrade. The object is to time expenses as much as possible with the ability to recoup on investments by growing the customer base. This market demand can vary, based on the customer profiles that different operators serve.

"Rural operators encounter situations where the customer demand does not always justify the expense in network improvements," says Bernardin Arnason, vice president of business development for the NTCA (National Telecommunications Cooperative Association), which represents more than 560 independent operators. "A combination of competitive pressures and budget management ultimately drive the amount of investment put into the infrastructure. Most companies are going for the triple offering of voice, video and data, although demand from community to community differs." Arnason acknowledges that independent operators in rural areas face a different set of challenges than their urban counterparts. "A metropolitan market has the scale and more opportunity, although it also faces much more competition," he says.

"It's really a question of what services your customers expect you to deliver," says Alcatel's Fausch. "If you need line speeds upward of 8 Mbps and you can economically justify the investment based on the profile of your customer base, then the technology is available."