A CATV business strategy conundrum

Telecommunications, Jan, 2001 by Matthew Secker

The CATV industry is witnessing a new dawn of business strategies. Soon operators will be able to offer not only digital TV, but interactivity and internet services as well -- but what path will CATV operators decide to take?

European CATV operators have been busily upgrading their networks to cater for high-speed Internet access over the last few years, with high levels of investment being pumped Into the networks.

In the UK, NTL has been building its network from scratch and is now two-way enabled. NTL's fibre-optic backbone now has a network coverage of 34,000 kilometres, covering a large part of the country -- and extending this network is an ongoing process at a cost of over [epsilon]1.6m a day.

Telewest, another UK CATV operator, has upgraded its network from analogue to digital, permitting higher bandwidth services to the home and providing future scalability. This portion of the network allows the connection of digital TV set top boxes and high-speed data cable modems. Where the access network meets with the core data network (regional head-ends and hub sites) services are effectively converted into an IP datastream via high-end gigabit routers. This traffic is routed to various high-speed services, such as Telewest's blueyonder, a flat rate high-speed Internet access service, via a resilient ATM core network that provides quality of service (QoS) to the traffic it carries.

And to cater for distance and additional resilience, Telewest has also deployed 10-gigabit SDH systems to provide national connectivity. "Telewest is continually enhancing its network to satisfy consumer demand and to support the best possible hi-speed internet service," claims Andrew Kimberlee head of telecom and data engineering for Telewest. "For example, the 10 gigabit core SDH network will be upgraded to DWDM, permitting higher specification routers to connect via wavelengths at nominal speeds of 2.5G each, easily upgradeable via lighting up additional wavelengths."

One bundle

The two biggest CATV players in the UK market are NTL and Telewest. Comparing the two operators reveals some interesting findings on what, if anything, they are doing to differentiate themselves effectively from each other in the market.

"There are very few CATV operators out there that are offering a one-vendor relationship," says Garth Sumpter, business PR and media manager, NTL. "We are not selling any single solution. NTL is a one-stop shop and we have bought-in many smaller companies to provide this service."

But Telewest believes that it is providing a one-stop shop for its customers as well, and claims to have differentiated itself by its commitment to making blueyonder the 'best quality' hi-speed internet service In the UK. "By owning a network that supports multiple service platforms, Telewest does not need to rely upon third party relationship, as some competitors do, in order to offer consumers the benefits of a one-stop shop for their telecommunications services," says Chad Raube, head of marketing, residential internet services, Telewest.

Clearly, they are making their statements of differentiation, but in essence, most CATV operators are moving down the same path of providing one bundle of services for their consumer and business customers. But what about the threat from DSL players?

"DSL entrants are already having an effect in the US, because of the proprietary cable systems that have been sold up to now," says Sarah Hackforth, MD for Europe, River Delta. "The perception of the modem user is one of shared access, busy times, go slows, and customers are being sold on the fact that DSL offers them a Jimitless connection. This is a misperception in itself, but that is certainly the perception that's being sold to the consumers. The CATV operators have to compete with this, so their very focussed on offering QoS-based cable modem systems."

Steven Rickless, head cable service provider for KPMG consulting, however, believes that CATV operators in the UK have an advantage over DSL entrants because of BT's staffing tactics over the local loop. "We've been talking about these DSL operators for many years now, and they still won't be around till sometime this year," says Rickless. "CATV operators though have been rolling out their services for two or three years. The fact that they have rolled out these services before DSL entrants is a definite advantage for CATV operators, because they know what it takes to install a service, send an engineer out, and they will have the first important bite of the market."

Ensuring QoS

Another challenge for CATV operators is addressing the issue of QoS. The last mile of a CATV network consists of a CMTS (cable modem termination system), which is a head-end piece of equipment that communicates with the cable modem. When cable modems first came out they where all proprietary, so whichever cable modem you had in the field, you had to have that same company product at the head-end to talk to it and control it.

DOCSIS (data over cable systems interface specifications) standard, created by Cablelabs, means that a cable operator or consumer can purchase any DOCSIS modem as long as an operator has a GMTS at the head-end, which is DOCSIS compliant.