Cable Operators Prepare for Switch to All-Digital Systems
Comcast, Charter, Adelphia & Other MSOs Gear Up for Digital Simulcast Trials
JANUARY 01, 2005
By Alan Breznick, editor, Cable Digital News
As the new year opens, the cable industry finally seems poised to
start making its much-ballyhooed shift to an all-digital format for
its core video product.
Six months after Charter Communications launched the nation's first
all-digital cable system with a big splash in Long Beach, CA, many
large cable operators are quietly drawing up plans for similar digital
simulcast field trials and deployments in their territories. MSO
executives and tech vendors say they expect to see a flurry of such
trials and initial deployments in 2005 and 2006 as cable operators
seek to move more and more of their customers away from analog
broadcasts and set-top boxes.
"Now they're practically all gearing up for trials," said Seth Kenvin,
vice president of strategic marketing for BigBand Networks, a tech
vendor working with many cable operators on the digital transition.
"Some operators are laying out a time frame now and placing orders...
I think this is going to be a major wave for two to three years."
Indeed, several large MSOs have already tipped their hats. In
December, Comcast Corp. unveiled ambitious plans to launch digital
simulcasts of its analog channel lineups in most of its systems by the
end of 2005. Speaking at two separate financial analyst conferences in
New York last month, senior Comcast executives outlined their strategy
for carrying out the digital transition.
"Now, what we're doing is we are already beginning to put the
simulcast signals on to our systems," said David Fellows, chief
technology officer (CTO) of Comcast. "And over the course of 2005, we
will bring that up across our entire footprint."
In somewhat less bold fashion, Adelphia indicated last month that it's
also gearing up to introduce digital simulcasts in several of its
systems as early as the first quarter. The MSO disclosed its plans in
a Dec. 15 meeting with FCC officials in Washington.
"We're definitely looking at it," said Doug Ike, vice president of
advanced video engineering for Adelphia. "We're looking at candidate
Such other large cable operators as Cox Communications, Cablevision
Systems, Insight Communications and Bright House Networks are not
making their plans just yet, at least not publicly. But they're
closely monitoring the landscape.
"We know it's being tested in various places around the country," said
a spokeswoman for Bright House. "We're watching that. We're going to
keep track of what's happening."
The push towards all-digital systems comes as Charter continues to
report positive results with its Long Beach pilot. Charter, which
started digital simulcasts in the 75,000-subscriber system in early
July, has been delivering its 91-channel basic cable lineup in both
digital and analog formats with few technical or operational hitches.
"It's been a surprisingly easy transition after all," said Wendy
Rasmussen, vice president and general manager of Charter's Los Angeles
metro markets division. "It was not onerous at all to our customer
With 70% of Charter's Long Beach subscribers now opting for digital,
Rasmussen said the all-digital move has produced better picture and
sound quality for the bulk of the MSO's subscribers, raising their
satisfaction levels, cutting churn rates and bolstering the system's
competitive position against satellite TV providers. She said the
switch has also improved the company's relationship with the city and
boosted employee morale.
"There have been some good, tangible benefits," she said. "We're very
pleased with the results so far. Internally, I'd definitely deem this
Satisfied with Long Beach's initial success, Charter executives are
now looking at ways to offer more digital offerings. Among other
things, they're weighing Hispanic and broader foreign-language tiers,
particularly aimed at the local Asian-American community.
Charter officials declined to say where they'll try digital simulcasts
next. But, without saying so explicitly, they made it clear that they
will expand the pilot and extend the simulcasts to more markets.
"That's the future," said a Charter spokesman. "Digital simultrans and
all-digital are in Charter's plans."
Taking their cue from Charter, other large cable operators are
plunging into the digital simulcast business too. As noted before,
Comcast, seeing simulcasts as the first step towards true all-digital
systems, is leading the pack.
In a move to spur its digital transition, Comcast notched a 20-year,
$100 million deal with Level 3 Communications for inner-city and metro
dark fiber early last month. The fiber backbone deal, encompassing the
lease of 19,000 route miles reaching 95% of Comcast's cable systems,
will give the MSO much greater capacity for the delivery of
all-digital services, including video-on-demand (VOD) and
high-definition TV (HDTV).
"We are in the process of connecting or lighting up that fiber,"
Fellows told financial analysts in New York last month. "We have
already lit up the Boston to Washington, D.C. corridor and are passing
packets over that section of the network."
Like Charter, Comcast will keep its 80-channel or so analog lineup
intact for its non-digital subscribers as it begins its transition to
all-digital systems. So the MSO, while taking care not to lose any of
its analog customers, will use up precious bandwidth transmitting the
80 channels in both analog and digital format.
Despite the loss of bandwidth from such duplication, Fellows argued,
the digital simulcasts will produce "some significant near-term
benefits" for Comcast. First of all, he said, the switch will provide
the MSO's digital subscribers with "higher quality pictures" because
they won't be getting any analog signals anymore. This is especially
important for customers with large-screen digital TVs, a group that
spends heavily on video services and is quick to notice analog
imperfections on their big-screen sets. MSOs are particularly
concerned that these high-value customers could be enticed to switch
to competing all-digital satellite TV services.
Second, Fellows said, the switch will enable Comcast to offer VOD more
widely, including its free, ad-supported on-demand product. In
addition, he said, moving at least some customers to all-digital
service will allow Comcast to cut the cost of its digital set-top
boxes because the new set-tops won't require expensive analog
circuitry. Finally, he contended that the shift will permit Comcast to
create more specialized and low-end tiers to attract cable
subscribers, just as Charter is aiming to do.
"We're not forcing our customers to go digital," Fellows said. "I'm
going to give [Comcast COO] Dave Watson the opportunity to incent
customers, to get them to realize they really do want digital and not
just analog HBO, but all of the on-demand that comes with being even a
basic digital subscriber."
Over the longer term, Fellows definitely sees the move opening up more
bandwidth for Comcast. He estimates that the MSO could "triple the
capacity of our hybrid fiber coax network" once it recaptures all the
bandwidth used by the 80 analog channels.
"Once we have the digital signals up there, we can begin to take back
the analog signals," he said. "I don't think we're going to take them
all back in the near-term. But every time we take one analog signal
back, we can offer 12 channels in its place in standard-definition,
three channels in its place in high-definition."
Fellows figures that it will take about $150 million for Comcast to
bring its infrastructure up to snuff for the digital simulcasts this
year. Calling it "a modest investment," he said most of that money
will be spent on digital ad insertion and encoding equipment.
As for the new, cheaper digital set-top boxes that Comcast and other
cable operators envision, Fellows believes the costs could come down
to $50 per set-top or lower in a few years. Currently, Comcast
executives said, low-end digital-only set-tops cost around $70 to $75
apiece. This is about $50 less than the cost of today's low-end hybrid
analog-digital boxes. In hybrid set-tops with digital video recorders
(DVR), going all-digital could drop the box cost by as much as $100.
"Actually taking the analog circuitry out of one of our digital
set-tops saves an awful lot of money," Fellows said. "It's another
step towards getting that sub-$100, maybe even $50 set-top box."
At Adelphia, executives are studying their fully upgraded 750-MHz
systems to see where they have enough capacity to carry the same
channels in both analog and digital format. They're also testing
digital encoders, splicers and multiplexers to see how to make the
digital simulcasts work. "Certainly, we need to look for a
cost-effective way to do digital programming insertions," Ike said.
Adelphia and other MSOs are keen on solving this challenge because
local cable advertising is a $5 billion and growing annual business in
the U.S. alone. Once a cable system moves to digital simulcasts, local
TV commercials must be inserted and delivered in both analog and
In addition, Adelphia officials are weighing the costs of low-end
digital set-tops. Like their counterparts at Comcast, they're seeking
boxes with price tags of $50 or lower.
"We're still looking for the mysterious $30 set-top box or at least
$50 on the low-end," Ike said. "There's a lot of discussion with the
set-top box folks about what we need that set-top box to do."
Is this chicken what I have, or is this fish?