IP or ATM? That is the question

Apr 19, 2002 12:00 PM

I've been quite a cheerleader for TV-over-broadband. In fact, virtually all of my columns for The Analyst's Corner have had the delivery of TV as the underlying theme, and I shall continue along those lines more times than not. One reason is that the deployment of TV over a telco's network is no trivial task, and to say it's easy is a disservice to my readers. Yet, in the end analysis, only two factors really matter for telco-based TV: subscriber loyalty and new revenue. Along the path toward these goals are some important technology decisions--so this month, I'll talk about one of the biggest ones for telcos going with TV.

If we are to follow the success of the cable TV industry, subscribers stick with service providers that provide lots of services at a fair price: bundled service packages at a discounted packaged rate. That's how cable has maintained share despite satellite; that's why cable has been aggressively adding phone, data and interactive TV services. So let's look at a telco that's doing the same thing--Champaign Telephone (CT Communications), a 13,000-line ILEC in Urbana, Ohio, and a CLEC operation in neighboring West Liberty. Of course, being a telco, TV is the part that's being added to its existing portfolio of communications services, and Champaign will be doing so in both of these operations.

Many would equate "fair price" with "lowest price." One belief held by Champaign is that it need not necessarily offer lower prices than the competing cable carrier; a good channel lineup and the ability to bundle voice or data communications service with TV is expected to carry the day. "Our objective is simple", said John Ridder, Champaign's director of network planning. "It's to be the provider of the broadband pipe to the customer." From his point of view, the addition of video is an incremental step toward maintaining ownership of the subscriber. Anything less, and subscribers might defect. This aggressive stance will certainly help them, especially as Champaign puts its money (a.k.a., their capital expenditures) where its mouth is.

Champaign plans to offer four service products: wireline telephone service (local and long-distance), wireless PCS service, broadband Internet service and TV-based services. Its cable TV competitor is not offering phone or wireless, but it does offer Road Runner Internet service. This places Champaign at an immediate advantage, with respect to bundling. Champaign's TV service will include 127 channels of TV programming, six channels of pay-per-view, video-on-demand with some of the latest movies and a set of TV-based information services including AccuWeather. Anything but skimpy!

Champaign looked at the available technology platforms, and at the end of the evaluation it chose an IP-based approach. Followers of telcos that offer TV know well that they can implement ATM-based VDSL access platforms to bring TV to the home. The solutions work well, they're proven, they leverage existing infrastructure, and they inherit the service level and quality-of-service guarantees of ATM. What's more, they are reliable. I've commented to this effect in the past--and it's still true, as long as the service provider wants to deliver (just) TV.

But I've also maintained that IP is the future. Networks are increasingly IP-based, and IP is increasingly the way that digital content is delivered to consumers. And content delivery has become quite sophisticated, if you judge by looking at Web portals, Web-based videos, Web phones, chat, e-mail and all the other services made possible by the Internet (and therefore IP). This is exactly what Champaign recognized: It wanted to deliver more than just TV to their TV subscribers. Mr. Ridder pulls no punches: "IP has won, so our stance was to ask ourselves, 'How do we build a channel that satisfies everyone's IP needs?"'

Similarly, an IP infrastructure allows TV service providers to offer multiple simultaneous streams, each representing different services. Each of these services is not just a data stream; each has the potential to be its own revenue stream. 

Another major reason Champaign chose IP was that it could be network-agnostic, allowing service delivery over any physical cabling. Last time, I spoke about the FS-VDSL group, whose target platform is a combination of optical transport and VDSL access. Obviously, that's one approach, and the FS-VDSL's efforts to proliferate a set of standardized network architectures are laudable. But what if you don't want to adapt your network to the short cable-runs required for VDSL or bring fiber to the home?  

ADSL is an obvious alternative, and a growing number of ADSL solutions are capable of supporting the full range of services. ADSL equipment suppliers are overcoming the historical ADSL distance limitations, both the newest ones and some of the old standbys. Accordingly, Champaign is looking at alternative access and networking platforms with higher-speed connections to the network backbone and more robust routers to handle high subscriber take rates, as well as increase TV channel throughput and channel change efficiency.

So, let's look at a summary of Champaign Telephone's TV delivery infrastructure:

Quite an array of systems and software. "Nobody expected video to be easy, and traditional telecom consultants are no help," says Ridder. In fact, Champaign was an early video user. Back in the early 1990s, they were a site for Nortel's (then Northern Telecom's) Visit Video personal videoconferencing product, which tied a Nortel DMS-100 or Meridian PBX (2B+D) to a video codec board residing inside a PC running Windows 3.1, or a Macintosh II computer!

Back at the beginning of this article, I mentioned subscriber loyalty. If a service provider can offer it all for a fair price, then why should the subscriber change? The counter-argument says that subscribers are fickle. Independent carriers like Champaign will learn from experience whether or not they are right when they assume a fair price is not necessarily the lowest price, when they offer the widest variety of services in their market.  They plan to maintain subscriber loyalty by offering a variety of service packages, and for TV, anticipate a forty percent take-rate. Also, Champaign will be patient.  It has planned for a five-year ROI for its ILEC business in Champaign, and, a similar return on its CLEC business in West Liberty, Ohio.  This planning horizon gives them the flexibility to test their and fine-tune their service packages in the market, to arrive at the best mixes for their customers.

OK, so we can deploy this network and put all this infrastructure in place, but what are people going to watch?  Content acquisition has been a challenge for every one of the Telcos I've spoken with.  Some of the technology suppliers do work with studios and other content providers, but not all of them do - and even those which do, do not provide the whole enchilada.  Next time, I will profile one additional service provider, but you can be assured that I'll be writing about content in the near future.

I shall close, dear readers, with a question: what have been your early experiences with video and TV?  How about content acquisition? I'd love to relay some of the success stories (and even some of the horror stories) to our readers! So long until next time.

Steve Hawley is principal consulting analyst of Advanced Media Strategies.  He may be reached via his Web site, http://www.tvstrategies.com.

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