Telco video at the crossroads

Does anyone remember "The Year of the LAN?" For at least six or eight years back in the 1980s and early 1990s, computer industry gurus were saying that IP networking would become a fixture, like plumbing--first in businesses, and then “everywhere!" In a similar fashion, pundits like myself have been saying that "This is the year of TV-over-copper" since 2002. But this year should really be the year that “telco video” makes the transition from its protracted late-early-adopter phase into the mainstream. Certainly, 2003 set the stage, and 2004 will be a year in which the large carriers begin to show their cards. 

A watershed event came in mid-2003 when the FCC issued its decision to allow carriers to build new networks without having to unbundle and share them. At about the same time, technical requirements that were developed by the 20-plus carrier members of the Full Service Access Network consortium and standardized by the International Telecommunication Union (G.983 & G.984) were transformed into requests for proposals from Verizon, BellSouth and SBC Communications for network equipment that will allow them to deploy TV. 

By the end of 2003, more TV service and infrastructure choices were available to carriers than ever before. "Buy instead of build" was the road taken by several U.S. and Canadian carriers that chose to resell video services offered by partnered satellite TV providers. Most observers assume that this is a short-term solution, and that as the carriers build out their new networks, they will transition TV back to their own networks as they are built out.

Other options come under the categories of "Radio Frequency Analog vs. Switched Digital Video" and "Copper vs. Fiber."  RF-based broadcast TV, over ATM-based optical fiber, is straightforward to implement, harnesses existing ATM infrastructure and has the bandwidth to support HDTV. But it has two disadvantages. First is the fiber, which (unless it's a greenfield) means replacing existing copper. Second, there is less revenue potential than the interactive services made possible through switched digital video, using IP as a vehicle to combine the delivery of voice, data, Internet-based content and digital video over a single network.

IP will ultimately facilitate greater average revenue per subscriber and the unification of all services over one network, and carriers and content providers alike are increasingly accepting the technology. Evolutionary technologies such as ADSL2+, coupled with new video codecs like MPEG4 part 100 (H.264) and Microsoft's Windows Media, ease the ability to carry multiple TVs' worth of standard-definition TV simultaneously over existing copper. Yes, there are trade-offs, but the choices are greater than ever.

The high costs of implementing TV head end facilities drove two telco video phenomena in 2003: sharing and cost reduction. Operators that share their head ends include Iowa Network Services, whose installation represents the pooling of resources from more than 140 telephone companies across that state. Project Mutual Telephone in Idaho serves 11,000 access lines across five counties, and plans to share its head end with a consortium of twelve additional Idaho Telcos via optical fiber. MBO Video wholesales TV service to telephone companies in Arkansas, Oklahoma, Kansas and Missouri. Cimarron Telephone in Mannford, OK-- MBO's first retailer--leverages MBO's regional SONET network to deliver TV locally. Cost reduction is Broadstream's value proposition. Broadstream is a systems integrator and content aggregator to whom a telco can essentially outsource its head end altogether, allowing the telco to save significantly.

Then there were some disruptive changes. New network equipment suppliers including Calix and Occam Networks rolled out solutions designed expressly for triple play, accommodating multiple connectivity and protocol options in one platform. Zhone Technologies went even further, offering an end-to-end platform that includes a PSTN-to-VoIP gateway for the central office, a switch for the CO or remote that accommodates fiber, copper, ATM and IP, and a CPE device that supports up to four TVs, broadband Internet access and multiple telephone sets in one device without requiring separate set-top boxes. All of these suppliers interface with multiple middleware, head end and CPE options.

Another disruptive telco video development of 2003 was the entry of Microsoft.  Like the other middleware suppliers in the telco video space, Microsoft offers a complete service creation environment for TV but also leverages its other technology platforms, including its Windows operating system and server platforms, Windows DRM content protection and Windows Media. Microsoft has taken several runs at both the cable TV and the telephone carrier markets and had the patience and resources to quietly evolve its product set while waiting for the telco video market to mature.

Many other developments took place during 2003 that, time permitting, could also be covered here. There also are a number of issues that worked their way toward resolution during 2003 and will continue along that path in 2004. By far, the biggest issue for telco video has been systems integration. During 2003, technology suppliers and carriers finally got most permutations of the systems elements to work together. The challenge for 2004 will be the ability to support large-scale deployments using predictable and replicable systems integration and deployment methodologies. 

Suffice it to say that the stage is set for big things this year.

Steve Hawley is principal consulting analyst of Advanced Media Strategies. He may be reached via his Web site.