Cable telephony comes of age

The success of early pioneers in cable telephony-and the announcement of AT&T's purchase of Tele-Communications Inc.-leaves no doubt that new telephone operators are ready to compete for a share of the $100 billion local market using hybrid fiber/coax.

HFC networks are emerging as the medium of choice for these new entrants because they allow operators to offer a plethora of services, including telephony, on a broadband pipe to the home. HFC telephony delivers premium-quality service, exhibiting all the characteristics that make a phone call sound like a phone call should. This means instant dial tone without delay, jitter or echo, as well as all the narrowband services that consumers have come to expect, including call waiting, three-way calling, caller ID, enhanced 911 and operational features such as intercarrier billing.

Large multiple systems operators in the U.S. are achieving penetration rates of 10% to 20% of homes passed with more than 95% of subscribers dropping their old carrier in favor of the cable operator. Many operators are also experiencing second line take rates in excess of 50%-well above the national average.

Although there is a tendency to focus on large cable MSOs, many small operators are competing for a share of the local loop. For example, Globe Telecommunications has entered into an exclusive agreement with Newnan Utilities to offer cable TV, cable modem and phone service in Newnan, Ga., that is competitive with the incumbent's offerings. Knology, Globe Telecommunications' sister company in West Point, Ga., also offers competitive bundled services in seven second- and third-tier cities throughout the Southeast. Its strategy focuses on areas under-served by the incumbent phone company, coupled with an aggressive pricing plan. Many of Knology's customers can get bundled cable TV, high-speed Internet access and phone service for less than what most people pay for those same services priced separately.

Another category of newcomers to the HFC market includes independent operating companies with their own co-located cable TV plant. These operators use cable telephony to serve new-build neighborhoods, sometimes replacing aging copper plant. Telcos that partner with cable companies in nearby areas to provide competitive phone service using available switch capacity can achieve the same results. An increasing number of new operators, including competitive local exchange carriers and utilities, are targeting underserved communities where they will overbuild both the incumbent cable and phone companies to offer competitive services on new networks.

All this activity reflects the growing affirmation that the business case for HFC telephony has proved itself. Those who have already ventured into HFC telephony have witnessed returns far greater and faster than originally anticipated. Capital expenditures in plant upgrades, switches and equipment are quickly paid back while revenues, at even a 5% to 10% discount to the incumbent telephone company, generate cumulative positive cash flow within three years.

Time is ripe for telephony Until recently, most cable plant lacked the transmission quality required for telephony-a situation cable companies have changed by upgrading their coaxial cable distribution systems with fiber to increase capacity and quality. This plant upgrade has created a fiber optic backbone network within the cable distribution infrastructure that is very similar to the feeder plant of a telecom network. Rather than carrying strictly one-way cable TV traffic, this modernized plant can readily be adapted to deliver two-way communication services, including telephony and high-speed data, alongside cable TV.

In addition to HFC networks being two-way activated, a cable operator requires the equipment shown in Figure 1 to offer telephony services. The digital switch is responsible for telephony call setup, billing operations support system interfaces and routing, while the host digital terminal (HDT) provides conversion between the digital switch and the radio frequency carriers used to transport voice to the subscriber's location.

The network interface unit (NIU) at the subscriber's home converts the digital RF signals coming across the broadband HFC network into analog telephone signals carried on twisted pair wiring in the home. The NIU on the side of the subscriber's home is the first point in the network where the signal becomes analog, unlike that of traditional telephone companies that must convert the digital signal from the switch onto an analog loop that could potentially be 18,000 feet long.

This "digital-to-the-wall" technology is a significant advantage for HFC over copper. The longer the analog loop, the more susceptible the circuit becomes to impairments such as crosstalk, electrical noise, inductance, capacitance, lightning and power cross. A shorter loop minimizes the opportunity for these problems to occur.

Converting analog to digital at the customer premises is not the only advantage of the NIU. It also acts as an intelligent device that can activate a network alarm if a problem occurs between the NIU and the HDT. If an alarm is issued, the network operator can dispatch a technician directly to the trouble spot in the network, often before the customer knows a problem exists.

Traditional twisted pair networks cannot monitor network failures between the digital switch and the subscriber. The only way to detect a problem is to initiate an intrusive test, which can disrupt the subscriber's calls. Therefore, the test is usually only conducted in response to a customer trouble report, affecting customer satisfaction and perception.

Carrier-grade cable telephony NIUs and HDTs also provide many other types of service monitoring information. They continually send reports to the network operations center (NOC) detailing information on traffic levels, frequency hops due to ingress and NIU state changes. These reports, combined with statistical analysis, allow the operator to review trends and fine-tune the operation of the network to ensure premium quality and reliability. Furthermore, alarms give real-time reporting of network issues such as loss of communication between the NIU and the HDT so service can be restored without requiring a customer phone call.

Challenges ahead Although an HFC network has inherent advantages, new entrants unfamiliar with this technology can face operational challenges during the initial launch cycle. Figure 2 shows a typical customer trouble report chart for a new HFC telephony operator unfamiliar with the technology. The high "start-up" customer troublereport rate reflected in the figure creates the potential for initial customer dissatisfaction with the new service. This is followed by a rapid decline in customer trouble reports as the operator learns how to use and exploit the advantages of the HFC network.

Adequate, up-front training is one proven remedy to reverse this trend and achieve early customer satisfaction. Successful HFC telephony operators have learned that sound product training, as well as cultural and procedural training before launching service, will dramatically reduce the number of customer trouble reports and significantly improve both penetration rates and customer satisfaction.

Although digital connections to the first mile have some distinct advantages for assuring quality of service, learning how to use those capabilities takes determination and time. Many service-related problems can be avoided by simply not assuming that HFC telephony is "just another digital loop carrier." If all the capabilities of the HFC telephony system are understood and exploited, providing service becomes an easier-and therefore cheaper-means of providing dial tone. Changing an employee's mindset about a new type of technology can lead to significant gains in customer satisfaction and retention.

Another challenge to overcome is the bus-based architecture of the HFC plant traditionally used for "non-lifeline" CATV services. In a bus-based architecture, any disturbance on the bus can affect all parts of the HFC plant equally.

This is inherently different from a star network, which is the norm in traditional copper loop networks. In a bus-based architecture, operators must learn to coordinate the timing of their maintenance work and repair activities so that someone working on one part of the HFC plant does not inadvertently affect lifeline service elsewhere. This is a cultural departure from copper loop star architectures, and operators will need to retrain the work force to ensure a successful launch.

For operators deploying HFC telephony, statistical process control is an excellent way to perform proactive maintenance. Many HFC telephony pioneers have successfully used statistical process control procedures to improve the operation of their services and dramatically reduce trouble reports.

As a result of proper personnel training and HFC's inherent advantages over twisted pair, operators that pursued an HFC strategy early on ape no longer the mavericks of cable telephony. They are now viable providers of high-speed data, video and dial tone to more than 250,000 subscribers worldwide. Regulatory obstacles and difficult plant conditions have retreated as roadblocks to success. Instead, new entrants are exceeding their business plans by offering a premium-quality product with superior customer service.

Today, cable telephony is a proven business venture offering excellent returns on investment. And in the end, as long as subscribers' expectations for quality are met, bundled high-speed data, video and telephone service on a broadband pipe to the home will offer significantly more value to the customer than that of a traditional copper network.