COX DIGITAL ADS COULD SPELL TROUBLE FOR DSL

Cox Communications is successfully inserting local advertising into digital programming, negating one of the few advantages that video-over-DSL has over cable.

Incorporating local advertising into digital programming enables Cox to move some popular networks out of its analog tier, improving picture quality and freeing up analog bandwidth for services such as high-speed data and high-definition TV. Cox, which is making the switch in Orange County, Calif., initially is taking aim at direct broadcast satellite's all-digital offerings, not DSL.

“DSL numbers being what they are, it's not much of a competitive threat right now,” said Guy McCormick, vice president of technical operations for Cox's ad sales division.

Ad insertion earns several billions of dollars annually for the cable industry, including a hefty chunk from local sources. Telcos offering VDSL-based video, however, have yet to tap into it.

“It's something [DSL providers] think they could do, but nobody's spending a lot of time worrying about it right now,” said Bill Weeks, chief technology officer for Next Level Communications.

It could be a huge differentiator, though, given cable's technical limitations. Currently, cable cannot afford to shift all its programming to digital because it would require a set-top box for every TV and negate cable-ready TVs. VDSL, using Next Level's technology, can deliver digital signals to three types of televisions.

Doug Wenzlaff, executive vice president and general manager of Wood County Telephone Co., a 4000-subscriber VDSL provider in Wisconsin Rapids, Wis., sees a future for local advertising.

“It's not a large chunk of business at this point, but it has generated a significant amount of interest,” he said.

Like Cox, WCT can take a satellite video feed and insert a local advertisement into its stream because “the guys who have solved it for the cable world have as easily solved it for the video-over-VDSL world,” said Weeks.