DSL video: Here today, tomorrow, next year?

When it comes to the matter of delivering video over DSL networks, there are optimists, pessimists and pragmatists.

The pessimistic view: While the major U.S. telcos are just embarking on multi-billion dollar network upgrades to compete in the video realm, the cable companies are already in position to offer voice services, in addition to advanced video services and high-speed data. This year, they'll try to make major slices into their rivals' core business while boosting average revenue per customer and more than likely reducing churn.

By contrast, the optimists see a glass half full of opportunities for telephone companies to create innovative entertainment products that go well beyond what cable players now offer, using IP-based television. U.S. telcos can follow the example set by their Asian and European brethren, learning from their experience, and be in position within two years to compete with the cable industry, with video products that are highly customizable and distinct from cable offerings, say the optimists.

“Telephone companies have the advantage of having a fresh start,” said Tom Starr, chairman of the DSL Forum, which has been developing standards to enable the delivery of video over DSL into the home. “They can go beyond the cable experience with a wide range of video-on-demand and customized programming. It won't just be getting a movie, it will be getting a movie with a wide range of options — do you want standard definition, high-def, with or without ads or with French subtitles?”

Companies such as Korea Telecom and Chungwa Telecom of China are already integrating their high-speed data with their video service to create a new entertainment experience no longer even defined by channels, said Shailesh Shukla, vice president of marketing for Redback Networks, which supplied its edge router technology for both companies.

“From an architectural viewpoint, cable can't do that today,” he said. “There is a window of opportunity for the telephone companies to provide differentiated services that cable can't match.”

As for the pragmatists, they have a foot in each camp, believing that telcos have a significant opportunity but need to be quick to get into the market — and not necessarily to base their future on extensive and expensive network upgrades.

Brahm Eiley of The Convergence Consulting Group is a classic pragmatist. He points to Canadian service providers such as SaskTel and Manitoba Tel that are delivering video over DSL today and competing effectively with cable companies through service bundling and competitive pricing.

“If you start today, you don't have to wait for all these new developments in compression and other technologies to develop a lot of premium services,” he said. “A company like Manitoba Tel is competing on price and became net income positive in less than three years.”

The best U.S. example of a pragmatic approach is probably SBC Communications' new U-verse service, which builds on the telco's existing relationship with EchoStar — to resell Dish Network's satellite TV as well as its current ADSL offering — and new technology from 2Wire to create a highly customized entertainment experience without a network upgrade.

“You don't have to spend billions,” said Brian Sugar, 2Wire vice president of marketing. “You can create the same experience, or a better experience, than cable can, using your existing network.”

Since pessimism is paralyzing, let's set that viewpoint aside to ponder the other options. One point of commonality among the optimists and most pragmatists is that the telcos can't afford, at this stage of the game, to deliver “me-too” services that only mimic what cable does now.

“U.S. carriers have an uphill battle because digital cable is so ubiquitous,” said TeleChoice analyst Patrick Hurley. “Whatever they offer has to be cheaper or better or both.”

Better services can be defined in many ways, but the industry seems to be gravitating to two distinct possibilities that include more customizable services tailored to the individual user and integrated services that combine voice, data and video in such a way that offers ease-of-use as well as increased functionality. Customization basically means selective multicast or unicast services.

Companies such as UTStarcom are building their network equipment strategy around the unicast notion, with plans to widely distribute content closer to the customer.

“We assume absolutely a unicast-centric view of the world,” said Jeff Payne, vice president of marketing for UTStarcom. “We would put a master copy of content somewhere deeper in the network, but you put the first few minutes of all these films at the edge of the network. In a rack today, I have 40 terabytes of storage. If I am taking films in four- to five-minute segments, can put them all in 40 terabytes.”

With that kind of distributed storage, content can be delivered in less than a second after a customer requests it, Payne said. UTStarcom has developed a broadband media distribution protocol and a media location registry that coordinates the transmission of content between central repositories and the distributed network elements.

“If you have 15 to 20 minutes of the content stored at this edge server, it handles the fast forward/rewind scenarios,” he said. “But you are never bulk file transferring film across this network. The network also monitors what's going downstream. If it sees a lot of people looking at a lot of content, it sends it down, closer to the customer. If no one asks for something in a week, that content is dropped out. It's a completely self-managed network.”

However, the distributed intelligence version of a video network doesn't resonate with everyone. Paul Sanchirico, senior director of marketing for Cisco Systems' video networking group, calls that approach a management nightmare.

“We have extensive experience in this area,” he said. “There are 10 million subscribers who get digital video today over Cisco infrastructure — our switches, routers and transport gear. We've learned it's important to pay attention to the cost per stream and the total cost of ownership.”

Most of Cisco's current digital video customers are cable companies, but the equipment vendor believes the same lessons apply.

The Cisco approach puts VOD servers in video headend offices, which are regionally based.

“We don't distribute content further,” Sanchirico said. “The cable companies tried it, and it didn't work. Every time they wanted to increase what was available, they had to upgrade every single one of those distributed servers.”

Cisco rival Juniper Networks also favors a more centralized approach, but focused intelligence at a broadband remote access server or BRAS.

The other architectural issue that gets debated is whether to combine all services onto a single virtual channel into the home or separate them into single IP streams that combine at a home gateway. Cisco believes in service separation, said Sanchirico.

“The bottom line is that the home access gateway needs to understand in an easy way which service is being delivered,” he said.

Dave Boland, Juniper's senior product marketing manager, stresses the need to combine voice, data and video on a single virtual channel into the home to avoid chewing up multiple IP addresses for each customer and creating management issues.

It will be that integration of services that enables the greatest degree of differentiation, said analyst Hurley.

“Service integration is something the telephone companies can do better than cable,” he said. “And they can make it invisible to the customer.”

For example, Hurley said, integrating broadband Internet access and home entertainment would enable customers to program a personal video recorder through a My Yahoo portal on the Internet through a PC or a cellphone.

All of that is doable today, argues 2Wire's Sugar, without changing out the existing core infrastructure. The SBC U-verse service, which is a joint venture of SBC and 2-Wire, was carefully built around TV viewing habits and can create a highly competitive service today, he said.

“People watch about 15 hours of TV a week, but they record 25 hours,” he said. “Our research shows that if you give people a DVR [digital video recorder], a program guide and video-on-demand, the first place everybody goes is to watch their recorded shows, and the first thing they do when they are done is set up more recorded shows. Over time, they use VOD less and less.”

Rather than become fixated over how to create a network architecture to deliver massive quantities of content into the home, 2Wire is convinced that telephone companies can leverage existing business relationships to create highly customized video entertainment package easily available this year — well before most network upgrades are set to be completed.

In SBC's case, it will use existing business relationships with Yahoo, MovieLink and CinemaNow, and its EchoStar partnership, to offer a robust video entertainment package that customers can use with advanced DVR functionality. It will also offer media center functions and integration with the home PC, said Sugar.

“There is no way everybody is going to be able to be serviced by fiber any time soon,” he said. “As cable guys are encroaching and doing voice over IP, the telephone guys need to act today. They have a relationship with the satellite guys, they need to productize that and create an experience that will be very similar to IPTV.”

WHITHER QWEST'S VIDEO OFFERING?

The one major U.S. telco with the most experience in delivering video over DSL is the one company with seemingly the least interest.

Qwest Communications has been using its copper network to deliver video in Arizona and Colorado for more than three years now and has about 43,000 customers on the service. It continues to market Choice TV in the Phoenix metropolitan area and in Highlands Ranch, Colo., where it has video franchises, but a company spokeswoman said that Qwest is “continuing to evaluate whether or not to expand the service.”

Qwest is using very high-speed or VDSL technology and offers advanced services such as Caller ID that appears on the television screen to enable a customer to determine if they want to answer a phone call before turning off or muting a TV show.

“The feedback we have is that our customers love the combination of high-speed data, TV and telephone,” the spokeswoman said.

Qwest continues to build out its networks under the terms of its franchise agreements, she said, and is marketing the service in those areas.
— Carol Wilson