On equal footing: Video re-emerges from the shadows at Supercomm

A vendor representative - who will remain nameless for obvious reasons - was demonstrating his company's latest gear, which lets carriers provide video services over a fiber-based architecture, at last month's Supercomm. When asked about telcos' renewed interest in video, the answer had nothing to do with advances in the technology or improvements in the economics.

"In a way they're a lot like little kids. If one has something, they all have to have it," he said.

Of course, the biggest kid on the block also happens to be the new kid in town - AT&T. And with AT&T now the owner of the coveted "second wire" into a huge number of homes, the carrier will continue to provide the holy trinity of services: video, voice and high-speed data. As a result, telcos suddenly feel the pressure to react.

Supercomm reflected that reality, but in perhaps a more pragmatic way than ever. In the early 1990s when video services first appeared at Supercomm, it was almost a foregone conclusion that telcos could easily take over the residential entertainment market from their supposedly dimwitted, technologically retarded cable competitors.

Less than 10 years later, telcos have barely made a dent in cable's armor, and most incumbent cable providers appear more concerned about the infiltration of direct broadcast satellite than telcos. It's not telcos that find themselves in the position of playing catch-up, according to several vendors in Atlanta.

Luckily for those faced with a competitive threat from AT&T, many lessons learned from the early fiber-to-the-home (FTTH) trials, such as GTE's ambitious Cerritos, Calif., system, are being applied today. And one of the most important is to temper expectations.

"Early [FTTH platforms] were all great technologies looking for a solution," said Robert Lund, chief technical officer of Optical Solutions, which used Supercomm to unveil a large carrier-friendly FTTH platform. "There was no demand for it. Even if prices [for the equipment] did come down through volume, there was no demand."

But during the past few years, Internet applications have created unprecedented demand, which is spilling over to video-based entertainment.

"The Internet has really changed people's concept of bandwidth," said George O'Mara, senior applications engineer for Sumitomo, which came to the show to be viewed as more than a component manufacturer. "If you go back to Cerritos, the network did all these wonderful things, but the people weren't using it to full capacity."

You oughta be in pictures

Such demand - combined with the threat of AT&T and possible wireless competitors - made this year's Supercomm not only a buffet of video and FTTH technologies, but also might prove a seminal event as a number of telcos announced their intention to provide video services. Unlike the first go-around, though, FTTH has developed into a more cost-effective alternative, particularly when compared with the cost structure of competing cable operators.

"AT&T spent roughly $1500 per subscriber for TCI and MediaOne combined," Lund said. "[Telcos] can put in fiber to the home for maybe one-third of that cost."

Among the handful of deployments announced at the show, one of the most extensive was Next Level Communications' news that 14 Independent local exchange carriers (LECs) have agreed to deploy its Nlevel3 platform.

Of the new customers, which included Horizon Chillicothe Telephone, Mankato Citizens Telephone and United Telephone of Tennessee, about half did not have cable experience, said Pat Pachynski, senior vice president of marketing for Next Level. However, several also face demand to offer a complete package of services because of pressure from cable operators.

"Many of the ILECs we're selling to now don't have any real experience with video," he said. "If you look at line grown [for voice], it's not that much. We're a revenue opportunity."

In Atlanta, Next Level displayed its platform, which originally was designed with a set-top box that could decode three channels of video simultaneously. In the coming months, the company will unveil a one- and two-channel decoder.

The company also quietly discussed a new alliance with VideoTele.Com for digital encoding, demultiplexing and grooming equipment. The companies are developing a packaged software application that lets telcos perform a business-case analysis, including estimating return on investment before deploying any equipment.

"One of the things we've had to do with telcos is act as business consultants," said Lee Rainey, vice president of marketing for VT.c. "They don't have to bring in a lot of in-house video expertise. Only about 10% of our prospects have cable experience. We've worked the model on systems as small as 700 subscribers, and it still works."

Part of the reason it works is that more vendors are willing to provide full turnkey services, relieving telcos from such burdensome processes as contacting dozens of different programmers to secure rights to carry their networks. VT.c provides content aggregation, installation, market analysis and helps with local marketing campaigns.

In Atlanta, the company showcased several installation sites, including Chibardun Telephone Cooperative of Dallas, Wis.; Horizon Chillicothe Telephone in Chillicothe, Ohio; and PBT Telecom in Gilbert, S.C.

PBT uses VT.c's digital video headend suite to supply 127 channels of MPEG-2 digital video and more than 40 channels of music.

The whole nine yards

Also promoting its focus on full services was mPhase Technologies. The vendor showcased a prototype version of its Traverser platform, which provides video services over copper using rate adaptive DSL.

The company also highlighted it installation at Hart Telephone in Hartwell, Ga. (about two hours outside of Atlanta), where 12 beta customers now are receiving high-speed data, voice and video over existing twisted pairs. This fall the companies plan to expand with a production version to at least an additional 100 homes.

"They're looking at this as real revenue now," said Ron Durando, president and CEO of mPhase.

In March, mPhase signed a joint venture agreement with AlphaStar International to create a global broadband TV distribution network that telcos can use for interactive and video content. Under the agreement, AlphaStar will contribute its satellite and downlink facilities while mPhase provides the equipment for the headend/central office (CO), the access network and the set-top box.

"We've had consent from 96 programmers to deliver their programming over the new medium," Durando said. "It has allowed us to tremendously lower the cost of the digital headend."

PixStream, which has been providing video networking equipment to telcos for several years, also used the show to move toward a turnkey solution, signing a deal with Federal Hill Communications. Federal Hill will negotiate and license broadcast and cable network agreements and license digital video-on-demand (VOD) content for PixStream customers.

"What Federal Hill does is go into a phone company and within two months gives them a 100-channel lineup," said Dave Caputo, vice president of marketing for PixStream. "Basically, they become a virtual program director."

The move was prompted by the fact that telcos have never traditionally dealt with programmers or the continual negotiation style to which many are accustomed. "Really what we're selling now is business planning help," Caputo said. "There's no real magic to this. We just look at what's the stumbling block."

Piece by piece

Not all vendors, of course, are attempting to provide turnkey services, and the show floor was littered with many more interested in selling components or platforms.

Terayon Communications, for instance, displayed its CherryPicker digital video management system, which is now used by mPhase and Next Level. The system, which has been in trial in U S West's Phoenix area video systems, retransmits video streams that arrive at the headend/CO at variable rates within the limitations of DSL bandwidth.

"No matter which DSL infrastructure [telcos] pick, they're stuck with a fixed pipe, and the video remains variable," said Erwin De Bruycker, senior vice president and general manager of North American DSL systems for Terayon.

Ironically, CherryPicker was never intended for telcos but for cable operators taking different types of satellite feeds. However, the company is finding a rich market and plans to build its next generation product to handle services such as WebTV.

"We've been pulled into it. The product wasn't really built for DSL, but it's been a good product," De Bruycker said. "We're giving [telcos] a 10-to-1 savings because they don't have to bring the video back down to a base band."

Aiming beyond cost savings and into multiple services, Motorola carved out a space within its wireless-dominated booth for its Streamaster set-top box. The unit, which is separate from its set-top line acquired from General Instrument, is being positioned as an open platform that not only can provide traditional video services, but also games, information, videoconferencing, high-speed Internet access and other multimedia applications.

According to Motorola executives, telcos must think of providing something more than just entertainment if they are to survive in the video market. At the same time, telcos have the advantage of an architecture that is inherently more flexible than cable's hybrid fiber/coax.

"The telco space is behind, and they know they're behind," said Vernon Reed, strategic technical marketing manager for Motorola's multimedia systems division. "The biggest nightmare they've been going through is finding an end-to-end system that maps into a business plan."

Flexibility is the key, Reed added. Not unexpectedly, Streamaster is built to let the carrier choose what type of services it wants to provide. More important, the box can be upgraded via software downloads without truck rolls. "It's really becoming more of a residential gateway," Reed said, noting that the box can include a DVD player.

Any which way

Also playing up its flexibility at Supercomm was OnePath Networks, which announced that Direct Digital Communications, a Seattle-based carrier specializing in multi-tenant units, had selected OnePath as its exclusive supplier of broadband accesssolutions. Under the multiyear agreement, OnePath will provide equipment, systems and support, allowing Direct Digital to deliver bundled communications services to about 10,000 living units annually.

OnePath's iPath relies on FTTH, though the company insists that such an architecture is more economical than either very high bit-rate DSL (VDSL)-based systems or fiber to the curb.

"One of the things that not a lot of people want to talk about is the DSL reach issue," said David Stehlin, president and CEO of OnePath, which has been providing fiber-based infrastructure for SBC Communications' limited deployments of DirecTV in the multidwelling unit market. "VDSL also has some issues in terms of complexity that I don't know they'll ever overcome. Fiber to the curb also is more expensive when you consider all the electronics needed."

Still, it's the threat of AT&T that the company is relying on to push telcos into the video marketplace. "There was no driving factor a few years ago," Stehlin said. "There are now three camps of players that want to own that end customer."

Most vendors aren't in the business of picking winners and instead are trying to play at lease two of the three sides of the battle. But at Supercomm, there was a natural focus on telcos.

Artel, for one, is positioning its Cross Stream 155M Video Access Multiplexer as a product for cable operators and telcos. However, the product is intended for those using DSL access architectures.

With Cross Stream 155M, providers can access digital video content over an ATM network from remotely located VOD servers. Once picked up, Cross Stream 155M then transports the video in a compressed MPEG format over an ATM network for distribution through a DSL access multiplexer.

"In the cable world, they want one infrastructure to do voice, video and data, and ATM networks are the only ones currently available that can do that," said Marty Dugan, corporate marketing manager with Artel.

Later this year, the company plans to introduce an IP-based version of the Cross Stream line, but not until many of the issues surrounding quality of service are solved.

Artel's latest multiplexer also is the first built for compressed video streams, or MPEG-2. "MPEG fits nicely into ATM cells," Dugan said. "The real challenge is the induced jitter. Since video is very time-sensitive, you have to manage the jitter across an ATM WAN."

Ironically, with all the advancements, most vendors spent less time convincing telcos that the equipment actually functions and more time on the economics. All of which points to further deployments.

"If there's a chasm with the technology, it's close to being jumped," said VT.c's Rainey. "It's moved now to explaining how it works from a business standpoint."