North American cable prepares for HDTV, on-demand and bundling battle

John Moulding takes a look at how cable operators in North America are preparing for increased competition by expanding HDTV, VOD, broadband speeds and Internet presence. Network innovations like Switched Digital Video are among the technology enablers.

The announcement that Charter Communications, Inc. has deployed Switched Digital Video (SDV) in its Los Angeles region cable systems is the latest evidence that the US cable industry is preparing its networks for a fight with IPTV. The company joins Time Warner Cable and Cablevision among US operators known to be using a technology that dramatically conserves bandwidth for broadcast television and enables the expansion of HDTV and special interest programming, and/or an increase in broadband speeds, using the saved spectrum.

Charter is typical of most major US cable operators, facing up to the immediate threat from satellite TV but readying itself for triple-play competition with telecoms giants AT&T and Verizon, who are deploying video services market-by-market across the U.S. Expansion of its own triple-play bundle (500,000 Charter Telephone customers as of February 2007; 75 per cent of telephone customers taking three services) is a priority and the company believes it has first-to-market advantage in most of its territories.

HDTV BATTLEGROUND

HDTV is another priority for Charter, which currently offers 40 channels of HDTV (November 2007) while satellite rival DIRECTV is offering 75 national channels in HD with the promise of 100 by the end of the year. Charter Communications has publicly committed to 100 HDTV ‘programming options’ by the end of this year, including HDTV-on-demand, which is one notable service category where cable can shine compared to its satellite rivals.

HDTV is a key battleground between cable, satellite and IPTV and the race is now on to deploy more services. Comcast offers HD on-demand as well, with 100 hours of HD movies and shows at last count, and is on record claiming 200 HD ‘viewing options’ for its customers at any given time. HD movies-on-demand are also available from Cox Communications. A Time Warner Cable spokesperson said the company offered an average of 33 HD channels in its divisions as of November 2007, while Videotron in Canada broadcast 27 HD services in October. Cablevision, covering New York City among other markets, offered 41 HDTV channels as of September (plus HD-VOD).

MORE CONTENT-ON-DEMAND

On-demand services are hailed as a trump card by some telcos (indeed, some IPTV services only offer VOD combined with free-to-air digital terrestrial TV). And that is another area where cable is working hard.

Always the on-demand pioneer, Time Warner has gone further than most wired network operators in the U.S. or EMEA towards a network-PVR type service, in the form of its Start Over offering. This allows consumers to join a broadcast programme and rewind to the beginning, then view and pause (but not fast-forward). The service is independent of Digital Video Recorders and looks like a significant differentiator from either satellite or IPTV for the subscriber demographic that does not want the additional cost of DVRs. Said to be highly regarded by subscribers (by Time Warner), Start Over is now available in more than half the company's cable divisions.

Time Warner also offers a service called QuickClips, which uses content from channel owners that has already been repurposed for the Web, and delivers it as an ‘enhanced TV’ complement to broadcast TV. This could be weather reports on a weather channel, for example. A subscriber watching a weather channel could press the QuickClips icon (bottom of the screen next to Start Over) to access the programme options available.

The clips are actually streamed off the VOD servers and therefore technically part of the Video on Demand service. However, they can only be accessed via the broadcast channel and once the subscriber ends the on-demand session, they return directly to that channel (making it rather like a 'Red Button' multi-screen menu found on satellite enhanced TV).

Expanded on-demand libraries are one area where cable can try to set itself apart, certainly from satellite. Insight Communications cites 3,000 movies and shows (2,000 of them free) as part of its InsightDigital 2.0 digital subscription. At the end of last year Cox was already offering 5,000 titles within its on-demand service including movies, music and television shows.

On-demand competition is growing. Satellite operators are now deploying push-VOD services, downloading movies and the most popular shows onto consumer DVR hard-drives. Echostar DISH Network is even allowing some subscribers (those using its ViP622 and ViP722 HD-DVRs) to download movies over broadband using a pull-VOD model, courtesy of the receiver’s Ethernet connection linked into the home broadband network. The company says its IP-VOD service provides an extensive collection of pay-per-view titles, both new releases and past favourites.

DISH Online, as the new service is called, uses broadband but is not a typical Internet VOD service, being accessible only through the DVR, with movies downloaded into the DVR.

Given the increase in competition, volume of VOD may not be enough to differentiate cable. Assuming the quality of content was standardised across all platforms, pricing (including free VOD and even free HD-VOD) will be important, as will release windows, plus search and navigation issues.

HARNESSING THE WEB

Cable operators are increasingly harnessing the Internet, both as a distribution platform in its own right where they own content, or as a complement to cable TV, voice and data services that helps to keep subscribers within the brand-domain even when they are not watching TV. Comcast is perhaps the most notable example of a Web-centric operator, offering typical Web content services at www.comcast.net (claimed to be a top ten online destination in the U.S.), user-generated content at www.zidio.com, movies information at www.fandango.com, and games at www.gameinvasion.net. Comcast also owns thePlatform, which enables companies to publish Internet video services.

Comcast is also a major partner to News Corporation and NBC Universal for the Hulu Internet TV project, providing distribution for Hulu content on comcast.net and fancast.com and making its own content available on Hulu. It even runs a virtual entertainment complex in Second Life, the online game where people live a make-believe existence using avatars. Comcast is showing how online assets can also be integrated into the classic cable television experience. A partnership between ziddio.com and Facebook has resulted in the Facebook Diaries, a series of video shorts about people’s lives, that features on Facebook, Ziddio and on television within Comcast’s ON DEMAND VOD service.

Comcast is one of several big cable companies that is using the Internet to provide some cross-platform integration of its existing services. Its SmartZone service, for example, allows telephony customers to listen to voicemail online and forward voice messages as emails.

Comcast customers can view, save and print their call history - bringing to telephony some of the convenience already found in email. SmartZone is also the place subscribers can manage calling features like call forwarding and ‘do not disturb’ functions. Importantly, given the trend towards personalised entertainment, subscribers can personalise SmartZone with their chosen weather and news, and also add video clips.

Cablevision is pursuing a similar strategy with its Optimum Online web portal, which boasts over 2 million customers using the site as their homepage location. Customers can use the portal to manage their cable account, 'see' voice messages and email, and view TV listings for the cable service. Optimum Online also includes geographically targeted news, weather and traffic, etc.

Charter Communications has a notable online presence at www.charter.net including on-demand movies and television programmes (including international content). Time Warner (which owns Time Warner Cable) lists cnn.com and www.people.com among its most obvious online assets.

CABLE TELEPHONY

Broadband speeds on North American cable are as high as 20Mbps in Canada (at Videotron in Quebec). In the U.S., Cablevision offers 30Mbps downstream and 5Mbps upstream today in its premium data tier. Cable broadband speeds are expected to rise significantly thanks to the deployment of channel bonding and DOCSIS 3.0 technologies (Videotron is among those who have been testing pre-standards Wideband solutions that could deliver 100Mbps downstream). Broadband speeds, upstream as well as downstream, are sure to become a major competitive battleground with fibre-rich telcos.

The deployment of IPTV was a defensive response by telecoms operators, who recognised the need to become service providers in a world where bandwidth is becoming commoditised. One of the factors that prompted the launch of video services (and therefore a telco triple-play) was the success cable operators have had in the broadband and telephony markets. The cable advance into commercial telephony will stir up the market further.

Cable telephony penetration is increasing, with figures of 11 per cent of telephone capable cable homes for Insight Communications (covering Ohio, Illinois, Kentucky and Indiana) and one-third for Cablevision (Optimum Voice service), as examples. Cox experienced a 21 per cent rise in telephone subscriptions last year.

There is a value to voice services in terms of new customer acquisition. For example, Videotron says that since the start of this year, 35 per cent of its telephony sales have been to consumers with no previous Videotron products. Cox Communications had 448,000 non-video homes by the end of 2006, pursuing its strategy of delivering "a line in every home".

The greatest value of telephony is still as part of a discounted bundle however, helping to provide the reduced customer churn and higher Average Revenue Per User that all network operators seek. Cox stated in its 2006 annual report how bundling was its "best offense and defense".

QUAD-PLAY

The quad-play is something US cable has to address. Verizon and AT&T both have notable wireless services and can eventually tie these in with their video, voice and broadband offers. In most instances, it looks like cable will have to partner, just as Time Warner has done with Sprint.

Videotron in Canada already offers wireless voice and quad-play, and has been chasing wireless spectrum (its parent Quebecor Media wants to launch a 3G network). Cogeco Cable, operating in Quebec and Montreal, is offering its high-speed Internet customers free access to Wi-Fi hot-spots, while RCN on the U.S. east coast offers its RCN Wireless service powered by wireless network operator MobilePro.

ON-SCREEN CONVERGENCE

Assuming cable operators have access to wireless voice services, it is quite hard to see where telcos can find a truly unique selling point against their wired network rivals. One area could be the converged television/telecoms environment powered by IMS (IP Multimedia Subsystem), including telephony services on the TV and the concept of seamless content mobility, where a video session can be transferred from a television in the home to a mobile device when the subscriber leaves the premises, for example.

Some cable operators are now offering caller-ID on the television set (for example, Cablevision Systems with its Optimum Digital TV package) where subscribers can see incoming call information on their TV screen. Cablevision already offers the service in Long Island, New Jersey and New York City and was expected to deploy across its entire service area before December. This service is free and illustrates that the more obvious converged entertainments and communications services are not exclusive to IPTV providers either.

GENERAL DIFFERENTIATION

Different cable operators in the US cite various factors that differentiate them from either satellite or IPTV, including network reliability, availability of television signal (no rain-fade like satellite), ease of multi-room television, and picture quality for HDTV. Compared to satellite they can point to high-speed broadband and telephony (although satellite/telco bundles add up to the same triple-play) and far more on-demand options, even given the advent of push-VOD. Local TV is also a notable cable asset.

Localisation is also on the telco IPTV agenda so it is clear that where major cable and IPTV providers are present in the market, increased competition and service innovation should follow. Ultimately, cable operators may even migrate their services so television is delivered as switched IP all the way to the customer premise, meaning they become IPTV providers themselves technically - except using a different network infrastructure (HFC instead of fibre or DSL).

Perhaps the increased focus on customer experience and customer care in both the U.S. and European cable markets reflects the fact that ultimately, there may not be that much to separate the triple-play contestants in terms of technology or services offered.