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Show me the money.
That's what MSOs seem to be saying these days when it comes to parting up their rich digital spectrum among the herd of interactive services clamoring for a ride on the cable pipe. While capacity doesn't appear to be an issue as yet, choosing between profitable and questionable services is.
Depending on the system architecture, the treasured digital spectrum is a generous 200 megahertz wide. So for now, the choices are not driven by a short supply of bandwidth, according to Jim Chiddix, chief technology officer for Time Warner Cable.
"I don't really think we are having to make any choices any hard choices about using the spectrum. With the architectures that I think we have all used, our spectrum is almost unlimited," Chiddix says. "I think we have a very flexible HFC architecture. If we are not foolish about how we use spectrum. I think the current upgrades will carry us for a long, long time."
One example of this is found in cable modem service. While it is growing quickly, even the addition of rival ISPs to the cable pipe probably won't require Time Warner to add extra bandwidth.
"There is no reason not to use the same 6 megahertz channel for a mixture of ISPs. We do not need another channel for ISPs," Chiddix says. "Adding additional channels for cable modem service would be driven by volume, not by giving customers a choice of ISPs."
Indeed, booming use of bandwidth-sucking streaming video may force cable operators to pry open their original 4 megahertz to 6 megahertz high-speed Internet channel.
"The question is when," Chiddix acknowledges. "But today in most of our hubs, which are a multiple of nodes, we've only got one or two CMTSes. So we long before we have to think about subdividing nodes we simply add more and more CMTSes and put fewer and fewer nodes on each CMTS."
At the same time, Time Warner does have its priorities - and they don't center on the dozens of interactive TV startups all pitching their services to the cabler.
"Right now we are thoroughly consumed with the deployment of first of all digital boxes, second of all modems and third of all, video on demand. Those are proven products - customers are clamoring for those products," Chiddix says. "Interactive TV beyond video on demand is much less clear. And there is certainly something there, but it is hard to put a lot of energy into pursuing it while we are using all available resources for these clear and present businesses."
One place where interactive TV services have found an early home is Insight Communications, a cabler with more than 1 million customers mostly in the Midwest. Insight has rolled out not only digital and cable modem service but also video on demand using a system supplied by Diva and subscription-based interactive TV with local and regional content on a Liberate Technologies platform. Next year the company plans to launch cable telephony to complete the package.
"It's all a priority," says Charlie Dietz, senior vice president of engineering for Insight. "We look at the bandwidth model and by the end of 2000, 95 percent of our customers will be on a two-way, 750 MHz system."
As with other MSOs, there is no shortage of interactive TV and service providers pitching their products to Insight. The trick, Dietz says, is to put them to the business sense sniff test.
"You really have to look at the product and see if it makes money," Dietz says. "You have to be competitive with the satellite guys, but you also have to run a good business, too."
Bandwidth-hungry VOD requires the most modeling, in figuring out how many homes can be served by a neighborhood node server. While it is possible high VOD demand could sap available bandwidth in the future, Dietz says cable's node architecture works in his favor.
"Four thousand homes per laser is the choke point, but the good news is if we reach 30 percent penetration I can separate the nodes again," Dietz says. "You spend the money wisely. You make assumptions at the time as we did with video on demand and allow a little extra, and then it becomes a bandwidth management issue."
As with Time Warner, Insight is not looking to add an additional digital channel for other ISPs should open access come to its network.
"We don't want to keep giving over service dedicated spectrum," he says. Instead, Insight plans to direct traffic to ISPs using a single channel, and "if you do your modeling 6 megahertz is a lot of bandwidth."
The question of how much spectrum interactive TV will claim is linked to the bottom line, according to analyst Todd Wiener, managing director of TechTrends Inc.,
"In an ideal world, they would build out all of the infrastructure, deploy all of the services, and every consumer would sign up and pay," he says. "But that's not realistic. And that's why operators will have to expand their ITV deployments gradually, until they are absolutely convinced that consumer demand will translate into revenue."
As to what cable operators are targeting as priorities: "Video on demand and e-commerce are the two greatest opportunities in interactive television, but we believe that video on demand will have a greater impact in the near future," Wiener says.
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