06.16.04

Kip Compton, Comcast Cable; Ran Oz, BigBand Networks

Abstract

Encouraging growth in services such as video on demand (VOD), tiered high-speed data and high definition television (HDTV) could transform the cable industry in the personalization and richness of offerings to subscribers, and the resulting revenues generated. However, analog broadcast programming, that continues to occupy well over half of the cable spectrum, constrains the amount of programming and services operators can provide without expanding capacity through intensive efforts and capital expenditures.

All-digital cable is currently gaining interest as a means of radically altering spectrum allocation by carrying all programming, including basic cable, in digital formats that have more than 10X better bandwidth efficiency than analog. But this too involves high expenses and complications in the requirement that all deployed analog set-top boxes (STBs) be swapped for digital devices and cable-ready analog televisions be connected to digital devices.

The authors propose that digital simulcasting, in which basic and enhanced basic programming are carried both in analog and in digital, provides a smoother migration towards all-digital cable by allowing a gradual swap-out of analog devices, rather than a singular transition. Digital simulcasting positions operators for the benefits of more and richer services on an all-digital network, and in the mean time, provides ancillary benefits such as more economical deployments of digital video recording (DVR) and local advertising.

Beginning of the Migration to All-Digital

At the Morgan Stanley Global Media and Communications Conference in September 2003, Comcast Cable president Stephen B. Burke proclaimed, "I don't think we'll run out (of bandwidth) in the next 24 months, but I can see it in the next three or five years. The next answer is to go all-digital." Mr. Burke listed multiple drivers for the operator's expanding bandwidth requirements  including faster Internet service, launches of hundreds of new video programming channels, and growth of VOD, HDTV and DVR.

Without going all-digital, all of these growing, bandwidth-intensive services are constrained to the cable spectrum above approximately 550 MHz, the frequency below which typical cable systems broadcast basic and enhanced basic programming in analog format. That means that in advanced plants with spectrums of 750 MHz or even 860 MHz, most capacity is dedicated towards carriage of fewer than 100 analog programs, while hundreds of digital programs and all emerging services contend for the rest.

Conversion to all-digital provides tremendous gains in available bandwidth by extending digital video efficiencies to basic and enhanced basic programming that currently occupy the large majority of cable spectrum.

The beginning of 2004 saw the first "all-digital" plant announcements from cable operators. These deployments do carry all programming, including the basic and enhanced basic tiers, digitally. But they also maintain that programming in analog form, in order to continue serving installed analog STBs and cable-ready analog televisions, without forcing those devices to be replaced or adapted for digital reception. This method, called digital simulcast, is meant to ease the all-digital transition. But it ironically introduces obstacles to all-digital's primary goal by taxing an additional five to seven 6 MHz channels for the additional digital carriage, while still maintaining all analog broadcasting.

Digital simulcast is not the true all-digital network to which cable operators aspire in order to expand service offerings and enhance content quality, but it does provide a means towards that end by gradually transitioning towards full penetration of digital devices at subscriber premises. The alternative of a singular and sudden shift, in which all analog service ceases with simultaneous launch of the digital carriage of basic and enhanced basic programming, is a logistical near-impossibility given associated capital expenses of new digital customer premises equipment (CPE), overwhelming field service operations to enact the change, and potential subscriber irritation.

How Digital Simulcast Works

An operator implementing digital simulcast must first consider current analog carriage to determine and make accommodations for the bandwidth requirement of digital versions of the same programming. Many systems, including those upgraded to 750 MHz or more in the recent years, broadcast at least eighty channels of analog programming. Using advanced rate shaping technology, these eighty programs could be encoded and statistically multiplexed into as few as six 6 MHz channels, or a total of 36 MHz of spectrum. More or less analog programming could add or reduce a required channel.

Upgraded plants do not necessarily have the required spectrum available for digital simulcast, especially given recent launches and expansions of advanced services such as HDTV and VOD. An initial consideration should be the immediate migration of some analog programming to digital-only availability. Many operators have already done this as aggressively as possible, including conversion of premium programming, with only off-air broadcasting and those programs mandated by franchise agreements or contractual arrangements remaining on the analog tier. If there are remaining programs that operators can migrate to be digital-only, this should be considered as it practically liberates a full 6 MHz channel, and with the conversion to all-digital, in time those programs will again be available to all subscribers.

Once all programs that can become digital-only do so, there remain reasonably easy and available bandwidth optimization techniques operators can use in the near term to secure the capacity required for digital simulcast on most plants. Migration from 64QAM to 256QAM, more aggressive rate shaping or more intelligent channel line-up planning can be used to this effect. Emerging tools optimize line-up planning of all programs across all QAM channels to multiplex for the best combinations of bandwidth efficiency with video quality. These practices should facilitate initiation of digital simulcast in most cable plants at current advanced service usage levels. An operator can plan to be truly all-digital by the time that usage of advanced services is anticipated to impede upon the bandwidth required for digital simulcast.

Once digital simulcast is initiated, any of an operator's customers that are digital subscribers could then receive all of their programming, including basic and enhanced basic, digitally on their televisions equipped for digital reception. Customers that only subscribe to the basic or enhanced basic tier, and those televisions only receiving analog cable which exist in most digital subscribers' homes, would continue to receive their programming as they always have.

As new subscribers join the cable system, new televisions are added by subscribers, and the cable operator makes service calls, a transition can be enacted over time to equip even those televisions only entitled to basic or enhanced basic programming with digital set-top boxes (DSTBs) or other compatible devices, so that they can receive the digital versions of that programming. The operator can also conduct this transition in controlled and gradual manner proceeding through its systems' geographies incrementally. An additional initiative on which an operator may embark is to use the all-digital transition as an opportunity to reduce capital expenditures and depreciation expenses by encouraging and incentivizing subscribers to take retail ownership of their own CPE.

Program Sourcing and Encoding

Technically, there are several types of programming on the basic and enhanced basic tier to be simulcast. Digitally sourced programming must be decoded to be provided to analog subscriber devices. This already occurs for analog broadcast purposes so it does not drive an incremental expense, however for simulcast, besides decoding to analog, the digital version is also maintained. Analog sourced programming has a digital copy encoded to be simulcast, which does introduce a new expense. Programming available to the headend in both formats can have both versions mapped directly onto the plant with no incremental encoding or decoding required.

Off-air broadcast programming comes into cable headends terrestrially in analog form, and also digitally if the off-air broadcaster is using its digital spectrum allocation to simulcast as well. Most satellite-delivered programming is downlinked in MPEG-2 digital, in which case an analog copy must be decoded. In most systems, this already occurs for basic availability to analog STBs and cable-ready televisions. Some programming is satellite-broadcasted in analog, in which case there must be encoding in the cable system for digital simulcast. As digital simulcast and all-digital transitions spread through the cable industry, it will likely become increasingly sensible for broadcasters to transition towards making all of their programming digitally available.

Sources of basic and enhanced basic programming may require some encoding or decoding in order to effect digital simulcast.

While some content remains only available from analog sources, operators could consider a centralized facility that would perform all encoding in order to save on costs of encoding within each cable system. This could allow for resource sharing by multiple systems or even different operators in a region, with inexpensive optical transport used to reach every headend and hub, and performance of protocol conversion and de-multiplexing at the transport termination. National programming distributed in analog by satellite could be downlinked, encoded, and uplinked digitally for nation-wide availability, from a single central site, either owned by a large operator for all of its systems, or shared or accessed by multiple operators.

Maintaining Local Advertising

According to the Cable Television Advertising Bureau, local ad insertion revenues for cable operators will reach $5.3 billion in 2004, which indicates approximate doubling over the course of six years. In most systems, nearly all of this revenue is generated through insertion on the most popular basic programming, and thus entirely in analog format. This insertion is often done in the headend, but with advertising interconnects now being operated in 75 of the top 100 markets, a significant amount, if not majority, of the insertion is being completed in hubs or otherwise delineated zones. There are more than 3,000 analog insertion zones in the United States today.

The number of programs into which cable is inserting has recently grown significantly. Over the last five years, the average number of inserted networks per system has more than doubled to over 30, with many top markets such as Denver and Chicago surpassing 40. It is critical that any implementation of digital simulcast not only ensure the integrity of this revenue stream, but enable it to grow through the support of new functionality and extension to more programming.

Local advertising has emerged as a substantial and highly profitable revenue generator for operators that must be maintained through any transition to all-digital cable (source: Cable Advertising Bureau).

The authors recommend that operators encode all analog-sourced programs to digital, and utilize Gigabit Ethernet transport to distribute this programming to the hub or zone levels of their networks. Insertable basic programming is today accompanied by analog cue tones that instruct ad insertion systems of proper insertion points. There is an increasing trend towards these same networks embedding the tones as SCTE-35 messages within MPEG-2 streams to signify the splice point. However, many still do not provide these digital program insertion (DPI) messages.

A system combining switch/routing with media processing can address all requirements to enable standard digital splicing for all programs. This system can source digital programs by DVB-ASI or analog programs with encoding performed, and then embed any missing SCTE-35 messages at their correct splice points. The now all-digital programming, complete with digital cue tones, can then be multiplexed and converted to Gigabit Ethernet for cost-effective distribution to hubs or ad zones.

In hub facilities, another similar system receives programming, removes any jitter introduced during transport, performs a DPI splice of the right advertisement for the area from a local server according to the SCTE-30 interface, and performs any necessary rate shaping so that multiplexes fit capacity including their advertisements. The authors recommend that in order to accommodate the video quality requirements for advertisements and not require excessive rate shaping, digital simulcast programs, or at least those with inserted advertisements, be spread across multiple QAM channels rather than concentrated together. The programming multiplexes are also converted out of Gigiabit Ethernet and passed on for cable plant carriage. For simulcast programming, at this point a decoded copy would be created and both versions would receive their final necessary modulation and combination onto the cable plant.

Digital splicing improves overall economics by taking advantage of Gigabit Ethernet and digital content efficiencies, which could open more programming to ad insertion revenues.

This insertion topology effectively mimics existing analog advertising insertion systems, in which programming is distributed to zones where advertisements from a digital server are decoded and then inserted. The topology remains the same, but some additional expenses are incurred in upgrading servers and expanding encoding. The extent of decoding should remain the same for programs already having advertising inserted, with the modification that the decoding is now applied to both programs and advertisements, and not only the advertisements.

In addition to the architecture described here, operators can take advantage of the flexible characteristics of digital media and transport protocols to otherwise configure digital simulcast and ad splicing deployments in order to meet particular goals. For example, a master inserted advertisement could be spliced at the headend level to conserve on storage requirements and splicing activity at hubs, and then only those hubs with different local advertisements for the spot in question would splice over that with their advertisements. Servers and splicing could also be centralized even for zoned advertisements, to conserve and share resources across hubs, although this can increase transport requirements due to the resulting different multiplexes, with the same programs but different advertisements, that are simultaneously carried.

Centralized server and splicing consolidation are among the efficiency improvements which can offset the costs of modifying ad insertion for digital simulcast programs, resulting in generation of new revenues by inserting advertising on more programs. Fewer and in some cases more economical resources process and transport content that's digital in more of the network, including the content that's ultimately delivered analog. This is key to generating more revenues, by enabling more open and cost-effective extension of local advertising to more programming, both analog and digital, lowering the justifying threshold for program popularity in order to trigger ad insertion and the revenues it generates.

Alternative views suggest that the digital simulcast solution could be an overlay atop of the existing analog network and, as such, the legacy analog ad insertion system would remain in operation and the signal coming from the DPI multiplexer would not need to be split and decoded. The challenge to this approach arises from the additional operational and equipment costs associated with maintaining two separate ad insertion systems, as well as the back office complications resulting from having to reconcile the insertion of the same ad across both the analog and digital programs. The authors believe that the ultimate solution, in the best interests of operators, is to leverage DPI benefits for digital, analog and simulcast programming, especially given that the ultimate goal of digital simulcast is an all-digital plant in which analog ad insertion will be obsolete.

Digital Customer Premises Equipment

There are multiple methods that the operator can consider in the devices deployed for subscriber access to all-digital content during the digital simulcast transition. To conserve costs, these can include a DSTB with a single tuner, an outlet digital adapter (ODA) that connects directly to the television to further minimize cost and space requirement, or a network interface (NIU) unit at the ingress point to the home to perform digital-to-analog conversion for all analog STBs and/or analog televisions inside.

As DVR becomes better understood and more appreciated by subscribers, it is emerging as a key competitive issue between the cable and direct broadcast satellite (DBS) industries. Viewers are increasingly interested in time-shifting television viewing as part of their subscription package. 25% of all new DBS subscribers now receive DVR through boxes that, because they have few if any analog components, have a definite cost advantage over those currently used by cable operators.

DVRs with analog components in them are of course more expensive than those with only digital components. Industry experts estimate that cable operators could save as much as $100 per device if they, too, could use purely digital DVRs in their networks. The corresponding savings associated with simple, single-tuner DSTBs are up to $50, and the situation could be further enhanced by use of ODAs or NIUs.

Use of a network interface unit to decode digital video can feed all analog devices and cable-ready analog televisions in a home, minimizing the cost of conversion to all-digital.

To be clear, the transitions in subscriber homes do in fact represent additional costs versus leaving analog CPE untouched. But the time allowance of digital simulcast as a gradual means to convert to all-digital enables the operator to plan and implement economically optimal change.

Digital Simulcast's Financial Impact

A key, current goal for many operators is to enhance revenues through all-digital cable, expanding programming and services, to achieve more premium penetration, transactional revenue and subscriber loyalty. Digital simulcast is a means towards this end and as a process does create costs without enabling much in the way of immediate new revenues. However, as cable spectrums begin to fill with HDTV launches, faster data access, and increasing VOD usage, some means of near-term capacity expansion is required to further these growth trajectories.

If subscriber disruption is minimized to both contain costs of the transition and to provide adequate customer care for minimization or even reversal of churn, then all-digital's capabilities to expand bandwidth are dramatic, more than doubling the amount of content most cable plants can carry. In contrast, embarking upon more plant upgrades has a far higher expense, and may provide less of a gain. For example an 860 MHz plant with analog programming below 550 MHz that upgrades to 1GHz expands its digital carriage capacity by less than 50%, versus a gain from all-digital well above 100%, even on a plant already upgraded to such high spectral frequency.

Digital simulcast does increase costs in more encoding for program origination and ad insertion. However, these investments are maintained once all-digital cable is achieved. Digital simulcast has financial benefits en route to all-digital by immediately allowing more cost-effective all-digital CPE including all-digital DVRs for new and upgrading subscribers, and improving transport and ad splicing efficiencies, which can open additional ad insertion revenue opportunities. Importantly, digital simulcast allows the operator to control field support and call center resources and to maintain subscriber loyalty through minimal service disruption, while enacting a gradual change to all-digital cable and the enhanced revenues it promises through expanding content and services.