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4
The Role of Cable Television in the NII
Wendell Bailey, National Cable Television
Association
Jim Chiddix, Time Warner Cable
There are over 11,000 cable television systems in the United
States. They, along with the equipment vendors that have
traditionally worked with them, represent a springboard to an
extremely high capacity, nearly ubiquitous broadband two-way
information infrastructure serving both the business and
residential communities. This existing resource passes over 97
percent of the homes and businesses in the United States and is
connected to nearly 65 percent of the residences. The cable
industry has made significant improvements in the quality and
reliability of its networks over the past few years and has begun
to put in place the structures needed to transform its systems into
highly flexible multiple service vehicles. Yet, though we have
continually expressed a willingness to make the investment
necessary to bring about this transformation of our facilities,
there are significant impediments to that goal. The primary barrier
to the realization of our full participation in this national
information infrastructure is posed by excessive regulation of the
cable industry. This federally imposed burden, which undermines our
financial capabilities, is coupled with other levels of regulation
and barriers to the provision of communication services posed by
state regulators and local franchise authorities. When these
restrictions are linked with such problems as denial of switch
interconnection access and usurious pole attachments and duct
rental contract provisions by potentially competitive local
exchange carriers, it becomes clear that the most capable and
flexible network available today can contribute its full resources
to the achievement of a national information infrastructure/global
information infrastructure (NII/GII) only if the government
promulgates a rational set of regulations that make it possible for
full and complete competition to flourish.
The basis for today's cable television networks is coaxial
cable, a radio transmission medium capable of transporting a large
number of separate radio carriers at different frequencies, each
modulated with analog or digital information. It is common practice
to use filters to segregate the high- and low-frequency portions of
the spectrum to allow simultaneous transmission of information in
both directions. This ability to transport coexisting carriers
carrying different kinds of information (essentially separate
"networks") provides an enormous amount of flexibility and
capacity. Today's coaxial systems are, however, arranged
architecturally in a broadcast topology, delivering the same
spectrum of information-bearing radio carriers (commonly called
"channels") to every customer in the community.
The advent of fiber-optic transmission technologies optimized
for broadband use during the last decade allows a cost-effective
upgrade of existing broadcast coaxial networks to a hybrid fiber
coax (HFC) architecture, with fiber trunks providing transmission
to and from small neighborhoods of a few hundred homes. This
arrangement of fiber and coax segments the traditional coaxial-only
transmission plant into many localized areas, each providing a
localized assortment of information. When combined with the
economics of high-speed digital switching technologies, this
architecture allows the simultaneous delivery of multichannel
television transmissions and switched video, voice, and data
services to and from individual homes within these small serving
areas. The upgrade of existing coaxial cable TV networks to a
hybrid fiber coax architecture as described above costs less than
$150 per home passed and can be accomplished over the period of a
few years.
The current design and economic considerations of a hybrid fiber
coax cable network call for an initial passing of 500 homes (of
which about 300 currently subscribe to cable), but it can be
further segmented into smaller and smaller coaxial-serving areas.
Its potential digital capacity is at least 1.5 gigabits per second
downstream (to the home), and 500 megabits per second upstream.
This is in addition to the transmission of 80 channels of broadcast
National Television System Committee and high-definition television
signals. Networks
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configured this way can provide for extremely high-speed access
to both symmetrical and asymmetrical data services, as well as the
ability to evolve to even higher speeds and higher usage levels
through further segmentation of the coaxial "last mile" of the
network. Further, because analog and digital carriers using
completely different modulation schemes and protocols can coexist,
an evolutionary path is kept open for continuing advances in
digital services and technologies, while, at the same time,
allowing the pragmatic adoption of technology options to build
cost-effective systems today.
In building a hybrid fiber coax plant, the cable television
industry is providing a cost-effective, reliable, ubiquitous
transmission system that can simultaneously support many separate
networks, the sum of which makes the necessary upgrade investment a
sustainable one for any company in our industry. Time Warner, for
example, currently has plans to build at least four separate
networks on the foundation of its fiber-upgraded plant. Cable
Television Laboratories, an industry R&D consortium, is working
with a group of broadband equipment manufacturers to develop an
open standard that is called the Spectrum Management Application,
to allow the coexistence of these multiple networks and the
maximization of the efficiency with which the radio frequency
spectrum within the transmission plant is used.
In Time Warner's upgraded plant, for example, there are plans
for the coexistence, and separate operation, of networks that will
continue the broadcast of scores of analog TV channels and will
begin the delivery of high-quality digital telephone service, the
provision of high-speed personal computer interconnection service,
and access to a wide range of interactive video services. An
additional network designed for interconnecting PCS radio microcell
sites may be integrated into that residential network, or may be
operated independently.
Time Warner's personal computer interconnection services will
incorporate support of the Internet Protocol (IP), and they are in
the process of working with a number of companies that are
designing the necessary hardware and software systems needed to
provide a service of this type. Many companies in the cable
television industry envision initially offering access to a variety
of online service providers, as well as e-mail and direct
connection to the Internet at speeds currently unavailable to
almost anyone, anywhere. We do not pretend to know how the Internet
will evolve; there are those who claim that it will one day provide
video, shopping services, and all the rest. It is far from that
today and has many shortcomings, as recent security problems have
demonstrated. But regardless of whether PC interconnection
ultimately flows through a number of competing national online
services or through the laissez-faire anarchy of the Internet,
cable intends to offer a highly competitive avenue for local
residential and business access to any viable service provider.
On a separate front, the industry is just beginning to
understand interactive television services through projects like
Time Warner's Full Service Network in Orlando, and while this and
other trials are beginning to teach us a few hard-won lessons, it
is far too early to set the standards for technologies that are
still in their early innovative phase. We are, however
incorporating standards wherever we can, particularly for content
(MPEG, for example.) There will still be public policy questions to
be dealt with in interactive TV, but they should wait until the
technology and business mature at least to the point that such
issues can be intelligently debated based on information and
experience that we will gain from the trials that are under
way.
An example of the harm that government regulation can do is
evidenced by the so-called rate regulations that the Federal
Communications Commission (FCC) enforces on the cable television
industry. These regulations are over 600 pages in length and are so
complicated that the commission has issued corrections and
clarifications that total several hundred additional pages. While
many people think that these rules are just about the subscription
fees that operators may charge to a customer, they do not
understand that these regulations also directly affect whether or
not we can include the cost of a new piece of equipment or a mile
of fiber-optic cable in the cost of "doing business" and adjust our
rates to recover the expense. In fact, the top FCC official
recently replied, in response to a question about "upgrade
incentives," that upgrades are just a code word for rate hikes. Any
premature attempts to set either mandated technological standards
or regulations shaping business structure have the real potential
to slow innovation in a field that may have great future value to
American business and society. Such standards may be called for by
industries that have a stake in the status quo and wish to limit or
confine the directions that innovation may take, but these calls
must be resisted if the country is to benefit fully from the fruits
of the process of invention and exploration.
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Representative terms from entire chapter:
interactive multimedia
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In the meantime, the PC networks that the industry is building
will follow a much better understood path, since they will use an
existing installed base of home computers and their operating
software, and an existing communications model as a starting point.
Although companies such as Time Warner will be one of many content
providers, these will be networks that success in a competitive
world will demand be kept open, and they will be as symmetrical as
actual usage demands.
The cable industry views the competitive provision of wireless
and wired telephone service as an immediate opportunity. The
benefits of competition to the American public can only be
realized, however, if four legislative and regulatory principles
are observed:
•
The elimination of historic state and local
barriers to competition in telecommunications;
•
The creation of requirements for interconnection,
access, compensation, unbundling, collocation, pole and conduit
sharing, and number portability and dialing parity by the incumbent
telephone monopoly;
•
The prevention of interference by local authority
in the growth of competing telecommunications services; and
•
The recognition that to enhance telephone
competition, debilitating cable rate regulation must be
reformed.
The industry strongly supports the concept of universal service
and agrees that each telecommunications provider should carry its
fair share of the burden to ensure that universal service remains a
reality. However, universal service should not be maintained
through subsidies flowing directly to particular telecommunications
providers. Rather, such subsidies should flow directly to the
consumers in need of such support, if the concept of truly
competitive service is to be maintained in a multiple-provider
environment.
In summary, the existence of a ubiquitous broadband cable
television system in this country affords an almost unique
opportunity to see the rapid realization of a series of extremely
powerful digital networks. Some can offer competition to the
existing telecommunications monopolies; some can interconnect
computers and computer-based interactive television terminals in
ways that can lead to an explosion of new and highly innovative
services. In order to open these benefits to the American public,
however, government will have to take an active role in lowering
barriers posed by incumbent telephone companies and by state and
local governments, as well as by current federal cable television
regulation. Government will also have to exercise restraint in
order to allow innovative and entrepreneurial forces to chart the
way into a digital future without the imposition of mandated
standards designed to protect a variety of existing interests.
The cable television industry has much to offer in helping this
nation to realize the potential of the NII. The other network
providers are seeking alliances with us and we with them. If the
network of the future is to have a chance to be what its promoters
believe it can be, government needs to provide guidance, not
hindrance. If it can do that, we can do the rest.
Addendum1
1. For your company or industry, over the next 10 years, please
project your best estimate of scheduled construction of new
broadband facilities to the total residential and small business
customer base, in two-year increments.
Over the next 10 years, we project that the cable industry will
upgrade its plant to hybrid fiber/coax architecture with relatively
small node areas (approximately 500 homes passed on the average) to
virtually the entire cabled universe. Since small businesses are
for the most part mixed with residences, these same projections
would apply to both bases. Currently, there are approximately 97
million residences in the country, 95 percent of which are passed
by cable plant. (Sources: A.C. Nielsen and Paul Kagan.)
2. Over the same period, please project dates when each family
of service will first become available, and its subsequent
penetration of the total base, again in two-year increments.
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The four major families of service which we foresee are
multichannel broadcast signals; digital telephony; personal
computer network services; and switched interactive multimedia
services. Multichannel video services are already available, of
course, to all homes currently passed by cable TV plant—96
percent of U.S. households. Cable telephony services are beginning
to be offered in certain markets in 1995. PC modem services will
become available in 1996 and interactive multimedia services are
expected to become commercially viable in 1997.
Projected penetration of all U.S. households and estimated
market share are shown in Table 1 (availability of these services
would track the percentages in #1, from 1999 on):
TABLE 1 Projected Penetration of Advanced Cable
Services in U.S. Households Percentage
Year
Cable Telephony
PC Network
Interactive Multimedia
1995
1
0
0
1997
2
4
0
1999
5
6
4
2001
10
8
10
2003
15
12
15
2005
20
18
25
3. Please outline the architecture(s) which will be used to
build this broadband plant.
The architecture which will be used to build this plant will be
hybrid fiber/coax architecture, as outlined earlier in our paper,
with fiber nodes located in neighborhood with (on the average) 500
homes passed. Based on today's cable penetration, this would mean
300 cable subscribers per node, on average.
4. Please outline the peak switched digital bandwidth (in kbps
or Mbps) available to an individual residential or small business
user when you launch broadband service, and how that bandwidth can
evolve to respond to increased peak traffic and to new, high
capacity services (which may not now exist).
Peak digital bandwidth to and from the customer can be examined
in the aggregate or on a service-by-service basis. In the
aggregate, with hybrid fiber/coax architecture to 500 passings, we
must make some penetration assumptions to have a meaningful answer.
If we assume that cable maintains its current 60 percent
penetration, this results in 300 customers per node. If we assume
that 40 percent of those customers avail themselves of digital
services of one kind of another, that results in 120 homes. If we
further assume that peak usage of digital services is 33 percent (a
conservatively high assumption), then the maximum number of
simultaneous users being served by a given fiber node at any one
time would be 40.
In cable systems as currently being upgraded, the spectrum from
50 MHz to 750 MHz is reserved for outgoing transmissions, but 50
MHz to 550 MHz is assumed to be reserved for broadcast analog
services, with 200 MHz remaining for digital services. Assuming 356
QAM digital modulation, with an efficiency of 7 bits/Hz, this
results in a total outgoing or "downstream" capacity of 1.4
gigabits/sec. This, when divided by 40 users at peak usage time,
yields approximately 35 megabits/sec of outgoing bandwidth
available per customer. Even given the expected volume of
interactive video delivery, this number is ample for outgoing
transmissions. It easily accommodates telephony, PC modem, and
interactive multimedia applications.
Incoming bandwidth currently spans the spectrum from 5 to 40
MHz, a total of 35 MHz. Because of noise addition problems in this
portion of the spectrum, modulation is probably limited to QPSK
with an efficiency of about 2 bits/Hz, yielding 70 megabits/second.
If this is divided by the 40 peak users to be fed from a fiber
node, this yields 1.75 megabits/second available to each user. This
is more than sufficient for telecommunications, including video
telephony, and is sufficient as well for easily foreseen
applications in PC network and interactive multimedia services.
Both the downstream bandwidth and upstream bandwidth can be
increased in several ways. First, the number of customers per fiber
node can be reduced on a neighborhood-by-neighborhood basis, based
on usage, through the use of spare fibers (which are being
installed) to subdivide nodes into smaller neighborhoods. In
addition to spare fibers, wavelength division multiplexing can be
used on a single fiber to the same end. It is easy to foresee
average node sizes of 125 homes passed per node or less, resulting
in at least a fourfold increase in the numbers cited above.
There is also the ability to dramatically increase the return
spectrum. Time Warner's project in Orlando successfully makes use
of 100 MHz of spectrum, from 900 MHz to 1 Ghz, in the return
direction. This spectrum has fewer noise problems than the low
frequencies cited above, so higher modulation efficiencies are
possible. However, assuming the same kind of QPSK modulation used
at the low frequencies, this would yield an additional 200
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megabits/second of transmission capability, or 5 megabits/second
per peak user. Again, this number can be multiplied through
segmentation as outlined above.
It is possible to push these numbers significantly further. If
very high speed, truly symmetrical capacity is required,
frequencies above 1 Ghz can be used. The cut-off frequency of the
coaxial cable employed is close to 2 Ghz, allowing for very
significant expansion of capacity for high speed symmetrical
services.
5. Please project the capital investment you or your industry
plan to make on a per home-passed basis to install broadband
infrastructure, and on a per subscriber basis to install specific
services.
Our experience to date indicates that an investment of between
$125 and $135 per home passed is required to upgrade existing
coaxial cable television plan to the hybrid fiber/coax architecture
referenced earlier.
Assuming a 15 percent penetration rate, we expect the
incremental costs per customer moving into telephony to be no more
than $1,000 per customer. This investment is largely variable in
nature, is made incrementally as telephony customers are added.
It is estimated that PC modem services will cost between $400
and $600 per customer, again, incrementally against only those
customers taking the service. This covers the cost of the PC modem,
as well as central routers, servers, gateways, and support
systems.
It is estimated that interactive multimedia servers will cost
between $700 and $800 per incremental subscriber, again accounting
for terminal equipment in the home as well as switches, servers,
and associated central investments.
6. Please respond to the concerns raised in Vice President
Gore's letter (copy of letter attached) regarding the ability of
users of your network to original content for delivery to any or
all other users, versus the control of all content by the network
operator.
The concerns outlined by Vice President Gore are largely
addressed in our original paper. We expect to support several
different coexisting networks on our broadband transmission system.
These range from regulated common carrier-type symmetrical
telecommunications services, like telephony, to highly experimental
asymmetrical interactive entertainment services. In the middle
ground will be a PC network, with great capacity. This network will
be as symmetrical as it needs to be, given marketplace demand. As
outlined above, we have the ability to expand network capacity in
pursuit of the amount of symmetry that makes sense. However,
premature installation of capacity and symmetry, in advance of
demand, will be prohibitively expensive and, we believe, will not
be supported by private investment.
7. Please specifically enumerate the actions which you or your
industry believe that the federal government should take to
encourage and accelerate the widespread availability of a
competitive digital information infrastructure in this country.
We specifically address these points in our paper. To reiterate,
they are:
•
The elimination of historic state and local
barriers to competition in telecommunications;
•
The creation of requirements for interconnection,
access, compensation, unbundling, collocation, pole and conduit
sharing, and number portability and dialing parity by the incumbent
telephony monopoly;
•
The prevention of interference by local authority
in the growth of competing telecommunications services; and
•
The recognition that to enhance telephone
competition, debilitating cable rate regulation must be
reformed.
Note
1. All projections (unless noted) are the
estimates of the authors and do not represent an official position
of the National Cable Television Association or Time Warner
Cable.
