February 15, 2007

Digital Signals: Breaking Up Better Be Hard to Do

By Jim Barthold

For those of you who may have missed it while fighting winter storms and sundry strains of influenza, competition has arrived. The hype's over: Verizon is serious about television, and cable is serious about telephony, and the satellite guys know that HD is the only way they'll stay ahead of both wireline providers because they don't really have voice or data plays. Consumers, meanwhile, despite their stubborn reliance on TV news to tell them what's going on, are beginning to realize that, as with airlines, they have a choice when it comes to telecommunications providers.

Consumer electronics manufacturers are throwing kerosene on this competitive blaze with newer, ostensibly cheaper and bigger TV sets that can expose a pimple on Katie Couric's chin – as long as the network quality is sufficient and broadcasters are feeding it coal by watermarking that every prime time show is being delivered in high definition – even if it doesn't always look that way.

This gives the unholy trio – cable, satellite and telco – an opportunity and a dilemma. The one that delivers quality HD wins; the one that continues to deliver pixilated pictures and on again/off again sound – as is too often the case – loses the battle and perhaps the war because the consumer will go where the quality's the best.

Cable operators "need to monitor everything; need to act like a telco, act like a satellite operator," said Eric Conley, CEO of Mixed Signals, which, not ironically, builds "digital content monitoring solutions."

Cable's competitors have convincingly argued that more bandwidth equates to better pictures. Telcos, particularly Verizon with its fledgling FiOS and soon the satellite guys, claim to have this great channel capacity and gleefully point out that cable doesn't. While there's a grain of truth to that, it doesn't wash with Conley.

No need for bandwidth - yet

"That may be the case in the future as Verizon goes in and others with 10 Mbps to the home, but really nobody has enough stuff to fill that yet, and it probably won't happen for a while," Conley said.

Building systems just to get more bandwidth costs money – and cable already spent billions to reach its current level – so operators are "optimizing what they have, and every time they add a new QAM or new mux they're utilizing it as much as possible," he said. This means "bandwidth utilization tools become ultra, ultra critical because it can save millions of dollars in each system, much less across the entire MSO. It's the type of thing where you can spend a little bit now on these tools to optimize and built out plant ... and it saves millions of dollars going forward."

There, incidentally, are mixed signals (lower case) for anyone in the cable space. Spend money? Ouch! Save money? Yes! Conley made it clear that this can't be a half-hearted effort.

"It doesn't work to monitor a few things, a few channels, that sort of thing. Even the ones that are already monitoring need to get over the hump to monitor everything and do it the right way and spend money on the monitoring side," he said.

Cablevision gets kudos

The usual suspects line up as Mixed Signals' customers: Comcast, Time Warner, Cox and soon Charter, Conley said, but the one that's doing it the best and most correctly is Cablevision Systems.

"I believe they got it early because they're extremely advanced in what they offer on the digital side ... and they're adding hundreds of channels a year, it seems like. They got it early," he said.

The rest of the industry, he advised, better get it because the competition everyone's talked about for so long is here, and the consumers with the most money are the ones with the most incentive to wander off to competitors.

"It's going to turn into the cell phone market where subscribers have options and can just switch if they're not happy with service," he said. "The quality's bad, they're trying to watch "24" but the audio keeps going in and out, or the video goes to black and pops back - after a while they're going to say the heck with it and switch to Verizon or switch to DirecTV or something."

Off they go

And they'll take their high-speed data and their phone service and at least $150 a month with them when they leave.

"The whole playing field is changing, and cable operators know this," he said, perhaps giving some operators too much credit. Mixed Signals, of course, is in the business of both stroking and scaring its customers while offering the final pin to stick into the competitive voodoo doll.

"The key is, and the magic in it (Mixed Signals' product package) is, to be able to alert the operators if there's a problem before the subscriber notices – something that's in the plant that's crossed some kind of threshold where if it gets worse it's going to show up as macro blocking or screens going black or your left speaker going silent or something like that. We're able to alert before those things happen and point to what the root cause of the problem is so the operators can fix it before a single problem comes up," he said.

All they have to do is spend money – heh heh – and take a serious interest in the type of product they're delivering to consumers who shelled out at least $2,000 for a TV set and home entertainment system – before paying for professional installation to get the best quality picture and sound.

A good product, Conley emphasized, will save money because cable operators can use monitoring to map out and do trend analyses across the entire system to minimize the number of multiplexers and switches and QAMs and to maximize the system's performance within its boundaries without losing the quality needed to deliver a good product.

Cable operators, he insisted, "get it, or they're beginning to get it, but the deployment base for monitoring isn't that high yet. It's the type of thing that for every major operator in the United States, it's a top three or four agenda item for 2007," he said.

And that may be two or three – or "24" - steps below where it needs to be.

- Jim Barthold