Transcript SP-6 - TMCnet

“From TV to Telco”
Transformation of Cable
Industry
February 6, 2002 – Miami, FL
Ahmet Ozalp
VP, Strategic Marketing
Narad Networks
1
The Transformation started in Early 90’s
Cable Industry Revenues
Hi-Speed
Data
Digital
10%
Video
6%
Residential
Telephony
3%
Premium
Video
21%
Analog
Video
60%
Total: ~$39 Billion
•
Broadband revolution has
been transforming cable
industry rapidly since
early 90s
•
For most MSOs 50% of
revenue growth is coming
from non-video services
•
Cable modem penetration
in U.S. is leading DSL 2
to 1
•
Voice deployments has
been lagging high-speed
access, BUT momentum
is building behind voice
as the right technologies
emerge
Source: Morgan Stanley
2
U.S. Cable Telephony Deployments Where are we today?
U.S. Cable Telephony
Penetration (2002E)
16,000
14,000
•
Almost 15% of U.S.
homes will have cable
telephony available at the
end of 2002
•
More than 2 Million new
cable telephony
subscribers within the last
4 years
•
Penetration of upgraded
homes > 16%
•
Predominantly
“Proprietary Circuit
Switched” technology
000 s
12,000
10,000
8,000
6,000
4,000
2,000
0
Telephony
Homes Passed
AT&T Comcast
Cox
Cablevision
Charter
Residential
Telephony
Subs
Insight
Source: Morgan Stanley
3
How does it work ?
Proprietary Circuit- Switched
Telephony Architecture
6 MHz Channel
2 MHz => 24 Voice Circuits (TDM)
data
IP Backbone
Cable Headend
Router
Customer
Premise
CMTS
NIU
HFC
Access
Network
HDT
voice
PSTN
CM
Fiber
Nodes
Class 5
Switch
4
Circuit Switched vs. VoIP
Circuit Switched
Benefits
VoIP
Benefits
Faster time to
market
Lower
operating
costs
Proven
technologies
Lower overall
CAPEX
Low
incremental
CAPEX once in
place
Drawbacks
Conserves
valuable
spectrum
Drawbacks
Higher
operating costs
Higher CAPEX
per customer
Low spectrum
efficiency
High upfront
costs for new
system
Newer, less
well-proven
technology
Proprietary
5
Standardization Efforts by CableLabs
DOCSIS
1.0
 Best effort high
speed access
DOCSIS
1.1
 Quality of
Service (QoS) for
voice support
Packet
Cable
1.0
 Packet voice over
DOCSIS
2.0
 Improved modulation
to increase upstream
bandwidth
Pack
et
Cable
 Support
1.1for
DOCSIS in the
lifeline service
access network
 Support for Pure IP
and Hybrid (GR-303)
based approach in
the Headend
Pack
et
Cable
 Interconnection
1.2
of local packet
cable zones via
SIP protocol
6
Hybrid Switched/Packet Architecture
data
IP Backbone
Cable Headend
Customer
Premise
CMTS
Router
GR-303
Gateway
DOCSIS 1.1
or 2.0
MTA
CM
Fiber
Nodes
voice
PSTN
Class 5
Switch
Packet Cable - “Line
Control
Signalling (LCS)” based
on GR-303
7
VoIP – Pure IP Architecture
IP Backbone
data
Reginal Headend
or Data Center
Media Servers
Router
Customer
Premise
Cable
Headend
Optical
MAN
DOCSIS 1.1
or 2.0
Router
MTA
CM
CMS
MGC
CMTS
Fiber
Nodes
voice
PSTN
Media
Gateway
NCS: network based call signalling (MGCP)
MTA: Multimedia Terminal Adapter
CMS: Call Management Server (softswitch)
8
Cable Telephony Economics
Capital Costs per Subscriber
700
$600-700
600
$525 - 600
500
$400-500
400
300
200
100
0
Circuit Switched
New entrant
VoIP
Incremental Cost
for Existing Circuit
Switched
Infrastructure
 VoIP is expected to
provide CAPEX savings of
up to 40% for a new
entrant
 Savings $50 to $ 75 less
for service providers with
existing Class 5
infrastructure
 Primary line monthly
revenue per sub ~ $54
(AT&T)
Revenue Payback in
less than 12 months
Source: Morgan Stanley
9
Primary or Secondary Line ?
Primary Line
 High revenue per
subcriber
 Higher cost and
complexity
• Network or Battery power
• E911 and other requirements
Secondary Line
 Revenue per subscriber 1/3
of primary line (What
happens then to local voice
business?)
 25% - 30% less CAPEX per
sub
 Smaller upfront CAPEX
• No need for major upgrade of the
network powering infrastructure
MSOs with existing voice offerings (AT&T, Cox)
 primary line service via hybrid-IP or circuit-switched
solutions
New players (AOLTW, Comcast, Cablevision etc)
 pure VoIP or Hybrid VoIP solutions and mostly
secondary line services only
10
Residential VoIP over Cable
Projections (U.S.)
VoIP Homes Marketed
55,292
50,000
40,000
31,697
30,000
20,000
13,792
10,000
5,851
6,000
Number of Subs (000s)
Number of Homes (000s)
60,000
VoIP Subscribers
10%
penetration
5,000
4,000
5%
penetration
3,000
2,000
677
1,000
2,369
0
0
2,482
0
95
2002
2003
0
2002
2003
primary
2004
2005
2006
secondary
primary
2004
2005
2006
secondary
Source: Kinetic Strategies
11
What about selling Voice Services to
Commercial Customers ?
60%
 Commercial services market
is significantly larger than the
residential market
 voice, VPN, internet
access, T1/T3
connectivity and private
lines, centrex, frame
relay
40%
 The Cable plant passes 65%
of businesses in U.S.
Voice Lines and Revenue
100%
% of Total
80%
34%
52%
66%
48%
20%
0%
Voice Lines
Residential
Revenue
Business
 Specifically small and
medium business market
provides a major opportunity
 underserved by the ILEC
 too costly to serve with
fiber, but easily reachable
by cable
Source: US FCC
12
SMB Services Revenue Potential
Services Revenue per Customer
~ $8000 / month
5000
$250 - $1500
Monthly Revenue
4500
$175 - $3500
(100 – 250 employees)
4000
3500
3000
2500
$200 - $1500
2000
1500
$200 - $1500
$100 - $1000
1000
~ $925 / month
(10 – 20 employees)
500
0
Data
Source: IDC, Narad Analysis
Managed
VPN
Managed
Firewall
Voice
Storage
Cable’s Upstream Bandwidth
 Cable plant historically designed for broadcast...
 The upstream spectrum is limited to 5Mhz to
42Mhz, out of which roughly 20Mhz really usable
(noise and interference issues)
 Only QPSK or QAM 16 possible
 Both voice and data services are competing for the
same limited upstream bandwidth
 As penetration grows, bandwidth per user drops.
 DOCSIS 2.0 is expected to provide 3 x the
bandwidth – good for residential, but not enough
for business customers !
14
Cable Modem Take Rates drops with
Increasing SMB Size
Cable Modem Penetration among SMBs
25%
• Cable modem
penetration
falls as the company
size and needs grow
• Issues:
• bandwidth
• QoS
• SLAs
• ability to support
voice
• symmetric
bandwidth
20%
15%
10%
5%
0%
less than 5
5 to 9
10 to 19
Number of Employees
Source: AMI Research – 2001 Small Business Survey
20 to 49
New Technologies are enriching the
MSO’s Toolbox
Customer Size
Large
Business
Fiber to
Business
Gig-E
on
HFC
Small and Medium
Size Business
(10 – 500 empl.)
Very Small
Business
and SOHO
Cable
Modem
(HFC)
low
low - medium
high – very high
Cost
16
Gigabit Ethernet on HFC – How does
it work?
New Spectrum Added
Current Cable Spectrum in Use
.......
upstream
5
42 50
.......
downstream
6 Mhz
750/860
(MHz)
2.5Ghz
1GHz
100 Mb
Upstream and
Downstream
1 Gb
Upstream and
Downstream
 Extends the usable spectrum well above 2GHz by switching
and regenerating the packets within the access network
 Adds symmetrical 1Gb on trunks and 100Mb on drops to
customers
 Coexists with current services (analog and digital TV, cable
modem)
 ATM-like QoS built into standard Ethernet model
 Services: Tiered symmetrical HSA(1Mb – 100Mb), VPN, T1/T-3, remote storage, centrex services
Gigabit Ethernet on HFC Deployment
Example
•Areas without businesses are untouched
•No headend equipment required beyond a standard GigE port
W
...
W
W
W
W
W
W
Optical Network
Distrbution
Switch (ONDS)
Subscriber
Access Switch
(SAS)
W
W
W
W
W
Network
Distribution
Switch (NDS)
Service Examples: TDM over IP and
IP PBX
Business
Premise
Router
100BT
BIU +
IP MUX
Cable Headend
Media
Gateway
Media Servers
Service
Delivery
Platform
N x T-1
CMS
IP
MGC
IP-Mux
or
HFC with
DICSIS and
Gig-E
Overlay
T-1/T-3
Optical
Switch/
Router
PBX
or
Router
Fiber
Nodes
BIU
Class 5
100BT
IP
PSTN
IP PBX
19
It is all about Bundled Services
•
•
•
•
High Speed Access
– beat the competition by performance and price
– 1Mbps to 100Mbps dedicated, flexible bandwidth
– Security and performance guarantee (SLA)
Telephony
– beat the competition by low price and/or quick delivery
of services
– Voice, Video Telephony, T1 PBX Access, IP PBX,
Centrex
VPN
– site-to-site, telecommuter access
Storage Services
– remote file systems, data backup, disaster recovery
Summary
 Cable Industry is transforming...
 Data (CM) is leading the way, but voice may be the next
killer application
 Early adopters (circuit-switched telephony) will continue
towards a hybrid-IP telephony at least initially
 With VoIP reaching maturity, more MSOs will get into
voice business
 There will be a mix of primary and secondary line
offerings
 New technologies such as Gig-E over HFC will open up
new opportunities in the business services (VoIP and
other IP services)
 In the next 5 years we may witness a transformation from
“TV service provider” to a “super-carrier”
21
Questions ?
22
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