It's been a cold, cold summer in cable land. First, the industry got cold-cocked by the Adelphia mess, with indictments going down against the Rigas family that have shaken longtime loyalties to the core. Now it's AOL Time Warner's turn to get clobbered by a Washington Post article for $270 million in questionable accounting.
Finding a ray of optimism beyond the PR spinning has been difficult, but I think I've got one. That is, if operators can pull off an Olympian triple jump over the next couple of years.
HIGH-DEF HURDLES
The industry has banded together in promising FCC Chairman Michael Powell that they will carry at least five high definition signals in each of the top 10 markets by January. With broadcasters and set manufacturers also posting vows, it appears HD may finally get beyond the chicken-and-egg trap.
Along with VOD, HD is cable's latest weapon in its broadband arsenal. And it's aimed directly at satellite, a foe soon to be fortified by the EchoStar-DirecTV merger, which can't offer either VOD or HD because of bandwidth constraints.
Cable operators have the edge with 750 MHz, and are already doing a masterful job getting through the first leg of the jump: managing their bandwidth. While a few years ago no one dreamed 750 MHz wouldn't be enough, now MSOs face the reality of "contentious bandwidth," in which services - and customers - vie for a slice of what used to be seen as a fat pipe.
Each compressed HD signal uses 19.3 Mbps, up to six times the bandwidth of a standard definition signal (currently about 3.5 Mbps). Using 256 QAM (quadrature amplitude modulation) to move those HD signals from the headend to the home, operators can just fit two HD signals into one 6 MHz slice of bandwidth, with technology vendors such as BigBand Networks and others boasting solutions that cram three signals into one slice. SD signals, by contrast, are easier to manage; about 10 of them, compressed with current technology, will comfortably fit into one slice.
Six HD signals, then, would take up a mere 12 MHz, which is why most operators initially touting HD are putting together high definition tiers comprised of six HD services, including local PBS and broadcast signals plus perhaps Discovery's new HD Theater channel and Mark Cuban's HDNet service.
What happens when more and more analog signals convert to HD? That's already got the cable guys worried about a broadband bandwidth crunch (oxymoronic, but possible). Just do the math on a hundred HD channels, then throw in VoIP, data and the biggest bandwidth hog, VOD (because it sets up individual sessions for each user), and you can see where traffic jams might occur.
But that's all on a horizon several years out. More vexing in the immediate future is cable's second HD hurdle: copyright protection.
Because the signal arrives at the customer's home unencrypted, Hollywood and other content providers are already crying foul and demanding protection.
If they have their way, the new High Definition Multimedia Interface (HDMI) will become standard. Based on the Digital Visual Interface (DVI), HDMI effectively prevents copying because of its immense uncompressed data stream. While that might tick off the 3 million or so current owners of DTV devices who'll have to upgrade, it looks like Hollywood will win this battle.
DIGITAL DESTINATION
Assuming cable can settle the piracy issue, it still has a lot of ground to make up on DBS. And that leads into the third, and in my opinion the most difficult, leg of the jump.
DBS has done an excellent job over the last five years defining itself as the digital viewing destination. The majority of home theater owners use DBS, and I'm willing to bet the majority of those don't even realize they can't get true high-def from a DBS signal.
The driver so far for HD set sales has been DVD. A friend of mine recently bought his first Sony set for just over $1K, and all he plans to do is watch DVDs. When I told him cable operators would soon be offering HD channels, and that all he needs is an antenna to pull in broadcast HD signals, it was news to him.
Early adopters and home theater aficionados are buying into HD without giving a thought to cable, much in the same way they moved to digital picture and sound by purchasing dishes. DBS has been winning the hearts and minds of consumers where it counts, at retail.
Cable guys bemoan the DBS sales incentives - commissions can be more than $100 per dish sold in some retail outlets - and they bewail the fact that DBS was first to tout its digital sound and picture capabilities before cable could roll out its digital boxes.
But now it's time to recapture the high ground. Cable needs to have an ally at the point of sale for HD sets to tell people what equipment they'll need and how it can work with their cable subscription. Several operators, including Comcast and, of course, Cablevision (with its sister company Nobody Beats the Wiz), are already working on retail alliances.
They had better move fast, because my friend is not alone. I'm sure there are others with extensive DVD collections and an aging analog or projection TV who are beginning to form a picture of how HD might work for them. If cable isn't in that picture from the outset, getting tuned in later will be all the more difficult.
You can reach him at willworkman@hotmail.com.
