Summary

HFC, two-way upgrades and the commitment to digital services (TV and data) solve operational problems of cable operators and expand their product offerings. Consumers get more channels, programmers get more shelf space, Internet service providers get the speed necessary to attract advertising, and cable operators can offer new services. These new services have propelled the stock prices of cable operators and their suppliers to all time highs.

For now, cable is the only game in town for residential broadband. The image of the industry was given a lift by investments made by AT&T, Microsoft, Vulcan Ventures, and other recapitalizations. Nonetheless, cable operators face commercial and technical problems before they can become the full-service networks they aspire to be. Cable is the target for others wanting in on RBB; it must continue to invest or let new and old competitors take marginal revenues. This is painful when cable's base business has a high capital overhead and its financial position is highly leveraged. Table 3-6 summarizes the issues facing those operators who want to make the transition of cable to RBB.

On the horizon are alternative technologies that approach the RBB market differently and that could pose significant competitive pressures to cable. The next chapter covers one such alternative: digital subscriber loop access networks.

Table 3-6. Challenges and Facilitators for Cable as an RBB Network
Issue Challenges Facilitators
Media Has a shared media return path that is susceptible to ingress noise, particularly from noise sources inside the home. Uses hybrid fiber coax, which reduces deep cascades and associated reliability and equalization problems. Offers more bandwidth than just coaxial systems.
Noise mitigation Uses a shared topology, which means that a single noise source can adversely affect a large number of households. Return path is subject to ingress noise. Uses sophisticated noise mitigation and problem isolation techniques that are under development and that are being investigated in standardization efforts.
Signaling Requires new methods to remotely control the subscriber unit for return path use. Uses a scheme in which subscribers are always connected and in which there is no need for a call setup process for data or video, which reduces signaling requirements compared with telephone services.
Data handling capabilities Requires implementation of two-way HFC or use of telephone return. Is the natural topology for Internet data. High-speed forward and low-speed return closely maps to Web access.
Standards Proprietary solutions still popular Standards organizations are trying to balance system optimization with speed to market. Needed so that cable modems and digital set tops can be made available at retail. Strong support for DOCSIS and widespread effort on OpenCable and DVB
Regulation Cable is regulated by sometimes aggressive and incompatible municipal franchise agreements. Must Carry, closed-captioning, and emergency broadcast rules incur costs. Some relief will be supplied by the Telecom Act of 1996, which limits state and local regulatory rights.
Market Perception of market saturation; cable passes nearly 100 percent of homes in the United States and elsewhere, but has difficulty increasing take rates, especially among high-income viewers. Is the only game in town as of this date for RBB, multichannel service.
Business/ Financial Faces potential skilled labor shortages.

Faces strong competition from satellite and telephone operators.

Cable operators are highly leveraged, and continued development of HFC, digital TV, and data services will require further capital. 		Cable operators own many sources of programming. Represents influx of new capital.

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