Industry Perspectives: Delivering High-Quality Video Service Over DSL Networks
Carriers around the world want to deploy video over DSL to solve two of their most pressing problems—stalled revenue growth and competition from cable, satellite, and mobile operators. The traditional fixed-line phone business is saturated; most households in the U.S. and Europe are connected to the voice network, in many cases with multiple lines. Yet the number of lines in use is declining in the U.S. and in parts of Europe such as the Benelux Economic Union (Belgium, the Netherlands, and Luxembourg), as subscribers switch to mobile providers. And they are switching in droves. In the third quarter of 2004, the number of mobile subscribers in Europe was expected to surpass the number of fixed-line subscribers in 2003, according to a report by Ovum. Cable and satellite operators now also offer voice over Internet services that are gaining in popularity.
From all points of view, it appears that as carriers start adding video over DSL services to their existing voice and data portfolio, they can re-capture market share and revenue from cable and mobile operators. Belgacom, for example, has launched high-bandwidth Very high-bitrate Digital Subscriber Line (VDSL) services in Belgium specifically so that it can deploy interactive video and digital services over DSL in the future. Even in countries that do not have a high cable penetration rate, the ability to offer video over DSL will enable carriers take the lead and pre-empt attempts by cable and satellite operators to enter their markets and steal away customers.
Demand for triple-play services is on the rise, and studies by some industry analysts say the majority of carriers’ revenue growth will come from the deployment of video to the household. A study of future telco revenue by services in Western Europe conducted by Schema Analytics predicts that digital TV and Video on Demand (VOD) over DSL will account for 55 percent of overall potential average revenues per subscriber, while core telecom services account for only 23 percent.
Fiber-Fast Broadband Critical for Video Quality
Video is a natural extension to traditional telco services because carriers already have a copper line into every household. To take advantage of the video opportunity, carriers are partnering with video service providers—SBC with EchoStar, for example. But carriers need more than partnerships; they have a critical need for a fiber-fast broadband capability of 50-100Mbps towards the consumer. Only such a capability will enable carriers to compete effectively on price and convenience against cable providers, while simultaneously offering an exceptional video experience with equal or superior quality of service.
Reliable video delivery, however, presents carriers and their suppliers with a unique set of challenges. Because of the inherent flexibility of packet video, carriers are uniquely positioned to provide a powerful array of differentiated features like video mail, videoconferencing, and interactive TV. On the other hand, the low bandwidth previously associated with the copper infrastructure and the high bandwidth required by video mean that delivering premium-quality video service has historically been contingent on having fiber to the premises. But trenching fiber is both extremely costly—$3,000 to $10,000 per subscriber—and time-consuming. Technology Futures Inc. predicts that the U.S. will not reach 10% penetration of fiber in the access network until at least 2006 and perhaps not until 2007 or 2008. Clearly, carriers cannot afford to put off deploying video services until the fiber infrastructure is completely built out.
Luckily, carriers today do not have to install fiber to every home to get the fiber-fast speeds they need. To obtain the bandwidth, service flexibility, and quality that video requires, and to deploy video services more quickly, carriers in Japan, Korea, and now Europe and the U.S. are employing a hybrid fiber/VDSL2 network strategy. This strategy deploys fiber to the neighborhood, curb, or building and takes advantage of existing last-mile copper to access the home to deliver popular broadband applications such as High Definition TV (HDTV) and the triple play of voice, data, and video. In the U.S., carriers such as SBC have announced they are building fiber out to the node.