Impacts on Cable HFC Networks

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1 Copyright 2014, Technology Futures, Inc. 1 Impacts on Cable HFC Networks Robert W Harris Senior Consultant, Technology Futures, Inc. TFI Communications Technology Asset Valuation Conference Research Blvd., Bldg. C-1 Austin, Texas (512) Thursday, January 30, 2014 Copyright 2014, Technology Futures, Inc. 2

2 Overview Issues and challenges over the next 10 years Traffic trends and implications Direction of network evolution Copyright 2014, Technology Futures, Inc. 3 High Speed Data Consumer Speeds Asset obsolescence with each technology refresh (CMTS, Modems, ) Source: Jeff Finkelstein, Cox Communication Copyright 2014, Technology Futures, Inc. 4

3 Revenue Challenges Over Next 10 Years Expanding data-carrying capacity at >50% CAGR Equipment cost per Mb/s must decline by >33% to keep prices constant Monetizing new services Expecting limited revenue from Over the Top (OTT) services Cloud-based, healthcare, home security, education, business services, wireless backhaul Flat ARPU How to manage CAPEX requirements and control costs for growing and operating new businesses Copyright 2014, Technology Futures, Inc. 5 Technology Factors: Next Decade Service migration to all-ip equipment obsolescence Analog Video to MPEG Digital Video MPEG Digital Video to IP Digital Video Infrastructure improvements Migrating the cable network that was originally built for one-way (broadcast) communications Outside plant upgrades and expansion Decommissioning legacy systems Copyright 2014, Technology Futures, Inc. 6

4 Cable Network Evolution Options Address congestion of HFC with current solutions Smaller serving groups through Node splits and extensions To get to Gbps speeds over HFC requires new technologies Modify the RF spectrum to expand the downstream and upstream bandwidth capacities Migrate from 3.0 to 3.1 All options require dealing with an aging HFC plant Upgrade to FTTH Copyright 2014, Technology Futures, Inc. 7 Typical HFC Access Network Original Design Parameters 500 HP per Node 20,000 HP per 40 Nodes per Max 6 amplifier cascade Metro Optical Network Fiber Cable <20 km (typical) Node HFC Serving Area 500 HP Copyright 2014, Technology Futures, Inc. 8

5 Node Split to Reduce Service Group Size HFC Serving Area 250 HP Metro Optical Network Fiber Cable <20 km (typical) Node Add more fiber Add more Nodes HFC Serving Area 250 HP Copyright 2014, Technology Futures, Inc. 9 Node Split to Reduce Service Group Size HFC Serving Area 125 HP Metro Optical Network Fiber Cable <20 km (typical) Node Add more fiber Add more Nodes HFC Serving Area 125 HP Copyright 2014, Technology Futures, Inc. 10

6 Impact of Smaller Service Groups Acquire more equipment in the and outside plant along with associated construction costs for fiber additions Routing Analog Video Analog Video BC Digital Video QAM Analog Video BC Digital Video QAM Narrowcast Analog SDVVideo QAM BC Digital Video QAM Narrowcast SDV QAM Narrowcast BC Digital VOD VideoQAM QAM Narrowcast SDV QAM Narrowcast VOD QAM CMTS (Voice/Data) Narrowcast SDVQAM QAM Narrowcast VOD QAM CMTS (Voice/Data) QAM Narrowcast VOD QAM CMTS (Voice/Data) QAM CMTS (Voice/Data) QAM Analog Optics Node Analog Optics HFC Plant Routing CMTS CCAP (1 st Gen) Video Services IP Services Universal QAM Analog Optics Copyright 2014, Technology Futures, Inc. 11 Converged Cable Access Platform (CCAP) All services supported on a single platform Provides a smaller facility footprint, lowers OPEX New hardware (new capital outlays) starting 2014 Multiple technology refreshes (CMTSs, Nodes, QAMs, analog/digital video systems, ) Data Center for IP Services Data, Video, Phone CCAP (2 nd Gen) Routing Digital Optics Ethernet Node Digital Analog HFC Plant Copyright 2014, Technology Futures, Inc. 12

7 Site TX RX Issues from HFC Plant Aging Laser aging, clipping, performance Reflective optical splice RX TX Node Hi Lo Laser clipping Optical reflections Dirty connectors FP Lasers Leaky gaskets, damaged housing Cracked or deformed coax Corrosion of coax Signal leakage Upstream RF level management issues Strand Corrosion Broken lashing wire Corrosion of Housing Poor or non-existent grounding Power supply Noise & Hum Poor splices, no weather seal Radial cracks due to improperly formed expansion loop Aging transistors, capacitors, integrated circuits Unterminated taps, loose terminations Corroded or loose connectors Common path distortion Signal leakage Squirrel and rodent damage Signal leakage Ingress: Ham & Shortwave CB, paging systems Copyright 2014, Technology Futures, Inc. 13 HFC vs. FTTH OPEX per Mile of Plant HFC FTTH Technical Supervision $ $ Service Trouble Truck Rolls (for plant problems) $ $ - Plant Maintenance Truck Rolls $ $ - Material Inventory $ $ 4.90 Electricity Consumption $ $ - Power Supply Battery Replacement $ $ - Power Supply Equipment Repair $ 1.77 $ - RF Line Equipment Repair $ $ - Vehicle Accident Loss $ 8.80 $ - Employee Injury Loss $ 5.01 $ - Emergency Cable Repair $ 8.51 $ Total annual O&M expense per mile of OSP plant $ 1, $ Copyright 2014, Technology Futures, Inc. 14

8 Life-Cycle Cost of HFC vs. FTTH Broad assumptions but a generally appropriate curve Difficult for MSOs to justify the required outlay of CAPEX Life-Cycle Cost HFC vs. FTTH (~55 HHP/Mi) Relative Cost Years of Operation HFC FTTH Source Technology Futures, Inc Copyright 2014, Technology Futures, Inc. 15 Example Cable TV Channel Usage Ch 63 Ch 64 Ch 65 Ch 66 Ch 67 Ch 68 Analog Analog Digital Digital Digital 1 analog video ch 1 analog video ch 6-10 SD video chs 40 Mb/s 6-10 SD video chs 40 Mb/s 2-3 HD video chs 40 Mb/s 1 HSD channel 40 Mb/s Full Spectrum: over 120, 6 channels Copyright 2014, Technology Futures, Inc. 16

9 HFC RF Spectrum Today Upstream Downstream x Analog TV Services Digital TV Services 2-Way Applications "Broadcast" 2-Way Applications Upstream Downstream x Digital TV Services 2-Way Applications Analog Reclamation to offer more channels "Broadcast" 2-Way Applications Copyright 2014, Technology Futures, Inc. 17 HFC RF Spectrum Transition Requires Node and RF Amplifier Upgrades Phase 1: expand upstream and go to 1 GHz GHz Upstream x Digital TV Services Downstream Phase 2: Migrate to all-ip, expand upstream again and go to >1 GHz Debate on skipping Phase GHz x Split Point TBD Copyright 2014, Technology Futures, Inc. 18

10 3.1 Considerations Major step up from 3.0 Maintains backward compatibility Will be compatible with 1.1, 2.0 and 3.0 but to get the faster speeds of D3.1 the modems will need to be replaced Doesn t require replacing the HFC plant but the other activities discussed need to happen Extends the utility of HFC plant Delivers higher speeds in the downstream (up to >5Gbps) and upstream (>1 Gbps) Service offerings become competitive with FTTH Copyright 2014, Technology Futures, Inc. 19 Future Potential of 3.1 Parameter Now Phase 1 Phase 2 Phase 3 Frequency Band (300) (500) Downstream Modulation 256-QAM 256-QAM > 1024-QAM > 1024-QAM Channels Data Capacity 300 Mbps 1 Gbps 5 Gbps 10 Gbps Frequency Band (230) 5 - (400) Upstream Modulation 64-QAM 64-QAM > 256 QAM > 1024 QAM Channels Data Capacity 100 Mbps 300 Mbps 1 Gbps (2) Gbps Copyright 2014, Technology Futures, Inc. 20

11 Key Conclusions All services will move to IP Keeping HFC viable requires major investments in infrastructure upgrades and replacing legacy equipment Deploy more fiber and add more Nodes closer to the home Converging all services onto a single platform with (CCAP) will impact electronics (CMTS, analog/digital video systems) Upgrade RF amplifiers & nodes to expand the RF spectrum Upgrade modems to support higher speeds Copyright 2014, Technology Futures, Inc. 21 (512) Your Bridge to the Future Copyright 2014, Technology Futures, Inc. 22

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