After spending $85 billion rebuilding systems to deliver the vaunted "500-channel" universe, the largest cable companies in the U.S. confront an improbable dilemma: Systems are running out of space.
In addition to high-speed Internet services, movies-on-demand, and new digital networks, cable operators are squeezing in the biggest bandwidth hog: HDTV channels.
The specter of a cable system too choked for space to add services has already jolted the industry's power players into creating a secret organization to avoid a crisis.
Code-named NGNA, for "Next Generation Network Architecture," the project involves the three titans of the industry—Time Warner, Comcast, and Cox—that together reach almost 38 million subscribers.
Created last summer, the group has quietly marshaled outside engineers to completely rethink the
technology to create more capacity.
So secretive is the NGNA project that many executives in the industry and on Wall Street know little or nothing of it. "What the hell is NGNA?" asked the president of another cable operator, echoing the words of two senior Wall Street analysts.
Nonetheless, NGNA is a red-hot topic among cable-technology suppliers, who say that the changes the group is seeking could transform cable systems in the same way that the use of fiber optics did. The hybrid fiber/coax architecture proved to be reliable and flexible and allowed cable operators to offer many services they hadn't originally envisioned.
Industry executives familiar with NGNA are bound by non-disclosure agreements and would not detail discussions for the record. What they describe privately is an effort in which increasing capacity is just part of the mission. Operators are fundamentally rethinking dozens of critical functions at a cable system and mulling everything from new encrypting strategies to set-top boxes that can be dramatically upgraded by simply uploading software.
Even the most fundamental aspects of how cable operators deliver TV signals could be changed—all in an effort to squeeze more space out of the wires they own. Instead of offering hundreds of channels at once, cable operators might conceivably offer "switched video," treating every channel the way systems treat VOD movies; sending one digital packet at a time.
Executives at the three companies acknowledge the NGNA project—first disclosed by CED
magazine—but decline to offer details. The executives say only that the effort will ride on existing fiber and that the group's plan does not call for tearing up the system and replacing trunks, as the fiber upgrades did.
"We're not going to rebuild our plant; we don't think we need to," says Dallas Clement, a senior vice president at Cox Communications. "We think there are lots of levers, lots of creative ideas out there that can continue to make our plant very competitive and very relevant."
At the moment, plain old analog channels take up the most space. Two-thirds of the capacity of most cable systems is sucked up by transmitting 80 or so basic, pay, and pay-per-view channels as analog signals. One answer NGNA is pondering: If every customer were given a digital cable box—an expensive proposition for cable companies—all
the channels could be digitally compressed into a tenth of the space. That would essentially triple the amount of space available for other services.
While the 500-channel proclamation has been widely derided over the years, the cable industry has delivered on that promise, and much more. From a single wire snaking into the home, cable subscribers can get Web radio, cheap telephone service, and The Sopranos
The problem—as cable operators have come to recognize—is that TV's digital future requires far more bandwidth than first envisioned. Many of the 500 channels, for example, will command far more space when they transition to high-definition TV. The sharp picture quality requires more data, which takes up more space. And some major markets have more than a dozen broadcast stations, which are all going digital.
Some systems are already feeling crunched, particularly in markets with a large number of broadcast stations. HD cable subscribers in Manhattan, for example, are frustrated that Time Warner Cable doesn't have room for four HD channels in New York City (including Time Warner-owned TNT HD), the biggest market in the country. Cable networks say they're facing similar problems in other markets heavy with broadcast stations that have gone HD.
Still, operators have lots of ways to cope with the capacity problem in the short term, such as "reclaiming" analog channel slots. For example, to reclaim analog slots used by pay channels, a system could give only those subscribers digital boxes, then compress them digitally to free up space.
"Bandwidth is not an inhibitor at this point," says Mark Cuban, the billionaire founder of HD-programming startup HDNet. "In about five years, it could be a huge issue."
But the search for a long-term solution prompted the creation of NGNA. The effort emerged last year among top engineers at the three cable companies, which together reach two-thirds of the nation's cable subscribers. After much discussion with peers in the telecom and computer industry, they moved to galvanize a campaign to marshal their ideas.
What equipment companies find remarkable is that the cable operators are inviting so many of them in at the beginning of the process. Typically, cable operators tell vendors, " 'Here's the architecture we want. Bid on it,'" says an executive with one company involved in the NGNA process. "Here, it's 'What do you think our network should be?'"
In March, the companies invited executives from 60 vendors to Phoenix. More than 100 people sat in a Hyatt Regency ballroom for five hours as cable executives on stage detailed how they see the future network. Much of the discussion centered on a device that's key to cable's future, dubbed the "outlet digital adapter."
The device would allow cable operators to take their systems completely digital cheaply. Right now, digital boxes, at around $130 apiece, are too expensive to install in every subscriber's home. Executives say a new digital adapter that will display digital signals on ordinary TV sets could be simple and cheap, $35-$50.
The NGNA process has changed the minds of many engineers already. Initially, some cable operators thought that the low-end digital adapter would be pretty dumb. Operators now see it as smart enough for a remote control and an on-screen menu, letting subscribers use VOD systems. Comcast, in particular, wants to offer some free on-demand programming to every customer.
Committees of engineers are collaborating on various sections of a major report due out sometime this summer. "It would be great to see it in July," says one cable executive involved in the project. "I'd be disappointed to see it in early September."
Some elements of the plan could start appearing as early as two years from now, while the most sweeping affects could take five to seven years.
One senior industry engineer notes that cable operators primarily envisioned fiber in the late 1980s as a way to improve cable's reliability; the design unexpectedly enabled many new products that are driving the industry today.
"Every time you advance the technology," says the engineer, "you find that the benefits are broader than what you thought."