Seeking Alpha
Profile| Send Message| ()  
Broadlogic announced a chip today that provides a high density solution for converting Digital Cable TV channels to Analog. It’s a slick solution but I don’t think it will see mass adoption. Here’s why.

Om Malik has an article today that provides a good background on the company for readers that have no idea what I am talking about. It’s also covered in the Wall St. Journal ($$$ Link). Read these for a background on what the problem is that the company is trying to solve.

broadlogic

The goal is to reclaim the spectrum used for downstream analog signals on the coax cable to your home by compressing them into digital signals and converting them to analog signals once they reach the home. Cablecos like Comcast (CMCSA) and Time Warner (TWX) are forced to still use legacy analog transmission because many consumers use tuners built into TV’s and do not have a digital set top box to do the conversion. If transitioned to digital, ’ghetto’ analog spectrum could be used for more downstream Docsis broadband channels using Docsis 3.0 channel bonding. In short, FTTH-like download speeds (though upload speeds can’t improve much).

It will happen, just not in the way Broadlogic envisions it.

Why would Cablecos deploy a dedicated hardware solution based on Broadlogic rather than simply give their customers a dumb set top box for free? Cable companies would embed this functionality in the home gateway they currently deploy for Voice services. Unfortunately, once this hardware is installed it loses the flexibility inherent with a set-top box. If digital codec quality improves, a set top box can be swapped out by the customer. A home gateway screwed to the side of the home cannot.

More importantly, the Cablecos want customers to have a set top box in order to up-sell on-demand services that generate high margin incremental revenue. This is especially true at existing analog customers which are low revenue low margin subscribers anyway. Installing a box outside the home with the Broadlogic chip removes the opportunity to force customers to use a set top box.

My Verizon (VZ) FiOS TV service only generates the most basic analog channels in my home even though they have none of the spectrum constraints the Cablecos do. I suspect it is because they want this up-sell opportunity.

I think Broadlogic has a courageos technical solution to a problem that is already solved. The solution? Give everyone a set-top box for free. And up-sell a la carte services.

Source: Cable's Analog Ghetto: Why Broadlogic's Solution Is Unlikely To Work