By Carl HoweArs Technica had an article yesterday claiming that cable companies are facing a big bandwidth crunch, based upon a report at ABI research. The author of that report says:
"The increasing bandwidth demands on cable operators will soon reach crisis stage, yet this is a 'dirty little industry secret' that no one talks about," said Stan Schatt, VP and research director for ABI Research.
Currently, cable providers need close to 750MHz of spectrum to deliver the goods: about 676MHz for downstream applications like analog cable, digital cable, HD programming, video on demand, Internet data, and VoIP service. Upstream spectrum needs are comparatively paltry, totaling about 54MHz.
750MHz of spectrum isn't going to be enough in the future, says ABI Research. "Uploading bandwidth is going to have to increase," Schatt told Ars Technica. "And the cable providers are going to get killed on bandwidth as HD programming becomes more commonplace."
It later argues that cable companies will need 3 GHz of new spectrum to meet all demands and Schatt makes what I think is rather a silly prediction at the solution:
Digital switching is key," Schatt argues. "Ultimately, the cable companies will have to move to IPTV. They'll be brought kicking and screaming into the 21st century."
Yeah, digital transmission is essential. I'll buy that. But IPTV? Not necessarily.
In my geographic area (Boston rural exurbs) our cable infrastructure is actually fiber to the neighborhood, not copper. 90% of the transmission goes over the fiber, where bandwidth is plentiful; only the last few hundred yards use copper coaxial cable that has the bandwidth limitations mentioned in the article. And given that most customers don't actually buy all the features that the article mentions, the cable companies can actually manage much of their bandwidth demand at the box in the neighborhood without affecting customers one bit. IPTV, on the other hand, would require wholesale rip-and-replace changes to the cable plant and cause much more disruption. Let's see, incremental upgrades versus rip-and-replace. Which do you think the cable companies will go with?
Another fun fact in our area of the country: Verizon (NYSE:VZ) is deploying its fiber service, FiOS, to compete with our major cable provider Comcast (NASDAQ:CMCSA). Verizon is deploying fiber to the house, while Comcast uses the above-mentioned fiber to the neighborhood technology. So is the user experience so much better with Verizon? Ummm. Not really. In fact, the Verizon cable boxes being used to deliver its FiOS TV services are actually nearly identical to the Comcast ones. And Comcast is actually delivering more high-definition programming at the moment, despite the "limitations" of its cable infrastructure. Yes, Verizon offers faster Internet services over its fiber connections, but those are also more expensive too.
Bottom line: Don't get hung up on the bandwidth crunch and immediately assume there's a "one-technology-cures-all" solution. Technology is only one piece of marketing communications services. Customers also care about the costs of delivering service -- and that's where all of these companies will end up making real and significant tradeoffs. How they are implemented and marketed will have just as much effect on the business results as how those services are built. Anyone who claims that everyone will be forced to convert to a single new technology just doesn't understand how businesses actually work.