An Infrastructure with Broad Potential

by Roger F. Bindl

Published in Roundtable Magazine Sep/Oct 2002 www.opastco.org

Part of "it" is built, and they are coming. A field, or infrastructure of copper, fiber, and emerging technologies is already fulfilling dreams of revenues through broadband enabled services. This paper reports on how a telecom industry has capitalized on it’s infrastructure for delivering broadband services over DSL, what it did, and where it might go.

Play Ball - We have a start

There are teams of telco’s providing broadband services today over existing, upgraded, and built out infrastructures. They started with a base infrastructure of copper direct to the home or via Digital Loop Carrier Systems (DLC) (Figure 1). Data is provided to the home over dial up in this scenario, but the routers and servers for advanced services are there.

DSL opened the door to faster data, and optional voice trafficking via gateways (Figure 2), but the crowds came slow. Telco’s reported take rates around 5%, although some got to the teens. The grandstands were partially built, but mostly empty. Email & Chatters at 50 words per minute didn’t need megabit services, and the need for faster downloads wasn’t as strong as the need to save money.

Broadband, if partially defined as video, has delivered a fast pitch. The stadium’s are equipped with or have access to video head-ends (Figure 3) , and the people are coming.

Tables 1 & 2 show batting statistics for telco’s using VDSL to deliver broadband services, principally video, to the home.

Table 1: Video Take Rates
Take Rate Statistics on Homes Passed After 1 Year After 2 Years Median
Video when competing with analog CATV 8-70% 35-90% 44-80%
Video when competing with digital CATV 10-30% 30-49% 24-34%
Caller ID & Call Waiting on TV   30-91% 78%
Expanded Packages   50-98% 80%
Data Take Rate with Video   15-70% 43%

 

Table 2: Packages & Revenues
Services Average
Broadcast Video Revenue per month $19.99-$60 Median $46
Broadcast Video with Data Revenue per month $40-$95 Median $81
Pay Per View Revenue per month $4-$40 Median $9
Pay Per View Take Rate per month 2.5 movies
Digital Music Take Rate with Video 11-40% Median 28%
Video Churn 0-5% <2%
500Kbs Data Service Take Rate with Video 46%
1Mbs+ Data Service Take Rate with Video 54%
Caller ID w/Message Waiting Revenue per month $5-$8 Median $6

Like beverages and hotdogs at a baseball game, the audiences crave concessions. They pay to enter, but spend to be entertained. Early statistics show much larger takes rates on data, when customers purchase video. TV Caller ID is almost a must, and most want premium channels. It’s a bundled experience for all to enjoy.

Television Statistics and Home Run Hitters

How much is television worth? There are interesting statistics on how significant it is. The average American watches more than 4 hours of television per day. On-line sources estimate that 98-99% of U.S. household have at least 1 television, 34% have 2 television, 40-66% have 3 or more televisions, 66% watch television while they eat, 56% pay for cable television, 6 million videos are rented daily, and television is watched 250 billion hours per year. Television is an entry ticket to the American home, and opens the doors to other services and revenues.

Broadcast video is an but item on a list of services, though, it’s also like the home run hitter that draws a crowd. The audiences come to watch the big hitters, but they purchase concessions as they watch. Like an analogy to baseball, the real revenues come from more sources than just the game ticket.

The typical list of concessions, or services beyond broadcast television include:

An overlooked group of services, not typically seen in a standard list of DSL enabled services, is Streaming Media. PPV, and VOD fit this category, but with DSL it’s usually relative to full screen, DVD quality video. Many of the Internet centric companies – versus telephony/CATV – fill this base with another group of services.

Buy me some peanuts and cracker jacks – or Streaming Media

Streaming Media enables several types of services. Many of these have been free, but free concessions don’t make money, so the model is changing. Advertisers have and are paying for some of the services listed below, but content providers are beginning to charge customers. These services are billable, and creative minds are finding ways to sell the peanuts, and popcorn, and cracker jacks of the data world.

A definition for Streaming media is content sent to an end user for immediate viewing & listening. It includes streaming audio and streaming video. It may be real time (live), or stored content. By today’s definition; the content is typically compressed; viewed or listened to as it is sent; stored in buffers to give the impression of continuous feed; and it is typically sent over the Internet in data packets.

Go to http://www.cultivate-int.org/issue4/video/ for a good Introduction to Streaming Video. The authors, David Cunningham & Neil Francis from the University of Bath, provide an overview of why to use streaming video, what it is, an overview on standard MPEG compression, and what the big three are doing with proprietary compression (RealMedia, Quicktime, & Windows Media Player). It also includes information on content creation, servers and clients, availability, and problems with solution. The article includes links to related sites, on the topics they cover.

To play, one has to learn the rules of the game, but there is ample information on streaming media, and servers. The internet has many sites like Streaming Media with tutorials and lists of vendors, the University of Wisconsin with tutorials, and Streaming-List.Net with lists of hardware, software, consultants, etc.. A search for "streaming media" on Google will find over 500,000 links to information. Focusing on servers – "streaming server" – finds over 35,000 links.

One of the most important segments of streaming media is content creation, but it doesn’t take an all star team to play in this arena either; It does not take computer geeks, techies, or net head. It takes initiative, imagination, desire, and decision. Search the Internet for "streaming media publishing tools" or "web publishing tools" + "streaming media" to find reviews, and tools for creating and editing media. Most of these tools are very much user friendly, and do not require background in complex software.

The following demonstrates a tool for producing interactive, streaming media. It’s an add on product to Microsoft Producer for PowerPoint 2002. The tool assists in producing a web site (Image 1) with synchronized video, audio, an interactive topic list, and images.

Image 1: Sample Streaming Media Web Page

The production side (Image 2) of Microsoft Producer is a user interface with media lists, previews, and timelines. Production is basically a process of importing video, audio, images, PowerPoint slides, and HTML pages as project files, then dragging them into the timeline. This is barely an exaggeration, as the process is that simple – the tough part is being creative enough to make the project interesting, valuable, and enticing to users.

Image 2: Production Tool

This is but one tool among many, and by no means a recommendation. The point is – streaming services & content, from a creation, production, and delivery perspective is not difficult, nor to be feared; Creating valuable, and sellable content is however an art.

Content is a concern, and obtaining it requires knowledge of a semi-exclusive industry. It’s also important to understanding how it works, as with the FCC overseeing, and seeking comments. Content production is a subject on it’s own, and how it’s changing (very slowly). Quality recording and editing equipment is now affordable to the masses. Hardware for editing and production have been replaced by software. The average player can now afford to produce movies. The average player might not hit home runs, but discovered talents will come to the surface, as an avenue for entry has opened here like it has for the telecom industry.

Other things that Internet & Broadband People Do

Beyond the typical list of broadband services, and beyond Streaming Services is a market of broadband users. They do things differently.

The following is a partial list, from USA Today, on what people use the Internet for.

On the other hand, people with broadband are also more likely to create and maintain on-line information; 39% have or are managing web site data, 16% do this daily; 43% share files (like photo’s) 14-17% do this daily. We hear concerns on the deployment of broadband, but the adoption rate is in line with other technologies (Table 3). Broadband is rolling out much like other technologies.

Table 3: Adoption Times for New Technologies
Technology Yrs to reach 10% adoption Yrs to reach 50% adoption
Video Cassette Recorder 10 14
Compact Disc Player 4.5 10.5
Color TV 12 18
Cell Phones 8 12
Personal Computer 4 18
Broadband 4  

Making Choices

The final word on broadband services, and generating revenue from them, is choice. Telecom service providers have an infrastructure of fiber and copper wire that is capable of all the services listed above, but each has to make choice on how to use it. Knowing what the choices are is helpful step; below are some of the choices.

Services Selections

Delivery method over copper infrastructure

Compression and video encoders

Transport & Aggregation of video (See Figure 4)

Content & Servers

Souvenirs for home

So we’ve been to the game. We bought tickets at $40 per person. We drank some beverages for $5 a glass. Two hotdogs were a must at $9.00. Candy was extra, and the kids picked up a few souvenirs. The day cost about $80 each.

The question now&ldots; does this analogy fit? Is television like a ticket to the game, or broadband services? Are concessions the package the make it complete?

Clear Lake Telephone Company thinks so. They’re one of many small telco’s that smile proudly when asked about the digital divide. They might even snicker at city folks that brag of digital TV and cable modems, and wonder how the cow pokes get by in a digitally enhanced world.

Concession Stands in Rural America – What Digital Divide

Clear Lake is but one example of rural America capitalizing on it’s infrastructure of copper wire, enhanced by fiber, and DSL technologies. Like man others, they’ve have an ADSL/VDSL concession stand of broadcast television, movie channels, pay per view movies, electronic program guides, television caller id, internet, and telephony bundled services.

Yes, there is a digital divide, but it isn’t out here. Clear Lake is a small rural town with big town services. The town is in north central Iowa. The phone company is family owned, and providing service for over 100 years. A beautiful lake on the west side of town reminds you of Key West as people gather for evening sun sets, and the "Lady of the Lake" paddle wheel boat gives hints of the big Mississippi. But, Clear Lake is a small rural town.

So, perhaps the analogy above is at least on track. Telco’s have a rich infrastructure of copper wire. Fiber distribution and DSL technologies have enhanced that infrastructure. The field is there, and telco’s are using it to deliver a broad range of new services.


Images 3 & 4: Clear Lake, Iowa. A rural town with broadband services.