It’s no surprise that cable operators face competition. That’s a good thing. As we wrote in our 2008 Industry Overview:
Competition is the lifeblood of a successful and thriving marketplace, and the cable industry faces stiff competition across all the markets it serves. The consumer is the beneficiary, enjoying more choice, greater convenience and better value than ever before.
Other companies come out with new products and services and we do likewise. But it may be that Verizon is feeling the heat a bit. I’m assuming that’s why they felt the need last week to launch an attack on the cable industry’s new DOCSIS 3.0 specification, which enables wideband Internet access.
Last year, we tracked Comcast’s deployment of DOCSIS 3.0 in a number of markets. Last week, Charter Communications joined in with the launch of its Ultra60 service. Later that same day, on Verizon’s PolicyBlog, came this post: Behind Cable’s DOCSIS 3.0 Broadband Claims. Let’s break down Verizon’s arguments.
Verizon correctly note that DOCSIS 3.0 equipment employs channel bonding to deliver faster speeds (Comcast’s Extreme 50 offers 50 Mbps downstream; Charter’s Ultra60 is 60 Mbps), but also has the potential to deliver hundreds of megabits per second. Verizon leaves out the context that cable has been migrating towards an all-digital environment for years (Here is one typical post explaining the transition). They also assert that channels for use in DOCSIS 3.0 services will come exclusively by moving basic analog tier channels to digital. That is incorrect, since it ignores the use of switched digital video which allows cable operators to reclaim bandwidth in the digital tier.
Citing many analyses – yet linking only to a report prepared by the Fiber to the Home Council (hardly an unbiased source) – Verizon states that higher speeds on cable will decrease the customer experience and will require cable to upgrade.
In fact, the cable hybrid fiber-coax plant offers a great deal of capacity and flexibility in how nodes are combined to provide optimal service levels based on subscriber penetration and demand. But also unstated is the fact that FiOS also multiplexes (or combines the signals) to customers onto a shared trunk — they just do so in a different portion of their network. In other words, even though the link to customers might be very fast, there is still a choke point where customers have to compete for bandwidth. Too many customers trying to access the Internet at the same time can have the same effect on a FiOS network as it could on a DOCSIS network. Funnily enough, the blog post makes it sound as if Verizon doesn’t have to employ any network management at all!
Verizon makes a broad assumption regarding cable operator deployment plans for DOCSIS 3.0 services, somehow minimizing the technology because it is just now being deployed, and citing “indicators” that it won’t be deployed to all customers.
I’m not sure what tea leaves were used to make that assertion.
Comcast has been quite public in indicating it had DOCSIS 3.0 services in front of 10 million homes and businesses at the end of 2008 and plans to have it in front of all the homes and businesses it passes with plant capable of delivering 3.0 service in 2010. That’s just one cable operator out of the dozens that now have plant capable of running DOCSIS 3.0 services. Those operators pass more than 90% of residences in the United States. And DOCSIS 3.0 service has been operating quite successfully outside the US for some time now, with deployments in Japan and Singapore.
All of Verizon’s arguments ignore the huge capital expense that Verizon has made and continues to make to ultimately serve a portion (50%) of its footprint; specifically, Verizon is spending $23 billion to reach 13% of US households. In fact, they are still conspicuously avoiding neighborhoods and whole cities, as this Baltimore columnist notes. The rest of Verizon’s footprint will be relegated to DSL service, which is rapidly losing market share.
In contrast, cable’s investment to deploy DOCSIS 3.0 is modest. And with the channel bonding that DOCSIS 3.0 permits, network speeds of 100 Mbps, 160 Mbps, and even higher will be possible. In fact, a 750 MHz cable plant (90% of the country’s cable network miles) has a digital equivalent capacity of approximately 5 Gbps of bandwidth.
Bottom line: The cable industry feels good about the services we’re launching these days. Competition has been pretty good for us; take a look at the growth rates for cable’s phone service. I’ve seen Verizon representatives claim the company’s network is built for “decades to come” and is “future-proof.” We believe in continually getting bigger, better, faster. We believe in delivering more value over time. I think this will be a good fight, and one that consumers will enjoy.
