Where are all the new HD channels?

[dkennedy]

Where are all the new HD channels?

Cable companies continue to struggle with limited bandwidth

June 1, 2006

By Ben Drawbaugh, HD Beat Magazine

Every time we look around we are asking ourselves; where are all the new HD channels? We see new channels announced, but they still don't seem to be offered to us by our cable company and considering the price we pay per month; we want to know why.

The hard truth is the simple fact that there isn't enough bandwidth. There would be plenty of bandwidth for HD if there weren't all those analog channels taking up so much space. Until there are more HDTV subscribers than analog subscribers the analog stations are going to continue to get the valuable bandwidth.

In the meantime providers are looking for ways to make the most out of the limited bandwidth they have. Currently they are deploying a technology called switched digital, which will allow them to only use the bandwidth of the programming that is actually being watch, rather than everything that can be watch, such is the case with the older method; digital simulcast. So, what is the hold up with switched digital? It isn't compatible with the FCC mandated CableCard.

On a non-technical front they are fighting to limit their programming, to what they believe their customers want. Cable companies are forced to carry certain programming in certain situations, such as public access or what is known as "Must Carry", which gives a broadcaster the right to force a cable company to carry their signal.

Unfortunately this doesn't work the other way and cable companies cannot force broadcasters to allow them to carry their signal.

With digital broadcasting, broadcasters have the ability to broadcast multiples SD feeds rather than just one HD channel and for obvious reasons the broadcasters want to be able to force the cable companies to carry this signal.

Many broadcasters argue that it should be all the same to the cable companies, but the cable companies are going to do whatever they can to reduce the bandwidth requirements of a channel, even if it means to reduce the pictures quality or in this case strip away part of the stream.

Currently digital must carry doesn't exist, but the battle rages on and now the FCC is proposing a mandate that would include it, but require the broadcasters to do more public service with their extra channels, either way bad news for HD fans.

[dkennedy]

Cable operators find it tough to swallow HDTV

June 5, 2006

By David Lieberman, USA TODAY

NEW YORK — After years of dithering and infighting by government officials and corporate executives, the high-definition TV revolution is finally here.

This year, for the first time, consumers will buy more HDTV sets than traditional ones. Morgan Stanley estimates that nearly 26% of households will enjoy HD's gee-whiz video and theater sound by year's end and that 67.6% will in 2010, thanks to prices falling from today's $1,000 and up.

That's good news for the TV industry, right?

Maybe not for cable operators.

Their wires are so packed with TV channels and new services — including video on demand (VOD), broadband Internet and phone — that many are scrambling to find bandwidth for the coming wave of HD channels. "Cable operators need massive capacity for HDTV, and have to move quickly," says Sanford C. Bernstein's Craig Moffett. "HDTV is hot."

Executives say they're on the case. But their favorite plans to fix their bandwidth problem will, at least in the short-term, create hassles for millions of subscribers — especially those who hate the idea of hooking their TVs to a set-top box.

For example, one solution could strip dozens of channels from customers with cable-ready TVs — forcing them to pay an extra $10 or more a month for a digital box and service just to keep the channels they get now without them.

The other leading remedy would hobble new HDTV sets designed with a slot to work with a slick, credit card-size CableCard instead of a box.

In addition to being an inconvenience and expense, either change would represent yet another setback for the decade-old federal effort to force the industry to free consumers from cable boxes.

But operators seem willing to take the heat. They fear that if they fail to heed warnings such as Moffett's, they'll lose many of their 65 million subscribers who are hot for HD to satellite and phone company rivals that already are able to offer lots of HDTV channels and plan many more.

"We think it is a good differentiator for us," says Carl Vogel, vice chairman of satellite provider EchoStar and former CEO of cable operator Charter Communications. "Our vision is to be the best video provider that we can be."

To build on that advantage, DirecTV and EchoStar are preparing to launch additional satellites and use other means to offer at least 150 national HD channels, as well as each market's local stations.

"Satellite's going to be constrained not so much by how many channels they can carry than by how many they can get," says Bob Scherman, Satellite Business News editor and publisher.

Meanwhile, phone company Verizon is building state-of-the-art, fiber-optic networks that it says can handle 210 HD services plus all the conventional TV channels.

No analog baggage

These newer rivals for cable have always been digital, transmitting all their programming in bits and bytes, so neither of them has to worry about serving "satellite-ready" or "phone-ready" TV sets. Their customers are used to needing a box or receiver to convert the signals into the images of, say, Katie Couric or Taylor Hicks on the analog sets that still dominate living rooms, bedrooms and kitchens.

More important, being all-digital makes more efficient use of their capacity: About 10 standard digital channels fit into the bandwidth required for one analog channel.

By contrast, cable's roots are analog, and they typically still offer analog transmissions of 70 or more of the most popular channels that the majority of their customers watch on "cable-ready" analog TV sets — without a box. Providing those analog signals eats up about two-thirds of a typical system's bandwidth, even after the industry spent $100 billion over a decade to string fatter lines to handle interactive services.

Thanks to that analog legacy, most cable operators have room to add only about a dozen HD channels — roughly half what DirecTV and EchoStar already offer.

It's a competitive gap likely to widen. Satellite companies "will likely have a two-to-three-year lead over cable during which they'll be able to offer a materially higher number of HD channels," Morgan Stanley's Richard Bilotti writes.

The imbalance hasn't hurt cable so far. Their local operations can more easily tailor lineups to offer HD feeds from the markets' popular ABC, CBS, Fox, NBC and PBS stations than coast-to-coast satellite broadcasters. And there isn't much national HD programming yet.

About 30 of the 500-plus national pay-TV networks offer HD, a short list dominated by premium sports, movie and porn channels.

Some cable operators, trying to come up with a solution to their bandwidth pinch, have asked other networks "to please wait on launching new (HD channels) until 2007," Pali Capital's Richard Greenfield writes.

Up to now — for their own reasons — programmers have been content to leave HD on "pause."

"Going HD is an expensive proposition for content companies, and a lot of programmers are waiting for enough viewers to jump in" by buying HD sets, says Bill Goodwyn, president of affiliate sales and marketing at Discovery Networks U.S.

But that wait seems to be over. In the past few months, HGTV, the Food Network, National Geographic and A&E unveiled HD plans.

"We're seeing a tipping point," says Gwynne McConkey, Lifetime's senior vice president for operations, information systems and technology. "We expect to have an (HD) announcement this year."

Whether smaller channels get in on the HD party is in doubt, however. They fear that cable's bandwidth problem could cause giants such as Comcast and Time Warner to save their precious few HD slots for networks they own.

"The haves will get richer, and the have-nots will get poorer," says Tracy Dolgin, CEO of the New York Yankees' Yes Network, which is distributed in HD. "The Sewing Channel isn't going to get an HD channel. It just isn't going to happen."

Cable's bandwidth Band-Aids

Cable operators looking to accommodate more HD channels have come up with two basic strategies:

•Drop analog channels (and the idea of "cable-ready" TVs). "The first thing we'll do when we start putting on more HDTV pictures is to take one analog channel off the system," says Comcast Chief Technology Officer David Fellows. "In its place, we can put three HDTV pictures."

The beauty of that solution: It's simple and cheap, and CableCards would still work.

It's also risky.

By cutting analog service, operators force customers to buy digital service and a box to keep watching favorite shows they used to get on their cable-ready TVs. Because the customer now has to get a box anyway, they might consider switching to satellite or phone video that has more HD channels.

To try to avert that, "We may choose to ... keep 20 or 30 channels in analog," Fellows says. "That way, the TV set in your kitchen will still be cable-ready."

•Keep analog service (and make current CableCards obsolete). Time Warner, Cox and other operators prefer a solution, called "switched digital," that lets them offer more HD without hassling analog customers. It would, though, create problems for folks with digital TVs and other devices designed to work with CableCards, not a box.

Operators now send all channels through their fat fiber-optic trunk lines and also through the slimmer coaxial cables running through neighborhoods and into homes. The cable-ready TV tuner, cable box or CableCard blocks everything except the channel selected.

With switched digital, operators would send all channels through their trunk lines. The system then would pass the analog channels through the neighborhood lines but send a digital channel only when a viewer selects it on a set-top box.

Instead of also pushing 300 or so digital channels through the coaxial lines, they would be handling only the 60 or so a neighborhood is likely to be watching at any one time. That would free capacity for HD transmissions.

"We're effectively making digital broadcasting the same as video on demand," says Seth Kenvin of BigBand Networks, a major service provider. "The subscriber doesn't know what's going on."

Time Warner has deployed switched digital in three cities and plans to bring it to all its systems. Cox and Cablevision also are drawing up deployment plans.

"If you're not switching, you're going to run out of spectrum," says Time Warner Cable Chief Technology Officer Mike LaJoie. "Once I have the switching fabric in place, I can add as many channels as I want and never overload."

The system also has appeal for investors who fear the cost of solutions requiring set-top boxes on every analog TV, which operators might have to offer free.

"Going all-digital would cost $100 per subscriber. Switched digital would cost about $5 per subscriber," Moffett says.

Makes CableCards obsolete

The good news for operators and investors is bad news for subscribers who bought TVs and digital video recorders that unscramble digital signals with a CableCard — effectively, a set-top box on a card.

The Federal Communications Commission prodded the cable industry to support the cards as a first step to fulfill a 1996 congressional mandate to free consumers from having to get a box to watch or record TV shows. But the cards now in use in about 400 products introduced since July 2004 — including lots of HDTVs — only receive signals and can't send a message to a switched system telling it to pass through a particular channel to the neighborhood.

CableCard users in San Diego found out what that meant last year when Time Warner deployed a switched-digital system. They lost East Coast versions of several premium channels. A company letter also warned owners of HD sets that they might not be able to get HD channels being added. As compensation, the company said it would give them a digital set-top box free for a year. Instead, CableCard customers decided to drop cable for satellite HDTV service.

That's a step backward, TV and DVR makers say.

"We see switched digital as another way cable is trying to undermine the CableCard and discourage its use," says Consumer Electronics Association spokesman Jeffrey Joseph. Although more than a million CableCard-ready digital TVs have been sold, he says, operators' half-hearted support has meant that only about 150,000 CableCards are in use.

An FCC spokeswoman declined to comment on the matter, citing the current government mandate for CableCard and proceedings in progress on new CableCard standards that would support interactive TV and switched digital.