WASHINGTON
Internet Protocol TV deployments aren't just the province of beefy bells. While AT&T and Verizon were still at the drawing board, a telephone co-op in the land of gigantic cabbages was rolling out service.
"We launched IPTV in December 2003, on all copper using ADSL2+," said Keith Southard, business manager at Matanuska Telephone in Palmer, Alaska, a city of around 7,000 known for its massive cole crops. "Small independents like us are moving pretty aggressively."
As phone co-ops go, Mat-anuska is actually among the larger ones. The 52-year-old indie has around 65,000 landlines in 42,000 homes spread over roughly 10,000 square miles surrounding Palmer.
The average telco in the 560-member National Telecommunications Cooperative Association has 5,344 subscribers. As phone companies go, however, Matanuska is wee compared to Verizon, which has 46 million landline subscribers in a 254,000-square-mile area. Yet the same force is driving both companies.
Landlines are going away.
Verizon registered a 7.5 percent drop in landline subscribers during July, August and September. Smaller telco exchanges report a decrease of 1 to 2 percent a year.
"It's not hard to imagine that voice services as a business don't have much of a future," Southard said. "We've got a lot of money invested in an infrastructure designed to carry voice... it's not hard to see the potential in the future if you don't do something different."
For small local phone companies--referred to as "ILECs," or incumbent local exchange carriers by the FCC--that something is Internet Protocol TV.
Around 100 ILECs have launched IPTV in the United States today, according to Kevin McGuire, vice president of business and technology for NTCA. It's the "IP" that makes the endeavor notable. Small telcos have been in the video business for years, either with owned analog cable operations or satellite TV franchises. But IP technology allows telcos to offer digital TV, advanced services and more channels. Matanuska, for example, offers 206 channels, video-on-demand, pay per view and soon, high-definition content.
TECHRONICITY
The advent of telco IPTV is a story of technological synchronicity; of codecs, chips, networks and hardware simultaneously reaching the stage of development necessary to do IPTV over copper. Those pieces started coming together about five years ago, said Jeff Houle, senior director of U.S. telecom sales for Tandberg Television. First, ADSL (asymmetric digital subscriber line) technology and DSL access multiplexers, or DSLAMs, allowed phone companies to get 8 to 10 Mbps into the home.
"That equated about two televisions and one broadband service," Houle said. "That's been the case for the last four or five years. Then in the last year, ADSL went to ADSL2+, gave more bandwidth to the home at longer distances."
Matanuska doubled its data rate to the home with ADSL2+, Southard said, from 8 Mbps over standard ADSL at 6,500 feet, to 16 Mbps.
Houle also said the completion of MPEG-4 was pivotal for ILEC IPTV. MPEG-4 can do an average hi-def signal in about 8 Mbps, compared to 18 or so with MPEG-2. The beauty of IP is that video signals are delivered to the home individually instead of as a package, so a 16 Mbps pipe will easily do HD, plus broadband and voice. ILECs are itching to use MPEG-4, but the set-top chipsets still need tweaking.
Ron Riggle, vice president of operations at Rochester Telephone in Rochester, Ind., said his company has six to eight HD channels for its IPTV service, but they won't be offered until the bugs are worked out.
"Everyone that has one is having a bit of trouble with the chipset," he said. "They're trying to combine MPEG-4 and MPEG-2 into one set-top, and it's having some problems with freezing."
Riggle and Houle both anticipated such problems would soon be resolved, especially with AT&T using MPEG-4 for its IPTV initiative, U-Verse. AT&T's set-top suppliers include Motorola and Scientific-Atlanta, while many ILECs use boxes from Amino in Cambridge, England. Tatung and Thomson also make IPTV set-tops.
Tandberg Television is a main suppliers of IPTV headend equipment. So are Tut Systems with its Astria line; Optibase with MGW platforms; and Minerva Networks, the VC8000. Each system handles a combination of signal processing and coding operations.
Tandberg Television was already a major player in video compression when it launched headlong into ILEC IPTV with its $80 million acquisition of SkyStream last March. Jim Olson was president and CEO of SkyStream at the time. He's now executive vice president of corporate development for Tandberg Television.
"SkyStream was entirely focused on smaller telcos and a number of very large telcos outside the United States," he said.
The SkyStream line, now sporting the Tandberg Television name, included the MPEG-2/AVC Mediaplex-20 headend and iPlex, an edge headend for adding local channels. Rochester Telephone is using two Mediaplex-20s in its MPEG-2, fiber-to-the-home operation.
RICH IN FIBER
Across the country, an overall snapshot of the local exchange infrastructure would reveal a mix of copper and fiber. Some operations use a fiber core with copper to the home. Others take fiber to the curb or all the way to the home, particularly in new developments. Rochester is going all the way. Riggle said the company serves about 6,000 households in a 240-square-mile area. The entire fiber build-out should be done in three years.
"It will be a nine-year capital investment run of about $9 million," he said.
Rochester decided to go all fiber after doing fiber to the curb at a nearby competitive exchange.
"We realized that just going to the curb doesn't really help you out. You have to go to the home," he said. "We could see the demand for speed was not going to let up. Why not build an infrastructure that would serve us for years to come?"
As for return on investment, "it's gonna take a while, but we're in it for the long term. We've been here 111 years. When you think about what brought us to the industry, the dance isn't always gonna be there... we've got to have diversity. Video is one of those things, ISP is another. We're just trying to make sure we stay here another 111 years."
Rochester now has around 1,700 subscribers on a legacy analog TV service; the 205-channel digital IPTV service is in the process of being launched.
Canby Telecom in Canby, Ore., went up with their IPTV service in October 2005. The company has 900 video subscribers in an 80-square-mile market of 8,500 homes, said Keith Galitz, the general manager.
"The plant is copper to the house, and we're totally rewiring the houses. We've launched fiber-to-the-home in new developments and fiber overlay in certain areas," he said.
"We're adding between 60 and 65 customers a month."
GETTING THE PICTURES
Like Rochester and Matanuska, Canby has its own dish farm to pull in programming. Individually, ILECs would be hard pressed to negotiate deals with hundreds of networks, but in this case, all three are members of the National Cable Television Cooperative. The NCTC negotiates programming deals as a collective representing 9 million subscribers--making it the third largest cable company in the United States.
However, the NCTC put a moratorium on new memberships last year as ILECs got serious about IPTV. Without a negotiating collective, 6,000-line ILECs like Canby have to pitch the likes of Viacom, Disney and Fox. It's doable--Galitz cut deals with six major cable nets for Canby's IPTV offering on top of the NCTC arrangement; but that's still six out of around 200.
McGuire said NTCA (the phone co-op lobby) is putting together a master programming agreement for members. Concurrently, the NTCA along with the National Rural Telecommunications Cooperative is working on a turnkey IPTV system with SES Americom, the Princeton, N.J. satellite operator. The system, IP-Prime, is a program distribution platform similar to Headend in the Sky operated by Comcast. SES Americom aggregates programming at its facility in Vernon Valley, N.J., encodes it for IP, compresses it with MPEG-4 and transmits it via satellite.
With IP-Prime, Brian McGuirk points out that ILECs can get into the digital TV business for the price of a receiver dish and three to five racks of equipment--less than one-tenth of the price of building a full-fledged $4 million headend. McGuirk is president of media sales for SES Americom.
"It's a great flip for the telco, putting capital into programming instead," he said.
There will also be a regular fee based on how many channels an ILEC takes. IP-Prime is in currently in beta at four rural cooperatives, and is expected to become available to ILECs either by the end of this year or early next year.
"Everyone can sort of see the finish line," McGuirk said.
