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Is it Cheaper to Go All-Digital, All-HD and All-Switched?

A participant on the NCTA’s switched digital video (SDV) briefing call last week asked why the cable industry isn’t moving more quickly to all-digital broadcast given the bandwidth savings. Verizon’s making the shift, why not traditional cable operators? The answer is that cable companies as a whole have a lot more existing analog customers, and the transition is going to be both complicated and expensive. It makes sense. However, I heard an interesting contradictory anecdote yesterday. The folks in Motorola’s SDV lab talk to operator customers all the time about the logistics of architecting networks that are a mix of elements – a mix of digital and analog, a mix of HD and SD, and a mix of switched and broadcast video. Apparently one customer ran the numbers for his network and came to the conclusion that it would be cheaper for him to go all-digital, all-HD and all-switched now. No mixed environments, everything uniform.

First off, and not surprisingly, the cable operator in question is a relatively small one. Presumably the capital cost of making a complete transition is not nearly what it would be for a larger operator like Comcast, and thus is quickly outweighed by the operating expense of managing a network with a huge range of video outputs. (I’m making the assumption that capital costs grow more or less linearly with more subscribers while operating expenses level out more.)

Secondly, the implications of making a complete transition are fascinating and manifold. On the one hand consumers get better service, and the operator gets more bandwidth to offer more HD content and advanced services. On the other hand, what do subscribers pay for when the transition happens? Will a basic price tier still be available given the level of service being offered?

It will be interesting to watch as different cable operators wrestle with how to make their own transitions.

3 Responses

  1. I suppose it’s not a huge surprise that smaller operators are taking the all-digital plunge now….they definitely have a lot fewer homes and subscribers to to manage during the migration. We’ve also been hearing that some larger msos are going all-digital in some smaller systems for similar reasons…they may be built out to only 550 MHz or so and have only a few hundred or perhaps less than 5K subs to cut over.

  2. Good point about the network build-out. Certainly if cablecos are down around the 550 MHz range they have particular incentive to make the shift to all-digital.

  3. Nice site, Looking forward to more.

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