DOCSIS An Opportunity to Reinvent the Cable Business Model

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1 DOCSIS An Opportunity to Reinvent the Cable Business Model By Andrew D Souza, CTO Architect, Openet Introduction In the broadband battle, cable operators were the early leaders, boasting faster speeds than the DSL service offered by their telco counterparts. However, as the telcos launch their ultra-fast fiber-to-the-home (FTTH) services, such those offered by Verizon and AT&T in the U.S.; FastWeb, Telefonica, and TeliaSonera in Europe; and Korea Telecom and PCCW in Asia, cable risks falling behind, hampered by its bandwidth limitations. DOCSIS 3.0 promises a way for cable operators to counter the telco threat by providing faster speeds to the end user up to 160 Mbps downstream and 120 Mbps upstream offering a more cost-effective approach for cable operators to compete and win against FTTH service providers with ultra high-speed data delivery. To take advantage and fully leverage new network technologies and opportunities, MSOs need to look at their existing OSS and billing environments and assess whether they can support these next generation services. Cable back office systems have historically been heavily customized, often in-house solutions that were generally developed to address a specific service or geographic region and designed to support static services billed on a flat-rate basis. Transforming these systems to support a new business model is a complex and challenging undertaking; however, those operators that succeed in this effort are rewarded with increased revenues, reduced operational costs, and stronger customer relationships. The perception of existing OSS/BSS capabilities must change from that of a back office function to one that is more subscriber oriented. However, long-term success depends on going beyond competing on speed and focusing on using the extra bandwidth to create truly compelling offerings. DOCSIS 3.0 can help cable operators take that step by providing not only the necessary bandwidth, but the opportunity to truly differentiate their services by delivering highdefinition digital entertainment and broadband services, such as the following: Streaming video to cable internet customers Bandwidth-intensive enterprise applications User-defined interactive programming, in which video programming is combined with internet sources High-bit rate services to facilitate faster file exchanges and high definition video downloads Time shifted and place-shifted video Interactive on-line gaming Over-the-top video content that allows consumers to stream video content from the internet to their televisions However, without proper management DOCSIS 3.0 threatens to cannibalize existing cable revenues, as television networks explore over-the-top internet distribution deals with content delivery networks or deliver content directly via the internet. It also threatens profit margins, as the marginal cost of adding network bandwidth will not be covered by the marginal revenue. WHAT IS DOCSIS The Data Over Cable Service Interface Specification, or DOCSIS, was introduced to address the challenges created by emerging broadband demand. Developed by CableLabs with assistance from a number of cable equipment vendors, DOCSIS defines the communications and operations support interface requirements for a data over cable system. The DOCSIS initiative was originally launched in 1997 to ensure the interoperability of modems, but has since evolved to provide additional capabilities and functionality. The successive versions of the DOCSIS specification include the following: DOCSIS 1.0 defines basic broadband internet connectivity for cable modems, enabling operators to purchase interoperable equipment from multiple vendors to drive down prices DOCSIS 1.1 provides quality of service functionality, allowing the cable operator to offer guarantees on data rates and service latency DOCSIS 2.0 was developed in response to increased demand for symmetric services such as IP telephony and increases upstream throughput to 30 Mbps of capability DOCSIS 3.0, the most recent iteration of the specification, provides a number of enhancements that enable operators to significantly increase their downstream and upstream speeds 1

2 Cable s Need For Speed Explosive internet growth in the late 1990s drove the cable industry s investment in high-speed data technology. The first cable modems were symmetrical devices with downstream speeds of only a few megabits per second and far slower upstream speeds in fact, many early cable modems used the telephone network as a return path. As cable operators upgraded their hybrid fiber/coax networks to support bidirectional data paths, cable modem speeds increased. However, slow uptake of DSL cable s primary competitor meant that cable operators were able to maintain their dominant position in the broadband internet market without implementing any significant changes in the services they offered. millions Figure 1: United States Cable High-Speed Internet Subscriber Growth Source: SNL Kagan The first half of this decade saw a surge of user demand for high-speed internet access, driven by the following factors: New choices in content and distribution: Users of peer-to-peer music sharing programs such as Napster and Kazaa were early and controversial bandwidth consumers. The increasing amount of mainstream content that is being made available legally, combined with traffic on user-generated content sites such as YouTube, is driving bandwidth usage across the board. Improved security: The always-on capability provided by both DSL and cable creates a security risk that discouraged some would-be early users from subscribing to broadband. Moreover, the shared nature of the cable network led to additional concerns; however, improved security in routers and cable modem network hardware, combined with network security features provided by earlier versions of DOCSIS, have alleviated many of those concerns. Lower cost: The monthly cost of a broadband subscription and the price of the modems themselves have fallen over the past several years, and operators have begun offering attractive pricing of triple-play bundles, making high-speed internet access an option for more households. Teleworking: As more companies offer their employees the option of working remotely on a regular basis, broadband access at home becomes a necessity. DOCSIS 3.0 was developed to address that user demand by providing increased bandwidth. As FTTH providers offering downstream speeds of up to 50 Mbps have gained traction and expanded their rollouts, particularly in North America, Europe, and Asia, MSOs have felt pressure to boost their own bandwidth capabilities in order to compete. DOCSIS 3.0 enables that via channel bonding, a technology that allows operators to combine multiple 6 or 8 MHz physical RF channels to create a single logical channel. While the current specification supports bonding of at least four channels, which would provide up to 160 Mbps downstream, channel bonding could eventually deliver speeds of up to 1 Gbps. From a services perspective, this means that cable operators will be able to supply enough bandwidth to support internet applications that include both video and audio content, such as YouTube and Blip.tv, as well as enterprise applications in the Small Medium Business (SMB) market. However, DOCSIS 3.0 goes beyond downstream speeds. The specification also includes the following features: IPDR conformance: DOCSIS 3.0 mandates support of several IPDR record types, providing the operator with the ability to mine a wider range of data that is stored within the Cable Modem Termination System (CMTS) Support for IP multicasting: IP multicasting, which allows operators to offer broadcast services over the cable network, is considered an important feature in the IPTV architecture Stronger security: DOCSIS 3.0 utilizes the Advanced Encryption Standard (AES), an encryption algorithm developed by the US government for securing unclassified material. AES is easier to implement and requires less memory than its predecessor, the Data Encryption Standard (DES), and provides enhanced traffic encryption and better validation processes. Support for IPv6: The decline in available IPv4 addresses has hit cable operators particularly hard. Each cable broadband subscriber requires multiple IPv4 addresses for the cable modem itself, any CPE devices, gateway routers, telephony adapters, etc. One cable headend could therefore manage hundreds of thousands of IPv4 addresses, and as demand for connected devices in the home continues to increase, that number will only continue to increase as well. IPv6 will address the issue of IPv4 exhaustion, enabling cable operators to scale their IP networks in response to demand and more flexibly allocate addresses and route traffic. 2

3 Opportunities Presented by DOCSIS 3.0 Previous iterations of the DOCSIS standard had little, if any, effect on back office systems. The cable industry s current OSS and billing environment is typically composed of batch-oriented, highly customized systems that are siloed by service and/or by region. This architecture, while inflexible and limited, has largely met the needs of the cable industry s traditional business model, in which operators pay monthly carriage or affiliate fees to programmers, then bundle those channels into packages. Consumers then subscribe to these packages, for which they are billed a flat monthly rate. While a small number of MSOs offer tiered data service plans, MSOs have largely extended the flat-rate model into the broadband internet space, offering subscribers all-you-can-eat data plans for a set price per month. DOCSIS 3.0 has the potential to enable MSOs to move beyond that limited model and generate additional revenue by offering more dynamic new services and capabilities, such as the following: A wider range of tiered data services: More compelling offers for larger enterprises: Convergent content services: Cross service controls and management: Enabling long tail services: DOCSIS 3.0 may enable speeds of up to 160 Mbps, but that doesn t mean that MSOs are necessarily going to provide every subscriber that degree of bandwidth capacity. Cable operators can charge a premium for ultra high-speed service targeted at enterprises, telecommuters, or other power users. The additional bandwidth afforded by channel bonding enables MSOs to compete more effectively for lucrative enterprise customers by supporting bandwidthintensive services such as video conferencing, online training, and corporate event broadcasting. While previous iterations of DOCSIS separated incoming TV signals from IP traffic and directed the former to the television set and the latter to the cable modem, DOCSIS 3.0 enables abstraction of the signal source, allowing more flexible determination of where content will be viewed. A subscriber could therefore have live broadcast video or other content streamed to his PC for viewing at a later time, or could watch a broadcast on his television set that incorporates additional information from the internet, such as statistics on players or details on an item that is for sale. IPDR will enable operators to apply real-time business rules based on what is happening in the network, enabling a more granular management of subscriber access rights or entitlement to services and aggregated content. This can be used, e.g., to offer a convergent parental control solution for data usage and TV programs, or to authorize place-shifted viewing of content from TV to the internet for subscribers. Even with the additional capacity afforded by digital video compression, cable operators have a limited number of channels that they can offer over the video network. However, by leveraging the convergence capabilities of DOCSIS 3.0 in conjunction with other technologies such as Switched Digital Video (SDV), the additional available bandwidth can be fully utilized, operators can then use that bandwidth to offer their subscribers highly specific niche programming, delivered either to the PC or to the TV via packet streams. However, while the DOCSIS specification defines the standards for cable modems and other network equipment, it does not address the OSS and billing systems that interface with that equipment. Those back office systems are critical to the visibility, monetization, and control of the services that DOCSIS 3.0 enables; while DOCSIS 3.0 defines the pipe, it is the OSS and billing systems that help cable operators monetize it. 3

4 Preparing Back Office Systems for DOCSIS 3.0 Cable operators must consider the following features as they invest in upgrades to support their DOCSIS 3.0 architectures. Next Generation Policy Management While most MSOs have implemented some degree of traffic management functionality to address congestion caused by peer-to-peer activity, few have deployed advanced policy management capabilities that enable them to make sophisticated decisions based on a wide range of criteria. These types of capabilities could add significant value to a DOCSIS 3.0 network by supporting dynamic bandwidth allocation based on a variety of factors or authorizing content delivery across multiple screens. Making contextual, real-time decisions requires session and subscriber awareness and the capacity to orchestrate service delivery at scale with low latency. By bridging the billing, CRM, and network domains, MSOs can use subscriber-specific rules such as entitlement and preferences as well as network-specific rules including available resources and network congestion to provide a richer experience and more value to their customer interactions. As an example, a customer who attempts to download a high-definition movie could be temporarily allocated additional bandwidth to support a faster download if he is a valuable enough customer. The MSO could also offer to sell the subscriber additional bandwidth to complete the download, or even use the event as an opportunity to upsell the customer to a higher-bandwidth tier of service. Flexible Pricing Traditional rating and billing systems are typically hard-coded, siloed, and lack the ability to support ad hoc pricing. These batch-oriented proprietary systems increase the time it takes to bring a service to market, limit potential business models such as pre-paid or on-demand, and increase the complexity of service bundle management. The emergence of multi-product devices that blur the separation of voice, video, and data services is increasingly driving the need for convergent management tools. What is required is a shift in the perception of existing BSS capabilities from a back-office function to one that is more subscriber-oriented. Modern real-time charging systems support non-subscription based charging, dynamic promotions, cross-service pricing plans, content charging, and the capability to monetize ad hoc users requests for network access and services. Enhancing existing BSS to be more subscriber- and transactionoriented is expensive. Moving promotional capabilities closer to the network-edge using real-time charging, avoids expensive upgrades and enhancements to existing OSS/BSS by shielding these systems from the impacts of these changes. Volumes and complexity of transactions and events Traditional Billing Recurring, fixed pricing Small volume real-time transactions Low use of transaction data for value generation Latency not critical Transactions numbers predictable Figure 2: Billing Must Evolve to Handle Transactional Opportunities Time Billing evolving to: Simple fixed (recurring) pricing High volume real-time impulse transactions High use of transaction data for value generation Latency critical Transactions numbers predictable Multi-Protocol Support The DOCSIS 3.0 specification includes support for IPDR, a real-time data collection protocol that can more efficiently, dynamically, and reliably collect data from the network than the SNMP protocol is able to do. However, DOCSIS 3.0 applies only to cable data services, without taking into consideration any convergent service that could be offered across the data and the video networks. If cable operators want to create innovative content services that leverage both broadcast video and high-speed data, they must have systems that support multiple protocols, including SNMP and Diameter. When asked to handle increased volumes and the diversity of transactions, legacy OSS/BSS architectures will be put under extreme stress. Operators must implement an efficient, scalable, cost-effective back office infrastructure that is capable of collecting and delivering subscriber transactions in real-time, across multiple protocols and networks. As users adopt an ever broader set of services and applications, the capacity to flexibly configure business rules to manage the increased volume and diversity of network transactions becomes a critical success factor. Systems need to be flexible in supporting different protocols, to enable integrations with thirdparty application providers, as well as legacy and next generation network elements from different vendors. This flexibility is important because most operators will migrate to new technologies using a phased approach. Data Processing and Mining Capabilities In order to fully leverage the value of IPDR, the MSO s OSS and billing systems must be able to collect and process IPDR streams to mine them for valuable network and subscriber data. This builds the foundation to enable personalized data services and eventually converged services based on consumption patterns and trends. That data can then be used in analytic functions such as capacity analysis, service planning, resource management, and usage management. As an example, an MSO can use network and subscriber data to identify consumers who both make long distance calls and subscribe to a broadband data service and offer them a high-bandwidth video calling service, either on an ad hoc or a subscription basis. 4

5 Backwards Compatibility While some of the larger MSOs have already launched their DOCSIS 3.0 deployments, it will likely be a gradual process for most. The systems that they put in place to manage their new network gear must be backwards compatible, providing a single platform to manage both older equipment and the DOCSIS 3.0 infrastructure, or they risk creating management silos that introduce inefficiency and preclude truly convergent services. Open, Standards-Based Technology Investment in standards-based OSS and billing standards typically results in faster implementations, reduced time to market and lower maintenance costs. Continuing to move toward standards-based processing (e.g., IPDR, Diameter and others) will provide a more agile underlying technology, which will ultimately increase business agility, enabling the operator to more rapidly pursue new market opportunities ahead of its competitors. Moreover, building and deploying a platform using Commercial-Off-The-Shelf products that use configurable interfaces, support industry standards and include reusable components will reduce development and maintenance costs. Conclusion Telecom service providers fiber-to-the-home offerings pose a significant threat to cable operators broadband offerings, and with broadband internet accounting for over 20% of the cable industry s total revenue, threatens the overall health of the industry. However, the telcos have largely marketed their fiber-to-the-home offerings as cable replacement services, differentiating themselves from cable only on speed and price, and cable operators have responded by offering potential subscribers lower promotional rates and/or gifts as an incentive to sign on. DOCSIS 3.0 provides cable operators with the opportunity to leapfrog the telcos by providing not only speeds that match those offered by the telcos, but also a truly differentiated experience to their customers. Using DOCSIS 3.0, MSOs will be able to introduce new services without the high startup costs associated with network upgrades, provide additional security features that will be particularly compelling to the SMB market, and enable operators to scale their IP networks more efficiently and flexibly. However, with the right OSS and billing environment, cable operators will be able to more fully leverage the value of DOCSIS 3.0 and avoid being just another large pipe. The perception of existing OSS/BSS capabilities must change from that of a back office function to one that is more subscriber oriented. Modern real-time data collection and charging systems are able to support a multitude of new business models to monetize the investment in high speed data networks, including non-subscription-based charging, dynamic promotions, cross-service pricing plans, content charging and the monetization of ad hoc requests for network access and services. About Openet Openet provides Transactional Intelligence solutions that allow cable operators to extract maximum value from their networks. With Openet s FusionWorks Framework, operators can gain visibility into network usage, dynamically control network resources, and monetize network activities. Openet enables cable initiatives across video, data, and voice services, such as DOCSIS 3.0 migrations, Addressable Advertising initiatives, and subscriber rights management in linear, on-demand, and SDV environments. About The Author Andrew D Souza is a Software Architect in the CTO Office at Openet. He has over eighteen years of experience in the design, development, and implementation of large scale OSS and BSS solutions for the convergent telecommunications industry, and is also a member of industry standards definition groups. Andrew holds a degree in Electronic, Computer, and Systems Engineering from Loughborough University in the U.K. Copyright Openet Telecom 2009 Dublin, IRELAND 6 Beckett Way Park West Business Park Dublin 12, Ireland Tel: Fax: Reston, Virginia, USA Sunset Hills Road Suite 310 Reston, VA Tel: Fax:

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