Diffusion. The. Bandwidth Challenges to the Digital Home. Group. Intelligence in. Action. A TDG dbrief. Author: Colin Dixon The Diffusion Group 2007

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1 The Diffusion Group Bandwidth Challenges to the Digital Home A TDG dbrief Author: Colin Dixon The Diffusion Group 2007 The Diffusion Group 5700 Granite Parkway Suite 200 Plano, TX Intelligence in Action

2 Bandwidth Challenges to the Digital Home Table of Contents Summary 3 Triple Play Leads the Way 4 Video Bandwidth Concerns in the Telecom Network 4 Telecom Operators Need a New Approach to Last Mile Bandwidth 7 Can Fiber Meet the Need? 8 List of Figures Figure 1 Video Bandwidth Required to the Home through The Diffusion Group 1

3 Summary Telecom operators planning to enter the television market using existing DSL technology will face serious bandwidth problems within the next 2-3 years. In order to survive in this hyper-competitive market, pay TV operators will be required to deliver three high-definition and two standard-definition television streams concurrently to the home. Yet given the bandwidth requirements of High-Definition Television (HDTV), the capacity of today s residential DSL networks will be rapidly overwhelmed. Using MPEG2-encoded content to deliver these video streams would consume a staggering 60 megabits per second (60Mbps) of bandwidth. Even with advanced codecs such as MPEG4 H.264 and Windows Media 9, bandwidth requirements will still be around 25Mpbs. With ADSL2+ providing, at most, 16Mbps up to 16,000 feet and VDSL offering 26Mbps up to 8,000 feet, it is clear these technologies will not be sufficient to meet the needs of TV viewers. Telecom operators should be evaluating solutions that allow them to grow into their network rather than out of it. When evaluating new last-mile technologies, operators must address the following questions: Does the solution support bandwidth capabilities in both upstream and downstream directions? Does it provide the flexibility to efficiently allocate bandwidth and thus allow for service tiering and the targeted application of bandwidth? Is it compatible with existing customer equipment such as coaxial cable, splitters, and cable-ready TVs? To maximize the life of a last-mile network, operators should carefully examine fiber to the premises (FTTP) solutions such as Gigabit Passive Optical Networks (GPON), Gigabit Ethernet Passive Optical Networks (GEPON), and Active Ethernet to solve their last-mile bandwidth issues. All three architectures provide an abundance of bandwidth to support advanced residential applications, although differences in the compatibility with custom equipment, throughput, and overall cost may give the edge to GPON The Diffusion Group 2

4 Triple Play Leads the Way The rush for Cable, Satellite and Telecom operators to deploy voice, video, and data service bundles is now in full swing around the world. Operators are beefing up their networks to add the missing service pieces to their offerings. For Cable, the missing piece is voice; for satellite, voice and data; for telecom, video. Although each must add a different service, upon one thing they all agree; triple-play services are the most effective way of retaining customers and growing revenue. As Comcast CEO Brian Roberts recently stated, there is no doubt that consumers want all three of these services, and bundling them together into a single offering creates a blockbuster product. 1 At the 2006 IPTV World Forum Asia conference, PCCW (the largest TelcoTV provider in the world) reported that churn had been cut in half due to the introduction of its 'Now Broadband TV' service 2. City Telecom s Chairman and founder, Ricky Wong, confirmed that it was becoming increasingly difficult to get PCCW subscribers to switch to his competitive (and significantly faster) data service and he put much of the blame (or credit, depending on how you look at it) on PCCW s triple-play service bundles 3. With Telecoms already providing voice and data services, they must add the most bandwidth-hungry of all the services, video, to their offerings. This presents enormous challenges to their existing networks and one which, as will be seen, existing last-mile xdsl solutions are simply incapable of delivering. Video Bandwidth Concerns in the Telecom Network Many Telecom Operators that have deployed triple-play services based on ADSL2+ technology are now facing a difficult dilemma. With the available bandwidth of these connections topping out in the range of 16Mbps, they simply 1 Interview with Brian Roberts, Bloomberg TV s Marketline, October 26, IPTV World Forum Asia, Shanghai, September 27, 2006, Presentation: PCCW s Now Broadband TV the Secrets of Success. 3 IPTV World Forum Asia, Shanghai, September 28, 2006, Presentation: Marketing IPTV Services to the Mass Market The Diffusion Group 3

5 cannot support the variety of services that (a) most had planned for, and (b) which customers now demand. While VDSL increases the available bandwidth to around 26Mbps, it dramatically reduces the range covered, from feet to 8000 feet and thus limits the telco s reach by as much as 75%. Moreover, even VDSL may prove inadequate to meet long-term bandwidth demands. Consider the evolution of bandwidth requirements for just the video portion of triple-play services over the next five years (see Figure 1 below). Between 2004 and 2005, when several pioneering telecoms launched their first video services, typically they needed to provide two standard definition video streams. The most commonly-used set-top boxes (STBs) used MPEG2 codecs so the bandwidth requirement for these two streams was a fairly modest 8Mbps. Today, in addition to two standard definition streams, an average PayTV service must be able to provide a high-definition stream. Using MPEG2 as the transport protocol means bandwidth requirements jump to the 22-24Mbps range (see Figure 1 below.) At 16Mbps, ADSL2+ is inadequate to deliver such throughput while VDSL is barely able to cope. Both TiVo and Digeo are delivering multi-tuner HD DVRs to consumers, and such devices are available from (and subsidized by) major PayTV providers in the US. Operators who deploy these solutions must anticipate that customers who use HD DVRs to record shows still consume HD video streams, even when they are not watching television. The expected growth in HD broadcasts will guarantee there is plenty of content to view and record. For the Telecom operator depending on xdsl to launch HDTV services, the outlook is bleak. Within five years, it is likely that many households will need three high-definition streams (one for the living room HDTV, one for the living room HD DVR, and one for the second HDTV in the master bedroom) and two standard definition streams (for standard TVs in rooms such as the kitchen and den). And this bandwidth will need to be available 24 hours day. Using MPEG2, this puts the video bandwidth requirement in the 60Mbps range; even channel bonding falls well short of coping with this demand The Diffusion Group 4

6 Advanced codecs such as MPEG4 AVC and Windows Media 9 will help to reduce these bandwidth requirements considerably. Today, high-definition video streams at 8Mbps are common, and over the next several years we expect to see improvements that bring the HD bandwidth requirement down to around 6Mbps. This puts the video bandwidth requirements in 2011 at around 20Mbps. Again, ADSL2+ cannot meet these needs and VDSL has little room for additional services. Figure 1 Video Bandwidth Required to the Home through 2011 The preceding analysis accounts only for the video portion of triple-play bandwidth. It does not include Voice over IP (VoIP) or broadband Internet services. As well, it does not anticipate the value-added services that will be added to this mix. No doubt demand for more bandwidth-intensive services such as IP-based video calling could dramatically change that picture, as could the demand for Internet video. In TDG s recent report, Broadband Video: Redefining the Television Experience, we predict that by 2011 as many as The Diffusion Group 5

7 million homes will be watching Internet-delivered video on their televisions 4. Advances in online gaming also could substantially increase bandwidth requirements as gaming-on-demand services become commonplace among broadband operators and HD-targeted advertising becomes blended with the gaming experience. No doubt the cinema industry provides some indication of how the future of home video will evolve. Theaters are preparing to make the leap to digital, embracing standards 2.4 and 9.6 times the resolution of 720i HD. Given the precipitous price declines of HDTVs in the 50+ inch range, the high-end market will move quickly to embrace these new resolutions. In order to compete effectively, video-on-demand (VOD) services will need to support this resolution as well, thus creating a compelling need for MPEG4 streams in the 80Mbps range. As well, demonstrations of UltraHD (with a resolution 36 times that of 720i) are receiving rave reviews 5. If the cinema Industry embraces this format, it could lead to home video bandwidth demands of a staggering 300Mbps (and that is with compression) just to support a single UltraHD stream. Telecom Operators Need a New Approach to Last Mile Bandwidth Incrementally upgrading the last mile from ADSL2+ to VDSL and using channelbonding will only provide temporary relief to the bandwidth problem. Operators need a solution that allows them to grow into their network rather than out of it. There are many technology options that promise to alleviate this bandwidth problem. In addition to taking into account cost considerations, operators should keep the following criteria in mind when evaluating these new technologies: Bandwidth capability in both upstream and downstream directions. Flexibility in allocating bandwidth, thus allowing for tiered services and targeted application of bandwidth. 4 Broadband Video: Redefining the Television Experience (The Diffusion Group, January 2007). 5 I Saw the Future of Digital Cinema and it was Good, TDG Opinions (The Diffusion Group, October 2006) The Diffusion Group 6

8 Compatibility with existing customer equipment to help maximize the reach of new services and minimize additional costs. As has been demonstrated, launching new IP services (especially HD video) will place tremendous burdens on bandwidth. In order to address these needs both now and in the future, operators should only consider solutions that can provide at least 1Gbps of upstream and downstream bandwidth to the home. Such bandwidth capacity will certainly meet the demands of the next decade and allow the operator piece of mind knowing their network is truly future-proof. It is also important that an operator have flexibility in allocating this bandwidth. With basic voice needs requiring only 64Kbits, ideally the bandwidth should be allocated in blocks of this size. This allows the operator to introduce finely-tuned service tiers that optimize bandwidth usage. For example, today many operators offer an introductory broadband connection in the 1.5Mbps range and a 3Mbps connection at a 30% premium. Having the ability to decide how much bandwidth should be allocated for specific services (and specific consumers) allows the operator to respond quickly and efficiently to address competitor s moves or service introductions. While delivering a robust connection to the home is important, it is equally essential that operators make certain that the services delivered can easily be enjoyed by the customer. For example, today the standard for video distribution in the home is coaxial cable and splitters, and almost all TVs support direct connection to cable. Some GPON (Gigabit Passive Optical Network) vendors support the delivery of basic TV services as QAM signals to the home. Utilizing such a solution allows an operator to deliver pay TV services without having to change the home wiring or even having to provide a set-top box. Further, support for MoCA (Multi-Media over Coax) allows for the distribution of broadband data services over the same coax/splitter network. Similarly, support for common business services can also help improve an operator s revenue picture. For example, many businesses still use legacy TDM services such as T1. Data termination equipment within the business relies on compatibility with T1. Having the capability to offer customers legacycompatible and cost-effective services based on the new triple-play architecture will no doubt provide a competitive advantage to both the operator and customer The Diffusion Group 7

9 Can Fiber Meet the Need? Bringing fiber into a network has the potential to alleviate the bandwidth problem; but with so many architectures and solutions on offer it is difficult to decide which is best. While this paper will not discuss the merits of each solution in detail, it can provide some overall guidance to an operator. Some Telecoms have elected to use Fiber-to-the-Node (FTTN) or Fiber-to-the- Curb (FTTC) and run xdsl to the household. While this approach delivers the bandwidth to address near-term needs (between 20-70Mbps), more robust solutions will be desirable before the decade is out. To maximize the useful life of the network, operators should carefully examine Fiber-to-the-Premises (FTTP) solutions such as GPON, GEPON, and Active Ethernet to solve their last-mile bandwidth issues. All three architectures provide plenty of bandwidth, and each has particular strengths, such as cost (GEPON), ability to support a combination of residential and business subscribers along with legacy business services such as T1 (GPON), and point-to-point architecture (AE). One advantage that GPON has over the other Gigabit Ethernet architectures is packet efficiency, a reality of the packet overhead requirement of Ethernet 6. For small packet transport, the GPON architecture can transport approximately 100% more twice as much payload data as the Ethernet architectures. For large packet data, GPON has an advantage of approximately 32% more payload data transported. Despite these differences, all three architectures provide a powerful solution which operators should evaluate carefully. 6 GPON: The Speed You Need, David Foote, Hitachi Telecom, FTTH Prism, Vol. 3 No. 1, p. 33, June The Diffusion Group 8

10 Copyright Notice This document was published by The Diffusion Group, Inc. Copyright Reproduction is forbidden unless authorized. All rights reserved. About The Diffusion Group (TDG) - TDG provides research and advisory solutions for companies serving the connected home and new media markets. Using a unique think-tank approach that blends executive-level consultants and in-depth market research, TDG generates reasoned and pragmatic insights that help clients make more intelligent market decisions. TDG produces more than research we create Intelligence in Action. For more information about The Diffusion Group, visit our website at The Diffusion Group 9