CATV s Answer to Satellite Competition

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1 CATV s Answer to Satellite Competition Independent cable system operators are increasingly finding it difficult to provide a service solution that is competitive with Direct Broadcast Satellite. From Personal Video Recorders to High Definition to advanced interactive applications, the DBS providers have economies of scale that give them an advantage over the smaller operator. To date, there have been no comprehensive headend solutions for the low subscriber count cable operator. Enter Transparent Video Systems (TVS) and its Independent Operator Digital Cable Solution. Transparent Video Systems has put together a turnkey digital cable system from headend to subscriber which provides significant cost savings over comparable all digital systems. Some of the benefits to this approach include: Features that customers demand, such as PVR and High Definition (HD). A cost effective way to meet FCC Must Carry requirements for digital programs. Reclaim bandwidth with no outside plant upgrades. High quality, high reliability, and advanced security. Reduced truck rolls and the ability to add new services remotely. Allows set top boxes to be sold at retail, opening up new business models. Supports pre paid options, giving another option for non pays. As low as 25% the cost of alternative approaches.

2 System Description Transparent Video Systems integrates its headend encoding, multiplexing, and QAM units together with open platform components from leading suppliers from around the world to create a complete, end to end, digital cable system. Based on the proven worldwide DVB and MPEG 2 standards, the Transparent Video Systems approach includes: A power and space efficient, high quality, digital headend solution that converts video, audio, ASI (satellite or server inputs), and 8VSB (e.g., off air) inputs to 64 or 256 QAM RF or Gigabit Ethernet outputs. Consistent quality of signal that is superior to analog. Channel changes which are faster than Digital Broadcast Satellite (DBS). Multiple set top options, including standard definition set top boxes starting at $80, dual tuner Personal Video Recorders (PVRs), and HD PVRs. Integrated Electronic Program Guide (EPG). A complete Subscriber Management System (SMS) that allows remote provisioning and management of video, telephony, and/or Internet subscribers. Standards based simulcrypt interface, allowing a choice of secure Conditional Access Systems (CAS) to be deployed. Operation with both one way and two way cable plants. FCC compliance for Emergency Alert, Closed Captioning, and separable security.

3 The Business Case for All Digital The Million Dollar Question Transparent Video Systems (TVS) allows an independent cable operator to migrate to an all digital cable solution on their terms either in a phased approach or via a flash cut. Either way, TVS offers a cost effective migration to digital while providing: Sales of set top boxes at retail shifting the cost burden to the consumer. Bandwidth expansion without costly plant upgrades. Addition of digital programs without the need for two way plant. Subscriber activation without a costly truck roll. TVS offers the ideal solution for the smaller operator; operators retain control over their customers and channel line up, while offering a package that is price competitive with Direct Broadcast Satellite. The all digital TVS approach eliminates or delays TVS calculates the non discounted the need for cable operators to make costly outside typical payback for a 4,000 subscriber plant upgrades to increase bandwidth. For instance, system with 2 set tops per household TVS customer Christopher Lovell, General Manager and a channel line up comparable to of the 4,000 subscriber, Coaxial Cable Television the most popular DishTV offering is Corporation (Coax), evaluated and compared plant approximately 22 months and only 40 upgrades with an all digital solution. Lovell months for the same system with only commented that the business case for TVS s digital 1,000 subscribers. cable solution was clear cut, as the total costs of the all digital approach were $1 million versus $4 million for upgrading the outside plant. However, Coax gains more than capital expenditure savings. The all digital approach promises additional savings from reduced truck rolls; this is due to the customer self provisioning and remote subscriber management features that come standard with the TVS solution. Given the consistent quality, the increase in channel capacity, and the inclusion of a user friendly Electronic Program Guide, new revenues can be expected, while allowing Coax to offer a product that is competitive with the Direct Broadcast Satellite (DBS) providers. New features, such as Subscriber Instant Messages (SIM), allow Coax to notify subscribers of new specials, entice them to order premium channels, or remind them to pay their bills. Adding a digital tier with separable security allows for alternative business models, previously not possible in the CATV industry. The TVS digital solution allows the retail sale of the set top boxes, enabling the cable operator to expand their marketing reach by working with other local merchants. More importantly, the retail approach enables new business models, such as those adopted by the cellular and DBS industries where the set top box is free to the consumer in exchange for a long term contract. A digital cable approach allows the operator to shift the cost of the set top box or PVR to the consumer, similar to what the DBS and Cellular industries have done.

4 The following diagram shows the spectrum of a typical cable system before and after an upgrade to digital. Figure 1. One Scenario for a Fast and Cost Effective Upgrade to Digital. In the above scenario, the operator has chosen to keep a mixed analog/digital system. In this scenario, the analog channels represent a combination of the off air broadcasts, free basic channels, and cable operator generated, local channels. This analog tier allows the operator to provide the basic channels to all of the television channels in the house without a set top box. In the diagram above, the digital tier represents the 19 channels that had previously been in analog form, as well as another 80 extended basic and premium channels. This channel line up compares favorably to a typical DBS Channel line up. 1 As a rule of thumb, one digital channel occupies one MHz of spectrum. Some TVS customers are evolving towards an all digital spectrum, reclaiming more bandwidth for new revenue generating services such as telephony and High Speed Internet. Alternative Approaches The design of the TVS Independent Operator Digital Cable Solution has been formulated with the low subscriber count operators in mind. As a result, the TVS solution is one third the price of systems intended for larger operators. Similar to some of the more expensive, centrally managed, all digital systems designed for metro areas, where grooming occurs in a satellite headend controlled by a third party, TVS allows the operator to maintain control of the subscriber and the channel line up. 1 The number of channels does not include digital audio signals, which could easily add another 30 channels for purposes of marketing to the consumer.

5 Component Typical 3 rd Party Satellite TVS Digital Solution All Digital Solution Headend Solution Cable Operator Control of Yes Yes No Subscriber Management Ability to Customize Channel Yes Yes No line up Pre paid Billing Options Yes No No Customer Self Care and Yes Yes No Provisioning On going Operations Cost X 2 3X 3 4X Overall System Cost X 2 3X X Table 1. Comparison of TVS versus Other Digital Video Approaches. Conclusion: The TVS Independent Operator Digital Cable Solution is ideal for operators facing the challenges of a small subscriber base, the need for more channels, and stiff competition from Direct Broadcast Satellite. From an economic standpoint, the TVS solution is as little as a 1/4 the cost of an outside plant upgrade and 1/3 the cost of alternative digital solutions. With features that customers demand, such as high definition, dual tuner PVR, and high quality signals, TVS has a solution to give the independent operator a competitive edge in this new era of all digital video.

6 Appendix A: Some Other Challenger Headend Applications Headend Digital Transport, shared headends, and remote grooming are applications ideally suited for the Challenger Headend. The modular nature of the Challenger Headend components allows deployment in a centralized or distributed fashion to suit an operator s particular network architecture. Here are a few examples where the Challenger Headend reduces capital investment and/or increases features. Drop and Groom for MDU, Hospitality, and Health Care Facility Applications Bulk customer agreements with commercial institutions constitute a significant portion of the typical cable system s revenue. The Challenger Headend makes it easy for an operator to drop only a portion of their channel line up to a particular facility, groom it so only a subset is delivered within the institutional cable network, and create a custom line up for each commercial contract. Shared Headends and Headend Consolidation The digital compression attributes of the Challenger Headend, when combined with fiber optic and/or microwave transport, allow operators to extend the benefits of headend consolidation to rural applications. In the example shown at right, a centralized Challenger Headend aggregates satellite and local off air signals into a multiplexed digital RF feed. Fiber optics or microwave is used to transport this digital RF feed to a hub location (often a former headend) where local digital RF signals are inserted via Challenger Encoder Multiplexers. Headend Digital Transport Application Edge QAM: In this scenario, the RF output from the Challenger Headend (Encoder Multiplexers, Receiver Multiplexers, and Digital Multiplexer) serves residences near the headend, while simultaneously providing ASI or 100BaseT digital outputs that feed a regional or metro fiber transport network. At the network hubs, edge QAMs convert the digital feed to RF Transparent Video Systems

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