Cable Operators Progressing Slowly Toward All-Digital Systems
The cable industry is beginning another phase in its transition to all-digital systems, our survey of major U.S. operators found. Most provide some digital channels in all or nearly all systems, which marked the first phase of the multiyear transition. Systems are continuing to switch off the remaining analog channels to take them all-digital in the second phase of the transition. Cable operators have a way to go before most companies are fully digital in all systems and have moved all channels off the analog tier, which frees up bandwidth for HD and broadband.
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Cablevision and Comcast are among the major operators that appear to be the farthest along in the second step of the transition, because they've moved more systems than some others to digital-only, according to Communications Daily’s research and interviews with analysts. Time Warner Cable is an example of an operator that’s not as far along, as are Cox Communications, Charter Communications and Suddenlink. Analysts and executives said those companies are making the switch gradually, and some are using switched digital as a way to free up bandwidth by sending to subscribers only the channel they're watching.
Cablevision is all-digital in its New York City and Connecticut markets and is in the midst of transitioning its Long Island market, said a spokesman. Cablevision will focus on its Westchester and New Jersey service areas next, but there’s no time line for when the company will complete the transition in its entire footprint, he said. The company in 2010 got an FCC waiver to encrypt the basic tier in its all-digital New York City systems, letting it cut down on theft of video. Commission staffers are working on a draft order that could let the entire industry scramble broadcast-TV and cable channels on the basic tier, as long as operators provide free set-top boxes, CableCARDs or other equipment to some affected customers (CD Feb 21 p6).
Comcast has been especially aggressive in the transition, said analyst Sam Rosen of ABI Research. Comcast will turn off all analog channels on certain systems across the U.S. on a phased-in basis this year, Rosen said. Twenty percent of Comcast’s footprint is all-digital, a spokeswoman said: “We are now embarking on the next phase of the digital migration by digitizing the remaining limited basic channels.”
The industrywide transition is “a relatively long process,” said analyst Ian Olgeirson of SNL Kagan. Rosen said it’s “very early in this process.” Going completely all-digital means having reclaimed all analog channels across an operator’s footprints, which is what our research tracked.
Time Warner Cable is all-digital in its Augusta, Maine, market and in most of New York City and part of Los Angeles, said a spokesman: “We expect to complete the company-wide conversion to all-digital in the next five years or so.” Cox Communications continues “to encourage voluntary customer migration from analog to digital tiers while simultaneously offering analog service options,” a spokesman said. “We regularly offer promotions and special offers to encourage new subscriptions to our digital tiers, from existing and new customers, promoted via various marketing channels."
Some companies have not yet started that part of the transition or have very few systems that are completely and only digital, our research found. Charter has very few areas where all analog channels have been reclaimed, said Chief Technology Officer Jay Rolls. “We have very little quantity of all-digital” systems, he said. The cable operator began providing some switched digital services in 2009, Rolls said.
Suddenlink has a few small markets that are currently all-digital, which are the “rare exceptions” a spokesman said. The operator has no plans to stop offering analog channels across the rest of its footprint, he said. “In most areas, lifeline or limited basic channels will continue to be available in analog form -- for the foreseeable future.” Suddenlink is giving customers free digital terminal adapters to make the transition, the spokesman said. DTAs generally are cheap set-top boxes with some advanced capabilities like HD but generally not PVR and don’t need CableCARDs to access programming. For Suddenlink, DTAs let the company “transition to all-digital lineups, reclaim bandwidth and add more services,” the spokesman said. “Through Sept. 30, we had installed over 930,000 digital adapters in more than 60 cable systems.” The company is spending $350 million in a three-year “Project Imagine” plan that ends in 2012 so that “substantially all customers” will be able to opt to buy all-digital packages, though they'll still have the option of continuing to get analog, the spokesman said.
Some companies may lose motivation to fully complete the digital transition after reclaiming a significant amount of channels, and some companies may decide it’s not worth the expense to become all-digital, analysts said. “When you get down to the last handful of channels, the incentive to close them out is somewhat diminished and countered by the potential difficulties,” Olgeirson said. For each analog channel reclaimed, cable providers can deliver 10-15 standard definition digital channels or 2-3 HD channels, Rolls said. Rosen noted that “there are still regulatory issues being addressed such as the ability of operators to encrypt” the basic-digital tier, such as what Cablevision got FCC permission to do. He said costs from the rollout include making sure that “all subscribers receive and connect DTAs.”