Cable Companies Bring a New Weapon to the Broadband Battle
Episode ID S2E04
February 17, 2023
In a move that will increase broadband competition for fiber providers, Comcast and Charter have announced plans to boost speeds by deploying DOCSIS 4.0 on their existing infrastructure – a shrewd and cost-effective approach. In this episode of All Day Digital, host Jeff Johnston gets an expert assessment from Jim Gleason, the president and CEO of Vexus Fiber who also happens to be a cable industry veteran.
Jim Gleason: I can't verify or say that it's not not true, I find it pretty hard to believe that you're going to be able to upgrade all your networks certainly for $100 even $200 to go full on DOCSIS 4.0.
Jeff Johnston: That was Jim Gleason, president and CEO of Vexus Fiber regarding claims made by Charter and Comcast about the per passing cost to upgrade their networks to DOCSIS 4.0.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the communications industry. This podcast is brought to you by CoBank’s Knowledge Exchange group.
The battle to provide the most reliable and fastest broadband network is heating up as fiber to the home deployments gain steam. In a competitive response, Comcast and Charter have announced plans to deploy DOCSIS 4.0 that will deploy fiber like performance over their legacy HFC networks with an incredibly attractive cost profile.
Jim is an industry veteran having worked in the cable industry for several years and as such has experience with HFC networks. And now as the CEO of a fiber company, he’s an ideal person to compare the two network architectures and help us understand what DOCSIS 4.0 means to the broadband industry.
So, without any further ado, pitter patter, let’s see what Jim has to say.
Jeff Johnston: Jim Gleason, welcome to the podcast. It's a pleasure to have you here with us today.
Jim Gleason: Thanks, Jeff. Glad to be here.
Jeff: Excellent. Jim, there's been a lot of buzz here recently in the press regarding these legacy HFC networks and specifically announcements coming from Comcast and Charter about some of the investments they're making that are going to significantly increase the speeds of these networks at pretty attractive cost structures. I want to dig into that with you, but maybe before we even go there, maybe you can just help our listeners understand, what is HFC and how does it differ from fiber to the home? If we can level set there, I think that'd be a great starting off point.
Jim: Well, I'm happy to try to answer. First, my background really came out of the HFC space or even more importantly, the cable space before there was an F in the HFC. We go way back in that space but now over the last three years, I've been in the fiber to the premise space. I'm going to be a little dated but HFC is Hybrid Fiber-Coax design which is essentially the latest greatest upgrade of a coax network and so if you think about a cable network. It started out as all coax, we over time, when we were in that space, layered on fiber to get rid of active component or amplifier cascades as we called it back in the cable business, so that we had fewer active components and more fiber out there.
Now, most cable operators and most cable systems are of an HFC design to where there's fiber out to a node and then from that node, you go through coax with a series of amplifiers and then eventually over coax into the customer's home or business.
Jeff: Okay, and then, of course, fiber to the home is pretty self-explanatory. It's just fiber right from the node into the house.
Jim: That's right. A little more, I guess, nuance of that it's also passive. Not only is it all glass or all fiber all the way from a transmission point into the customer's home or business, there's also literally from the laser, there aren't any active components until you get to a router in the house or business. That's really the big difference between and all-fiber network or an HFC network.
Jeff: Got you, and it's true too, from an operator perspective and maybe even from a customer experience perspective, I think it's well understood that fiber is a superior, or fiber to the home is a superior architecture versus HFC. Is that a true statement?
Jim: Absolutely, and having been in both places, it absolutely is for a few reasons. One, you've got more bandwidth, if you will, in the fiber network versus the cable network, and at least to this point, we'll talk about DOCSIS 4.0, in a bit, but at least to this point, that allows you to have symmetrical speeds to the customer, both upstream and downstream and in theory, we can also deliver higher bandwidth and better speeds over that network.
But, in addition to that and as I was mentioned earlier, it's a passive network in that you don't have a lot of active components in the network that need to be powered. In an HFC network, you've got active components out there on poles or in pedestals that require power and so in each of those cases, you've got opportunities for failure or noise. Those are the big differences between the two network architectures.
Jeff: Got you. Then so I would think from an operator perspective, economically speaking, let's put aside the cost of deploying the fiber for a second but just the margin on and the cost, the opex, to service those customers on a fiber network versus a HFC network is probably more attractive. When you have less components and it's more passive, my guess is probably has a better margin profile as well, no?
Jim: That's exactly right. There's less maintenance and there's not powered components in the field. You get rid of the power bill that you have out there but those active components in an HFC network require maintenance, they require balancing and other maintenance activities that optimize how the network works.
Jeff: Got you. That's super helpful. I think that's a perfect segue into, as you mentioned earlier DOCSIS 4.0, we understand the differences between the two architectures, which makes this whole announcement from Charter and Comcast intriguing, which is why I was excited to have you on to talk about that. Maybe just as a quick background, Charter and Comcast announced DOCSIS 4.0, so I would like you to help us understand that a little bit.
What they're touting with these legacy HFC networks is that they're going to be able to offer multi gig, symmetrical speeds at really attractive cost structures on per passing basis. I think if I got it right, I think Comcast said it's going to be about a $200 per passing incremental cost to deploy DOCSIS 4.0. I think Charter might have even said $100, which to me was like, "Wow, that's really cheap." What does all this mean to you? What do you make of it? How are they doing it?
Jim: Sure. I'll reiterate, Jeff, that it's been about three years since I was in the HFC space and I'm going to also preface this that I'm not an engineer. I've been in the business long enough to understand technology but not on the engineering side.
So 4.0 has come along since I've been in the HFC space, but what I do know is that it's going significantly beyond 3.1 to allow for more bandwidth and more speed downstream but significantly more bandwidth in the upstream. And that is because you're changing the profile of what we have used as an amplifier in the coax network significantly, since really the beginning of cable systems.
In the beginning of cable systems, not to drag this all out, but the initial cable system really didn't contemplate you really using much bandwidth going upstream. It wasn’t really there for much of anything and so therefore it's really small in terms of overall spectrum. That hasn't changed in really 30, 40 years. Now in DOCSIS 4.0 you're going to have to go change out each and every one of your amplifiers in your coax part of your system to change where the split between downstream and upstream is to give more spectrum to the upstream. And therefore, DOCSIS 4.0 is going to use its capabilities to increase efficiency on that but also give you more spectrum.
So, I find it interesting of the cost profile that they're talking about. I can't verify or say that it's not not true, I find it pretty hard to believe that you're going to be able to upgrade all your networks certainly for $100 even $200 to go full on DOCSIS 4.0. My understanding on the Charter front is it’s step one of multiple steps to DOCSIS 4.0 and still may not be completely symmetrical speeds, although meaning you will be able to have better upstream speed than what they have today. They are going to have to go touch every one of their active components out in the HFC network.
Jeff: That seems like a lot of labor and a pretty heavy lift. I guess without being an expert on the architecture, just the sniff test, I don't know, feels a little light on the cost structure, but hey, who knows? We shall see. I think it's important. The increase in upload speed, that was a pretty big weakness in these legacy HFC networks specifically with people working from home now and doing Zoom calls and gaming. I would think that's a pretty significant improvement to these networks that could make a big impact on the market.
Jim: Yeah, I think so. One of the attractive points for us of moving from largely having been an HFC cable operator to a fiber-to-the-premise operator was the going beyond the HFC network and the iterations of upgrades that have been required to get more speed and more throughput out of that network going to a next generation all fiber network gets rid of a lot of those limitations that are out there and the upgrade cycle of which-- that's been attractive, but then on top of that, very attractive for us to go to significantly better upload speeds.
We can do the networks that we have in place today are all 10 gig capable both directions. We're actively selling 1 by 1 gig, 2 by 2 gig, and we will roll out other speeds as applications warrant. The cable operators a lot of times have said, "Well, there still really isn't that much demand for improved upload speeds. Really an HFC network in today's space is adequate for a regular user out in their space." I find that interesting that now we're all very aggressive on deploying DOCSIS 4.0, mainly to be able to improve the upload speed. Clearly, there's a demand out there for better upload speeds.
Jeff: Especially, if you believe in the whole metaverse thing, that was quite a buzz not long ago. I think Facebook or Meta might be dialing their investment back a little bit, but a lot of people believe that it's not a question of it, it's a question of when. Now, what it ultimately looks like, well, who knows? I think what's not in debate is the impact that that's going to have on broadband networks. I've seen some estimates that the throughput speed required to have six degrees of freedom while you're wearing a virtual reality headset are enormous and maybe even more so than what you can do over an HFC network with DOCSIS 4.0. I don't know. We'll see.
Jim: Well, again, that's why we're in the space that we are in. If you just follow what's happened with the internet is the-- what happens is as we give application builders more bandwidth, and on the flip side, customers more bandwidth, both upstream and downstream, what happens is applications fill and are invented to fill that new amount of bandwidth. I think you're right.
I think with both metaverse, let's say, or AI capabilities, a lot of that is going to require some significant upload speeds that are-- and also low latency. A fiber network really gives you that capability already today. I think that's certainly one of the reasons that a cable operator who runs an HFC network wants to get better and more capacity on the upstream side. I truly believe that applications are always going to fill the improvements that we give them and more bandwidth and faster speeds.
Jeff: Yes, I'm with you there 100%. That makes an awful lot of sense. Let's talk about your thoughts as it relates to what extent do you think these investments and these new speeds on these legacy networks with these supposedly beautiful cost structures, to what extent do you think that might have on existing fiber companies on maybe how yourself and other companies look at deploying fiber into markets that are going to get upgraded to DOCSIS 4.0?
I bring that up for the reasons for talking about here also, but recently a number of cable operators or telecom operators, some of the publicly traded ones have been dialing back their plans for 2023 as far as fiber deployments. I don't know if that's just a coincidence. There could be a lot of other reasons obviously, why they're doing that. Anyway, I would just love to get what do you think the implications or the fallout of this could be to the fiber operators from a future build perspective?
Jim: Well, one, we've barely scratched the service on DOCSIS 4.0. Announcements are one thing, but real meaningful deployments are another thing. I think there's some time before DOCSIS 4.0 is going to be rolled out in any significant fashion. In fact, it's the leading edge of the technology today. There's going to be other issues that come along as the technology is deployed. I'll give you an example. As I mentioned earlier, we rolled out DOCSIS 3.1, which was the next most major DOCSIS upgrade. We were five, six years behind the first, maybe even more than that behind the first deployments.
There's a five to seven year span of when we were rolling it out. I wouldn't tell you that we were the least technology-leading company out there. We were more middle of the pack. It's going to be a while. Secondly, we also are being very successful in the fiber-to-the-premise space for a number of reasons. One, one of the things that we have really learned over our years is that customers are demanding better and better, more personalized service. We believe at Vexus that we deliver that. In fact, our customer ratings and our NPS scores show that. There's a service component to what we do too. Will it make the HFC network or the cable operator more competitive? Absolutely. I think it will improve their speeds and it will improve what they do.
Many of those large cable operators are pretty good at what they do. I think it will be a more of a competitive space out there, but I think we've still got a pretty good runway here in the markets where we’re deploying fiber and the markets that we're just starting to deploy fiber. We'll see how that goes. I still like our network better at the end of the day, because as I mentioned earlier, we have fewer active components that can go bad. We have fewer active components that require maintenance, and we have less powering out in the system that has to either have backups or can go down. I think the architecture's still better. If I owned thousands and tens of thousands of miles of HFC network and I was staring at replacing the last of the coax with fiber or deploying DOCSIS 4.0, I don't know what we would do. Given if the cost profile is what it is, I can certainly see why you would do it that way.
Jeff: It's tough to rip the band aid off if you've got such a vast network of coax. That's a significant capital expenditure. I'm with you. I totally understand why they're doing this. If I was in their shoes, I'm sure I'd do the same thing. You make a good point in terms of future applications and how they will suck up whatever excess capacity or speeds that you can provide as an operator. You certainly don't want to be playing catch-up in this industry. You want to be leading and clearly you guys are with the strategic moves you've made. That's great.
Then I guess when we think about the rural HFC providers, we're long ways off, and don't put words in your mouth, but it sounds like we're probably a long ways off before we're going to see DOCSIS 4.0 deployed in rural markets. Is that a fair characterization?
Jim: I think so, and I know, again, back when we rolled out DOCSIS 3.1, there were two things that we waited on. One, for the technology to prove itself out and become fully deployable, if you will, not to have to go through the early bumps and bruises of the technology and then frankly, let the cost come down. The cost in a CMTS, which is the brains back at the cable head-end to deploy data over cable. The cost of that first DOCSIS 3.1 CMTS at the beginning and when we deployed it, were significantly better when we did and I suspect that 4.0 will be the same.
There's a lot of reasons why it's not all going to happen all at the same time. It's the same thing as everything else too. The manufacturers can't deploy that for every cable operator all at once. I think it's a long runway.
Jeff: That's a good point with labor shortages the way they are and access to fiber and glass, it's tight out there as I understand. That's another good point. Well, Jim, look, we've covered a lot of great material here today, but before we wrap it up, I just want to give you an opportunity to-- Is there anything else that I didn't ask you or we didn't talk about that you think is pertinent to this conversation?
Jim: Well, I think that when you reflect on what's going on here, I think it's really interesting to see what's going on in many markets and the demand for bandwidth that's out there. You've got folks like us that are deploying fiber. You've got the cable guys that are upgrading to DOCSIS 4.0, and that's all happening because the demands for bandwidth in homes and businesses continues to skyrocket. As I mentioned earlier, when you give developers more capacity, they then develop applications that use that capacity, and so on and so forth.
We can probably try to speculate on what many of those applications are going to be that require much more bandwidth than we have today, but we probably don't even know what they are yet. I think that when you think about deploying broadband networks that go out there and connect homes and businesses, it's going to be amazing when we go down the road five years from now and look back at what the new applications are and the bandwidth that those applications demand. I think it's going to be incredible.
Jeff: It's exciting and I'm with you 100%. As we said, if we were having this conversation, I don't know, 10 years ago or whatever, did we ever think that streaming video would be what it is today and how the whole cable bundle is just completely falling apart? Probably not.
Jim: I don't think we would have thought it would be as common as it is today, especially video conferencing and how well it works. You can just imagine. I've seen some of the next-gen unified communications products to where you have a WebEx or a Zoom or a Teams meeting, but now it's going to be even more virtual where even looks like you're sitting in a conference room all together and all of that is going to require a lot more bandwidth.
Jeff: Well, super exciting. Jim, listen, thank you so much for your time today. I know you got a lot going on, so I appreciate you carving out some time out of your busy schedule to chat with us today.
Jim: Absolutely. My pleasure.
Jeff: A special thanks goes out to Jim for joining us on the podcast today. I think my main takeaway from today’s podcast is the future proof nature fiber to the home networks have and how this offers a long term competitive advantage over HFC networks. You know, HFC operators are in a tough spot. Over building their networks with fiber is probably not a sound economic decision, but at the same time they need to offer a competitive service with a good cost structure. So I totally get the DOCSIS 4.0 investments, which will likely serve them well for many years to come.
Hey thank for joining me today and watch out for the next episode of the All Day Digital podcast.