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Cable Operators

Driving Time Warner Cable’s Future

1/06/2006 7:10 PM Eastern

Mike LaJoie, the chief technology officer at Time Warner Cable, had an eventful 2005. The company pushed past 1 million voice-over-Internet protocol telephone customers, launched digital-simulcast and switched-digital-video systems and entered a landmark wireless deal with Sprint Corp., along with several other big cable companies. With Multichannel News technology editor Matt Stump, LaJoie reflects on the second-biggest U.S. operator’s 2005 accomplishments and looks ahead, among other things, to OpenCable Applications Platform and Internet Multimedia Subsystem implementations in 2006 and beyond. An edited transcript follows:

MCN: What’s your proudest accomplishment for 2005?

Mike Lajoie: The growth of the telephone platform. It has been rolled out across the entire company and has gone from 200,000 subscribers to something well over 1 million. That is a one for the books. We went from not being in the phone business to being the 10th largest residential phone provider in the U.S.

MCN: Do you worry that with the growth in wireless — and I know you’ll participate in wireless — that the landline phone business is the wrong business to get into at this time?

ML: I think that’s the wrong question — are they going to get a landline phone or a wireless phone? The right question is how are consumers going to want engage in consuming entertainment and information products and communicating with others? The answer is very broad.

MCN: What else are you proud of?

ML: We are now offering more interactive-television applications than any other multichannel video provider, bar none. That’s a pretty exciting thing. The voting and polling we’re doing with [local news network] NY1 are very popular. A lot of the tickers that we’re doing are real cool. In Austin [Texas], there is a lot of activity on eBay on your set-top box.

Another thing is the switched-digital stuff. Moving the delivery of our networks from broadcast to switched, when we look back, it is going to be a watershed event. It exemplifies the promise of hybrid fiber coaxial cable. It’s the most efficient application HFC can provide. It will take HFC and give it legs for at least another 15 years.

MCN: How many markets have you completed or are in the process of converting?

ML: We’ve done Austin completely. We started rolling it out in one more market. In the first half of [2006], we’ll roll it out in a handful of other divisions.

MCN: Is there a final time frame for all the divisions?

ML: Not one we’ve told Wall Street.

MCN: To what extent are you doing digital simulcast and how does that interrelate with switched digital?

ML: We did 14 systems in 2005 and we’ll roll out digital simulcast pretty much everywhere else in ’06. In order to switch, you only can switch digital program streams. The more streams you’re switching, the more efficient you are. You do digital simulcast first.

With switched digital, it takes only 40% of the bandwidth that the channel lineup takes to broadcast. Once you have the switching fabric in, you can have as many new program channels as you want, the workload doesn’t change.

MCN: Digital simulcast saves on bandwidth to the node, but you still have to convert those digital signals back to analog from the node to the home. So it’s only a partial bandwidth gain, isn’t it?

ML: Simulcast doesn’t help you with bandwidth. Digital simulcast actually takes up more bandwidth, because you’re carrying the same programs in digital that you used to only carry in analog.

The bandwidth savings is by switching. So first you simulcast, then you switch and what you end up with is much, much better picture quality for the digital subscribers and the ability to add as many new channels as you want.

MCN: [Time Warner Cable chairman and CEO] Glenn Britt released some startling early usage statistics from Start Over: more than 50% of digital subscribers in Columbia, S.C., used the service. That seems like a home run.

ML: It’s a very significant home run. This product, even more than [the digital video recorder], has the potential to really impact how you watch TV. I think it’s pretty obvious that networks that don’t have the Start Over capability will really be disadvantaged.

MCN: Were you surprised by the early numbers?

ML: Not really. This is really compelling. How many times have you sat down and you’re in the middle of a show and you say, darn, I wish I’d caught the beginning. [You don’t] have to worry about setting your DVR to record it in advance or to remember to do that. It fits so well with the way people want to be able to watch TV.

MCN: What are the major initiatives you want to accomplish in 2006?

ML: For 2006, we want much greater growth in phone. We’re really looking forward for that growth to continue there.

The big thing on the agenda for ’06 is OCAP. Another significant accomplishment that has been very quiet is we have the first two-way OCAP television set from Samsung in about 20 homes in Gastonia, N.C.

[This year] is when we start rolling out the OCAP launch.

MCN: What will OCAP mean for the consumer, the operators and the consumer electronics industry?

ML: It impacts a number of things. It impacts the CE industry and gives them the ability to innovate new products that plug directly into cable plant. In the past, the problem has always been that we put in a set-top box and that television gets tuned to channel 3, and all the features of that television set get lost.

With OCAP, that doesn’t happen anymore. Now there can be a real collaboration between cable systems and the consumer electronics companies to build interesting new devices. That’s number one.

Then the ability to promote our services with the hottest new CE products directly in retail — that’s good for us and good for customers.

The device portability, so when a customer buys a set-top and plugs it into one of our systems and moves to a Cox [Communications Inc.] system, the TV will work in both places. All of those things are good for CE and good for customers and good for us.

From our perspective, eventually, as these things start to penetrate, it changes our capital profile. So we don’t have to put set-top boxes out there anymore.

The other very interesting thing is that it ends up giving the cable industry a national footprint. You start to think about interactive-television applications, especially those things that work in conjunction with TV programming. What should happen is that you will start to see a lot more new interactive applications that are bound to programming that will work everywhere.

If you go buy satellite service, you need a box. If you get digital television from your telephone company, you need a box. Our customers won’t need a box. And their feature set and their applications they are used to getting will be portable across the entire country. Satellite can do that today with their boxes. Telephone companies won’t be able to because they only work in specific areas.

OCAP also gives us a uniform middleware layer, so [there will be] rapid development of new applications. We’re working in Java. You take that Java connection and you can start developing applications that will work on cell phones and that work on the desktop. So the opportunity of coming up with an application strategy that plays to all consumer devices becomes a reality.

It’s back to your previous question about telephone, where I said it’s not really so much about whether it’s a hardwired phone or a wireless phone. It’s more about that fact that consumer expectation to get all their products, when they want, how they want, wherever they are. It’s less of a fixed or wireless strategy and more of an application service strategy, understanding that consumer expectations are changing a little bit. People want to take their programming with them. They want to take their communications with them. They want them to work great wherever they are.

MCN: What are you learning in San Diego where Road Runner subscribers can watch their cable lineup on their PC? Will that become more widespread in 2006?

ML: Probably not in ’06. We will probably expand that in San Diego, although I’m not sure about that yet. We’ve learned more about the technology. It’s not enough customers to consider it a market trial.

It’s that same approach. Our customers are buying products from us and they like to be able to consume those products whatever way they want. We want our network to be the best networks for our customers, for our programming partners and our network partners. We want to have the very best network out there from all of those perspectives.

MCN: What else for 2006?

ML: Another key thing for ’06 is the integration of the Adelphia [Communications Corp.] acquisition. The exciting thing about it, the financial performance of Time Warner Cable compared to Adelphia is night and day. It’s great story for Time Warner Cable and a greater story for customers.

MCN: Any new technology you will be able to introduce?

ML: The good news is that [Adelphia chairman and CEO] Bill Schleyer, [chief operating officer] Ron Cooper and [CTO] Marwan Fawaz have been diligently bringing that plant up to speed. They’ve really done some great work there. But they don’t have any VoIP customers and that presents an upside opportunity for us.

MCN: What will we see in wireless in 2006?

ML: The initial steps that you’ll see in wireless are a bundling opportunity — being able to offer our products to Sprint customers, and they’ll be able to offer their products to our customers. It’s really a customer value play.

As you start looking down the road and you look at the opportunities, what’s very interesting is the signaling across our networks. We’re both looking at the new signaling control protocols, IMS [Internet Multimedia Subsystem] being one of them. That starts to get pretty interesting. They are building core and connect our data service and our video services, then all of a sudden, having the products show up across those platforms. So having your PC being a push to talk terminal. Having video, as they are authorized, show up on your handset. Having your chat from your PC show up on your handset or your TV. The seamless handoff from your wireless phone to your wired phone.

Then when you start thinking about the combination of adding WiFi and WiMax broadband wireless to EVDO [Evolution Data Optimized] technology and the 2G and 3G cellular technology, the possibilities that exist in defining application services across all of those infrastructures, it starts looking very, very compelling.

The real advantage with Sprint is that it’s all the cable companies working with Sprint. We really have a chance to define the application space and how it works best for our customers. So when you look at the new kinds of products to combine entertainment, communications and information services, they are pretty compelling.

MCN: Do you have a dedicated wireless team now working on all of this? How do you divide this labor up?

ML: We have a group of engineers focused on wireless technology and have been looking at it for sometime. CableLabs has a wireless committee. That committee has been going on for a year and a half. PacketCable is working with the 3GPP [Third Generation Partnership Project] consortium that’s building IMS — adopting IMS core functionality.

MCN: Is IMS universal? Or will cable’s IMS structure differ from telco’s?

ML: If you look at TCP/IP [Transmission Control Protocol/Internet Protocol] and why it was so influential, the protocol stack was defined in a very explicit way. It allowed segmentation that was required for internetworking of computers.

Vendors could play in a small segment of that stack. That’s a seven layer stack in TCP/IP — the application space, the session management space, the Internet-working space and everything that you did would work with what everyone else did because everybody built to the interfaces. Vendors could play and concentrate on one area of the stack.

IMS takes a similar approach to multimedia rich network signally. They have defined the stack into three layers.

One is the physical layer. That’s the transport layer whether it’s a wired telephone network or a wireless network or an OCM-192 optical network.

So long as they build to the next stack up, which is the services stack, where all the signaling servers, home location registries, application servers, media switches and gateways live, [things are fine].

And then on top of that, there is the application stack — push to talk, voice communications, or video or SMS or picture messaging, whatever you want to do, as long as you build to the interface that is either above or below you, your products works with everybody else’s product.

It allows for a lot of robust investment and creative thinking, and if it is as successful as TCP/IP it gives vendors a very, very broad marketplace to sell their products into and stimulates research and development, which makes things go faster. Then you can get interesting new applications and interesting new services, interesting new switching solutions that come out of a three-man garage shop. That’s the real power of IMS.

MCN: Where are you with [Data Over Cable Service Interface Specification] 3.0 and increasing speeds on the high-speed side? Any tests next year?

ML: There really aren’t going to be any 3.0 products available in ’06. As it stands, we’ve got a few places where we are doing 15-megabit service on DOCSIS 1.1 It’s working great. If we need to go with something that is greater than say a 30-megabit services in ’06, there are some proprietary solutions we could deploy surgically if we had to.

DOCSIS 3.0 is a pretty exciting opportunity. It really does play into all of our spectrum management plans. We’re going to want to be able to respond to customer demand for a really high, high megabit service. So the ability to bond 6-megahertz channels is the core feature that 3.0 gives you. The idea that we could bond four or more channels together and offer a 100-megabit service is a reality. That’s something you’ll probably see us doing within the next three years.

MCN: Anything new with your network, a la Comcast Corp.’s deals with Level 3 Communications, Cisco Systems Inc. and NortelNetworks Inc.?

ML: You divide that into four main parts. The access network, that piece that is DOCSIS between the [cable modem termination system] and the hub and the hub to the home.

Then there is the metropolitan piece: the Ethernets, the optical networks where we are running gigabit Ethernet to connect all those hubs.

Then there is the regional piece.

You combine the metropolitan piece and the regional piece and that’s your transport. That’s how do I move all those bits around on the networks that I own. And then there is the transit piece: how do I carry that stuff to the public Internet.

We do that the same way we do everything else. We’ve got a five-year plan. We look at how demand is growing and how our customer base is growing and we plan that stuff out. With that information, we can then drive capital investment. The cost per bit is going way, way down. As demand is tracking up the cost of the infrastructure is tracking down.

On the transit piece, we work mostly with Level 3 and an America Online [Inc.] company. You’ll probably see us and AOL working more closely together on how we buy all that transit. As a combined entity, we spend quite a bit of money there.

MCN: You’re always so calm about threats or potential network challenges like video-on-demand usage or the all IP platform or what you might have to do your plant. It’s hard to scare you about bandwidth issues.

ML: It’s just not scary. It’s partly the beauty of TCP/IP and partly the beauty of HFC. HFC architecture is a highly segmentable architecture. I can grow that network in very small fine resolution chunks in response to customer demand. I can make surgical investments in my core infrastructure that keeps me ahead of the game. And it’s a very well-known art. As long as you are paying attention, and you are monitoring the growth trends and you are monitoring the competition, you can anticipate what the expenses are going to be. And if I can anticipate my expenses, then I can drive my vendors to make the right kind of investment and manage my costs. And then the actual blocking and tackling of building this stuff out, and growing it as we go, this is what we do.

MCN: Competitors. The usual list is direct-broadcast satellite and telcos. Is that list getting widened at all, by wireless, consumer devices, by a Google Inc. or Yahoo Inc.?

ML: It’s still pretty much the same list. I compete with network operators and access providers. More and more, we are going to be competing in the application space. Google, Yahoo, [Microsoft Corp.’s] MSN, eBay [Inc.] figured out how to build applications that all they need to do from an infrastructure perspective is to provide a big fat pipe to a public Internet point of presence. They just have application management costs.

We’re working closely with a number of these companies. There are lots of opportunities. It’s still the truth, nobody on the planet has the residential pipe that I have.

MCN: There is a view that with that broadband pipe, people could circumvent your video service. You don’t control what goes over that pipe, like you do on the television side. If movies go directly over a broadband pipe, you don’t share in that revenue. And you’ve got the dumb pipe connected to all those Internet sites out there.

ML: I think that is partially true. I think that a “best-efforts network” [with VOIP applications or services] is something that competes with our video network and our telephone service. If you look at that, there’s still always going to be the need for guaranteed throughput. If you really want a high quality experience, you can’t rely on a best-efforts network.

As that distribution methodology captures more and more the consumer’s imagination, and they start consuming more and more of that, the high-quality real-time experience, you have come to the guy with the fat pipe at the end of the line. To get that nice movie, you have to download it, and it takes quite awhile. And if you started talking about high-def, you have a whole bunch of bits.

 

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