DOCSIS 3.0: Coming Soon to a Cableco Near You

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I hope broadband competition in the New York City area is the wave of the future. The region, which is densely populated, has three Internet service providers vying for customers. And since Time Warner Cable (s TWC) announced yesterday that it will deploy DOCSIS 3.0 to the city, the area also will soon have competing super-fast broadband offerings from all three providers. Verizon (s VZ) touts its FiOS service there, and Cablevision (s CVC) already offers DOCSIS 3.0 and just launched speeds of 101 Mbps to Long Island residents.

A lot has been written about the merits of Verizon’s fiber to the home vs. AT&T’s (s T) fiber to the node and U-verse services, but we haven’t spent a lot of time on DOCSIS 3.0 deployments. Sure, it will provide ultrafast broadband, such as the 101 Mbps services that Cablevision is offering or the 50 Mbps that Comcast boasts. But for providers, the upgrade makes a tremendous amount of sense for business reasons beyond happy customers — so much so, that 45 percent of the country will have access to D3 rollouts by the end of this year, according to data from research firm Pike & Fisher. (See chart for provider details.)

Given that the average  residential customer doesn’t currently need 50 Mbps down, and likely won’t spend $140 a month to get it, why are cable companies doing it? First off, the rollouts are cheap. Cablevision has said it costs it about $70 per home to deploy DOCSIS 3.0. Tim McElgunn, chief analyst at Pike & Fisher, estimated that it generally costs about $100 per home to deploy, or a few billion to upgrade across a cable company. Verizon is spending $23 billion to deploy FiOS, and general estimates are that it costs about $1,000 per home to deploy.

For a relatively small investment, cable providers get upgraded to a faster service that has benefits such as IPv6 addressing capabilities. They also can offer fiber-like speeds to business customers without spending more money to deploy fiber. Cable providers have seen growth in residential services stay relatively flat, so they’re looking to business access and interactive advertising to grow. D3 doesn’t really affect advertising, but it is an attractive offer to dangle in front of corporate users.

d3chart

Chart courtesy of Pike & Fisher.

24 Comments

Andreas

Nice to read that competition is picking up. But how does the building of fiber work in the US? It sounds like building owners let ISPs build the networks to the home, and give the ISP a monopoly on that cable. Why don’t the building owners build the network and make the cables open to competition. Then you would have an unlimited number of competitors that can offer internet, voip, tv etc.

Tony Casson

With 50+ Mbps of data available, the cable data pipe becomes more than enough to handle all our media needs. Why should we pay the cable company for their channel distribution services, then, when we can get almost all our television services over the web via Hulu, downloaded via iTunes or Amazon, and streamed via Neflix over Tivo or Roku. Mass TV market dwellers can also pull the network watercooler shows, news and sporting events in over the air in HD. I’m glad to see cable stepping up to the plate and striving to win the bandwidth game. It will be interesting to see how they handle the effect the extra bandwidth has on subscription to their channel distribution services. I can envision their response becoming very anti-competitive. Nevertheless, I think this is the right play for them. They have the most to lose if the telcos with fiber to the DSLAM, FTTH and FTTN beats them to the punch.

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