Megadeal extends cable footprint
The $10.8-billion acquisition of Continental Cablevision by the US West Media Group last February begins both a nine-month network management and integration countdown that will eventually lead to operations and engineering under one operating subsidiary--Continental Cablevision--and a commitment to hybrid fiber/coaxial-cable (HFC) network architecture that takes fiber to 500-home pockets for cable-TV service.
However, some differences are expected in how the two organizations use fiber. For example, Continental uses a redundant fiber-ring topology, while US West is currently building a coaxial-cable tree-and-branch type of architecture. Whether these differences need to be resolved remains to be addressed during upcoming months as the merger accord becomes final.
Nevertheless, it is clear that Continental will take the lead in the merged company`s network design strategy. According to Steve Lang, director of communications for US West Multimedia, "US West domestic cable properties will be managed by Continental Cablevision."
This suggests that David Fellows, senior vice president of engineering at Continental Cablevision, will be responsible for setting technical specifications for all the company`s systems. Fellows serves as the design architect for Continental`s HFC network.
The original design was pioneered by Cox Cable Communications. Basically a ring-ring-bus design, the network runs active fiber strands to between 1000 and 2000 home pockets. These pockets are then split into nodes serving 500 homes, with about four fibers serving the area (see figure). Fellows` architecture philosophy at Continental has focused on what service sets the company plans to deliver to the residential market and the typical reliability requirements of those services. Regional engineers then create the actual network design and review it with Fellows (see Lightwave, November 1995, page 1).
At present, Continental has 4.2 million subscribers and US West Media Group`s Media One cable-TV subsidiary in Atlanta has nearly 500,000 subscribers. On word of the deal, Time Warner Chief Executive Gerald Levin said, "The addition of Amos Hostetter`s Continental Cablevision systems to the cable footprint of Time Warner and US West confirms cable`s broadband pipeline as the primary delivery system for voice, data and video.
"The hybrid fiber/coaxial-cable architecture of cable systems gives them a distinct advantage in delivering data through high-speed cable modems, telephony and interactive television. It also reaffirms the value of well-clustered cable systems," Levin added.
Clustering played a key factor when the deal was sealed for about 11.1 times cash flow (factoring out to about $1.6 billion in international holdings), or $2100 per subscriber. The important issue concerning Continental`s cable holdings is that they are not only clustered, but in some cases they are also contiguous with Time Warner cable systems.
In fact, US West mentioned a combined cable footprint that covers nearly 16 million households. Continental`s upgrade initiative was designed to complete a telephony-capable network based on an HFC architecture. When the merger closes nine months from now, expectations are that Continental will have passed close to 40% of its customer base with an HFC architecture.
In short, the company is upgrading 14,300 miles of fiber-optic and coaxial cables with call-switching systems and home wiring. To make it telephony-capable, the next step will be to install the electronics at the residential end. The US West merger appears timely for Continental because the company did not have a telephony partner once it bowed out of the Sprint alliance. That partnership void is particularly crucial in California, where Continental plans to invest more than $700 million to upgrade its networks, and telephony services play a significant part of the payback equation.
Says Lang of US West Multimedia, "The basic plan for the US West Media Group was to upgrade its cable properties to HFC architecture, and that`s not going to change." He goes on to say, however, that "the difference now is that US West has bought the skill sets and technical expertise at Continental to manage and grow the entertainment distribution side of the company`s business." US West`s Media One Group is currently upgrading Atlanta to provide better signal, high-speed Internet access and more channels.
According to Lang, the US West Media Group believes the upgrade to HFC allows the company to provide services more cost-effectively and on an incremental basis. "HFC upgrades can be justified based on the cable-TV revenues alone, and there is an additional upside from telephony, high-speed Internet access, and eventually, interactive TV," he says. US West Media Group estimates that it costs $200 to $300 per home to upgrade a home that has already been passed with a coaxial-cable infrastructure.
Assessing the impact of the deal, Peter Krasilovsky, senior analyst with Arlen Communications in Bethesda, MD, says that "Continental provides US West with, for the most part, upscale markets that seek the types of interactive services that have been conjectured over the past few years."
He also notes that he would be surprised if the merged company could in fact be consistent in architecture across all its network areas, however. "That would be quite a mission," he says.
Krasilovsky emphasizes that US West has made it clear that it sees all the cable markets it hopes to enter not only as video providers but also as telephony providers. "The only question mark is how successful the company will be in delivering data, such as Internet-based services," he says.
In Krasilovsky`s view, Arlen Communications does not see coaxial-cable plant as being a great provider of data delivery right now, and nobody really knows how strong Internet delivery will be in the cable-TV systems market. Krasilovsky says that buying cabling plant that is not integrated with telephony systems "seems like the only way to go right now."
Business as usual
The basic design of MediaOne`s network consists of a Synchronous Optical Network backbone and a 750-megahert¥HFC distribution scheme. The company uses 1550-nanometer lasers in the supertrunks and exclusively 1310-nm electronics from the hub.
Gary Donaldson, director of engineering for MediaOne (formerly Southern Multimedia Communications) in Atlanta, says "it is much too premature to discuss the eventual impact on the respective networks because discussions have been taking place at the highest levels between Denver and Boston and have not yet filtered down to the engineering and planning levels."
However, Donaldson says that some network and geographical characteristics are already known. For example, many of Continental`s systems located in urban locations, particularly in New England, Ohio and California, fit Continental`s ring-ring-bus architecture. Donaldson suggests, however, that "while there are some heavily built-up areas in Atlanta where the installation of fiber rings for node feeds might be economical, there are also a number of areas outbound from built-up areas [where this architecture] might not be practical."
From the beginning, says Donaldson, MediaOne`s stake is firmly planted in the ground with HFC, and that`s largely predetermined by the fact that there were 12,000 miles of coaxial-cable plant to leverage. In the meantime, a lot of the infrastructure in Atlanta is built, with more than half of the 41 distribution hubs in place, according to Donaldson. The hub interconnect fiber is also about 90% completed, and much of the hub-to-node fiber is placed. In addition, Donaldson says that about 15% of the HFC radio frequency (RF) design is done, and nodes have been turned on.
MediaOne remains on a steep side of the learning curve with HFC networks, and Donaldson says experimentation and mistakes may be made before the company settles on something that it is sure will work. From an architecture standpoint, the impact on the joining of Continental`s properties to MediaOne may not be precisely known, but Donaldson says that reasons exist to take fiber deeper into the serving area.
Taking fiber to 250-node pockets would improve the maintenance of the network because there would be fewer cascades of amplifiers. In addition, the amplifiers could be turned up further without degrading performance. Moreover, the "gremlins that can get you in the RF plant probably will be reduced by an order of magnitude," says Donaldson. Scientific-Atlanta is supplying the network amplifiers and AT&T the fiber. q
Paul Palumbo writes from Seaside, CA.