In a major break with other leading U.S cable TV providers across the United States, Altice USA, the fourth largest U.S. cable TV company, announced plans to switch to a new fiber-to-the-home
Network, appears ready to use proprietary technologies it has developed on its own, and also appears to believe that “energy cost savings” will be substantial enough to allow construction of the FTTH network “within the existing capital budget.”
Any one of those actions--abandoning the hybrid fiber coax platform; using its own proprietary platform; or building a brand new network without boosting its capital budget--would be unusual steps. Taking all three is mind-boggling.
Of the three decisions, it is the clear break with HFC that stands out most starkly. The cable TV industry has insisted for decades that HFC is an extensible platform capable of supporting all future requirements. And the industry has argued for many decades that its platform was, in fact, superior to FTTH, in terms of its business model. In other words, HFC would allow cable to deliver all services, and better services, without the capital expense of starting over with FTTH.
Altice is breaking decisively with HFC, and will be the first major cable TV operator to abandon HFC in favor of FTTH. The strategic implications are enormous. If Altice winds up being correct,
then perhaps HFC does not have the “legs” touted by its backers, even if 10 Gbps is on the cable industry industry HFC roadmap.
If Altice is correct--and DOCSIS and HFC really cannot support future bandwidth requirements--then there is at least a possibility that other cable TV operators will face unexpectedly-high capital investment requirements they are not now modeling, as they would have to build wholly-new networks, not simply upgrade edge and headend gear, as now is the case.
That would have implications for profit margins (lower), capital budgets (higher) and equity prices (probably lower).
Altice has plenty of experience with FTTH networks. Altice France is on track to reach 22 million fiber homes by the end of 2022, and Altice Portugal will reach the milestone of 5.3 million fiber homes passed by the end of 2020.
The five-year deployment schedule will begin in 2017, and the company expects to reach all of its Optimum footprint and most of its Suddenlink footprint during that timeframe, within five years.
Perhaps just as surprising, Altice expects to do so without a material change in its overall capital budget.
Some will be skeptical about one or more of the Altice claims. Some might argue Altice is right, long term, but maybe wrong near term. Comcast, for example, uses HFC for all consumer locations, but spot deploys an overlay fiber-to-home network for customers (business or consumer) who want to buy a symmetrical 2 Gbps internet access service.
In large part, that is a practical choice. Comcast does not immediately have a way to supply symmetrical 2-Gbps service over its HFC network, though it can supply asymmetrical 1-Gbps service over HFC.
The point--it will be argued--is that even if, at some point in the future, FTTH is necessary for consumer customers (no other major cable TV company has said this), HFC will continue to supply everything necessary for the foreseeable future.
The big danger of moving to FTTH, say HFC proponents, is over-investment that does not generate a reasonable financial return, for the intermediate future.
Nor are cable TV executives the only believers in many other ways of supplying bandwidth and internet access to consumer customers. AT&T, for example, seems to be a big believer in fixed wireless, and Verizon thinks fixed wireless will be the first commercial application for 5G networks in the United States.
Google and Facebook likewise are developing multiple new platforms using wireless access (balloons, unmanned aerial vehicles, fixed wireless, Wi-Fi, shared spectrum, possibly others).
Some skeptics undoutedly will question the ability to build the new network without increasing capital budgets; the assumptions about operating cost savings; or the danger of using proprietary platforms.
Still, it is a history-making move.