Content Ecosystem Archive

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SES Prepares to Jumpstart UHD With Dedicated Channel Service

Steven Corda, VP, business development, SES

Steven Corda, VP, business development, SES

Satellite-to-Broadband Wholesale Initiative Aims to Ease MVPDs’ Entry into 4K

By Fred Dawson

June 22, 2015 – SES is in the advanced stages of testing the viability of a 4K UHD wholesale distribution service aimed at jumpstarting the flow of 4K UHD TV programming and opening new opportunities in satellite support for multiscreen broadband video.

The service would allow MVPDs to bypass the Internet with IP-streamed simulcasts of live sports and other events along with a full programming channel’s worth of content shot in 4K, including TV episodes and possibly some motion pictures. It remains to be seen what the adoption rate will be among distributors, but, judging from a live demo and early support from smart TV manufacturers, the service has the infrastructure in place to make it work.

“We’ve designed the service to be distributed to consumers over dedicated bandwidth via DOCSIS 3.0 cable modems,” says Steven Corda, vice president of business development for North America at SES. In other words, this is not a best-effort Internet feed but one delivered over a fully managed end-to-end satellite/terrestrial distribution infrastructure that opens the door to shifting the long-standing pay TV distribution model to the broadband space.

The content will be encoded using HEVC (High Efficiency Video Coding) compression and formatted for satellite uplink either at SES fixed facilities or directly from the field using a portable UHD-capable encoding, encrypting and uplink unit to enable live broadcast of UHD-captured events. SES will take care of content protection utilizing encryption tied to DRM technology.

The company will take the lead with, it hopes, growing industry support in lining up TV programmers who, at this early stage, might want to share certain shows shot in 4K with 4K set owners as a way to build demand for eventual full-channel UHD offerings. “We negotiate with programmers for transport rights to put their UHD content on our system,” Corda says. “Operators have to negotiate rights with those suppliers to distribute the content in their markets.”

So far, industry response has been encouraging, he reports. “We came up with the concept a year ago,” he says. “We held focus groups with cable operators to gauge consumer response to what we’re offering and determined there’s high interest.”

SES then went to the studios and sports networks to draw their engagement. “We intend to have a demo channel running this summer,” Corda says. “If the pilot trials go as planned, we hope to get up and running next year.”

At INTX in Chicago last month SES ran a UHD demo of some sample content broadcast via the SES-3 channel that will be used this summer to enable cable operators to prepare and test their networks for UHD trials. Along with some canned UHD clips, the demo included an uplinked feed of live content captured outside the McCormack Center.

The display used with the demo was Samsung’s 8550 4K TV. So far SES has agreements with both Samsung and Sony for displaying its 4K UHD service on various models, Corda says. “We’ll come in through apps developed for their app stores,” he says.

SES also has three UHD demo channels operating over different satellite positions serving most of Europe. In June the company partnered with Canal + Group to test broadcast the final of the Champions League soccer match in UHD. In May at the SES Industry Days conference in Luxembourg the company delivered the first DVB transmission of High Dynamic Range (HDR) UHD TV using Samsung’s new HDR display technology.

The first announced commercial UHD broadcast operation using SES facilities, slated to get underway in Europe in September, is a free-to-air channel to be offered by the German shopping service pearl.tv. “We will also be producing and broadcasting pearl.tv in native Ultra HD from a brand new studio,” says Michael Sichler, managing director of Enstyle GmbH, pearl.tv’s parent company.

In the U.S. the initial commercial service will consist of a channel featuring a mix of pre-recorded TV programs shot in 4K from different programmers plus occasional live events. “We may also go to the studios for placement of content shot in 4K that doesn’t have any other distribution path,” Corda adds. Where live content is concerned, “We envision programming networks will use our service to simulcast events in 4K,” he says.

“It will be two or three years before programmers have a full slate of 4K programming to deliver over their own channels,” he notes. “In the meantime we give them the opportunity to gain exposure for any content they have available in 4K.”

In the demo of the live uplinked feed at INTX the SES mobile unit was taking in video from cameras at 12 gigabits per second and compressing it with HEVC encoding for delivery at 20 megabits per second. “We see15-20 mbps as the starting point for UHD delivered at 60 frames per second using 10-bit coding,” Corda says. HDR will be brought into the initiative once a clearer sense of direction on formats emerges from the various standards-setting processes now underway.

By providing MVPDs a way to deliver a dedicated channel of 4K UHD programming over broadband directly to UHD TV sets, SES is opening a path to enhancing service value without operators’ having to implement HEVC in their headends and set-top boxes, Corda says. SES will provide UI support to ensure operators are able to promote whatever content they’ve licensed from the service within their own navigational environment. “We’ll change metadata on the fly as the programming changes,” he says.

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Big Bandwidth Efficiency Gains Are on Tap for UHD Migration

Kumar Subramanian, CEO, MediaMelon

Kumar Subramanian, CEO, MediaMelon

Distributors Will Have Multiple Options for Cutting Bitrates by Up to 50 Percent or More

By Fred Dawson

May 26, 2015 – The emergence of three radically different approaches to cutting video bandwidth consumption promises much-needed relief beyond the benefits of High Efficiency Video Coding (HEVC) as Ultra HD begins to pressure already-saturated access networks.

All three technologies have a long way to go in their efforts to build mass-market support.  But they have gone well past the vaporware stage with eye-popping demonstrations of their capabilities that have been galvanizing attention across the content distribution ecosystem. Adding to the bandwidth-savings potential is the fact that the solutions are not mutually exclusive, which means in theory, at least, any combination of the three could be employed to deliver even greater benefits.

Only one of the new solutions, the encoding technology known as Perseus commercialized by V-Nova, Ltd. is positioned as an alternative to HEVC or H. 265, which already has gained strong traction in chipsets manufactured for smart TVs, set-tops and other devices as the successor to the ISO Moving Picture Expert Group’s H.264. While supplanting H.265 on a large scale would be a tall order, V-Nova’s gains, touted as 2x to 3x over H.265, are already being employed in specialized usage situations by a growing list of adherents.

Like Perseus, the other two developments, including a range of video processing solutions from Faroudja Enterprises Inc. and improvements in ABR (adaptive bitrate) streaming efficiency from software provider MediaMelon, Ltd., are barely out of the starting gate. But, despite lower bandwidth efficiency gains than those claimed by V-Nova, their solutions may have a faster track to wide-scale adoption because they work with whatever encoding systems distributors choose to deploy

MediaMelon

MediaMelon’s approach is uniquely different from the focus on video processing that characterizes both V-Nova and Faroudja. The company has developed software that manages bitrate selection in the ABR streaming process to deliver an average 35 percent improvement in bandwidth efficiency, says MediaMelon CEO Kumar Subramanian.

Essentially, the MediaMelon QBR (Quality Bit Rate) technology turns ABR into an intelligent means of optimizing bitrates whether for purposes of bandwidth efficiency or to sustain quality against impairments caused when ABR drops the bitrate below the level required for optimum quality performance. The QBR technology, operating in the network core and in client devices, does this by means of rapid scene analysis, content characterization, perceptual quality mapping and advanced buffer management techniques, Subramanian explains.

“We figured out a way to improve streaming efficiency using ABR a better way,” he says. “It works with all the ABR formats – HLS, Smooth, MPEG-DASH, HDS. We’re pushing more bits when it matters and reducing the bitrate when the rate chosen by the ABR system is more than needed.”

In a demo at the recent INTX show in Chicago, MediaMelon showed side-by-side viewings of content streamed at 9 Mbps by ABR without QBR and at 4 Mbps with QBR. There were no discernable differences between the two streams. The demo also showed both streams operating at 4 Mbps where the impairments were quite noticeable on the ABR-only stream while no imperfections were visible on the QBR-enhanced stream.

During a viewing session, ABR client software chooses the transmission rate for each content segment from a set of bitrates at which each segment has been encoded for a given type of device. The choice of transmission bitrate is based on how much bandwidth is available to the device at that moment, which can result in wasting bits on still and low-motion video scenes and poor quality on complex scenes demanding more bits.

MediaMelon’s solutions, available as managed services or licensed software, work in live and on-demand streaming environments to bring intelligence to the ABR process by ensuring that the bitrate chosen to transmit each segment from the ABR streamer is based on which of the multiple bitrates encoded for each segment is best suited to delivering that segment at the desired quality level. On the bandwidth side, the company says the range of bitrate savings resulting from the process might be as low as 30 percent or as high as 45 percent, depending on bandwidth conditions, but, as Subramanian suggested, it averages out to 35 percent over time. From a quality standpoint, the company says the platform typically increases perceptual video quality by over 200 percent by allocating higher bitrates when available to video scenes where a lower bitrate would have caused artifacts.

At the transcoding end, operating either as an integrated component with the transcoder or as an independent component in the ingest workflow, the MediaMelon software uses sophisticated real-time frame-by-frame analysis of the content to determine what the optimal bitrate is for a given level of quality on each ABR segment. This doesn’t impact the rates at which the content is transcoded for streaming over ABR.

Instead, the optimal bitrate option based on the QBR analysis of each segment is conveyed to QBR client software that has been integrated with distributors’ media players to ensure that the ABR client software asks the streamer to use the preferred bitrate for that segment of content. MediaMelon says the QBR Player is available on iOS, Android and popular web video players such as DASHjs and Exoplayer. It’s also available as an SDK that can be easily integrated with smart TVs, custom player and CE devices, the company says.

MediaMelon, which has offices in San Francisco, London and India, isn’t ready to announce customers, Subramanian says, but adds, “We’re talking to everybody who’s engaged in streaming video, including content owners and service providers.” Third party outsourcers like Deluxe OnDemand who process video for streaming are also targets, he says, noting QBR has already been integrated into the Deluxe workflow.

Asked whether Deluxe is seeing the results claimed by Subramanian, a Deluxe OnDemand official says, “It’s every bit as good as they say it is.” Speaking on background, she adds “We see it as having a big impact on our customers’ ability to deliver UHD 4K content.”

V-Nova

As the video services ecosystem takes the measure of MediaMelon, the emergence of V-Nova’s Perseus has begun to shake up perceptions about the path ahead for encoding technology. The company mustered a phalanx of analysts and market players to vouch for its claims as part of an impressive April rollout that highlighted some customer wins, one of which, with Hitachi, was used to dazzle NAB Show visitors with demos of the bitrate-cutting prowess of the platform.

“Perseus has the potential to revolutionize video,” says Philipp Nattermann, a director at McKinsey & Company, in a statement included with collateral issued by V-Nova at NAB. “Its applicability is vast, both within broadcasting, as well as other industries including aerospace, defense, security, video conferencing, medical imaging and telematics, to name a few.”

The compilation of endorsements released at NAB included glowing comments from new customers such as Sky Italia, now preparing to implement Perseus commercially with its OTT and, eventually, legacy pay TV services; India’s Tata Sky, which is giving Perseus a hard look; European software supplier Wyplay, which reports it has successfully integrated Perseus to run with its Frog Client middleware on a Tier 1 European MVPD’s existing set-top platform, and Hitachi, which demonstrated a deployment-ready UHD ecosystem, combining Perseus with the latest Hitachi Kokusai 4K camera and Hitachi Data Systems servers to deliver UHD movies at 6-7 Mbps and sports programming at 10-13 Mbps, representing about a 50 percent improvement over current HEVC performance levels.

The European Broadcasting Union has chimed in with a vote of confidence for Perseus as well. “EBU has always played a key role in identifying innovations that are beneficial to our associates, and we have followed the development of Perseus products since its early stages,” says Puiu Dolea, the EBU’s manager of business continuity and special projects. “The step change in performance offered by Perseus opens many opportunities for new high-impact broadcast services that we are contributing to develop.”

Perhaps even more impressive is the praise Perseus has drawn from chipmaker executives at Intel and Broadcom. “Broadcom supports the Perseus compression standard, which offers an advanced tool to effect improvements in bitrate, quality and latency,” says Rich Nelson, senior vice president of marketing for Broadcom’s Broadband & Connectivity Group. “Combined with Broadcom’s set-top box technology, Perseus compression can help enable more efficient HD transmissions and more widespread Ultra HD content to subscribers around the world.”

Says Christian Morales, Intel corporate vice president and general manager for Europe, Middle East and Africa: “Perseus impresses with exceptional video compression performance on standard server and PC hardware, including real-time Ultra HD decoding or SD video at sub-audio bitrates on mobile devices. I am confident that with such performance Perseus is predestined to unlock great opportunities in multiple industries.”

But skepticism about the ultimate impact Perseus might have abounds, and understandably so in light of the failed attempts of many proprietary systems claiming superiority over the MPEG standards to crack through to comparable levels of mass market scale, including most recently the Google-backed VP9. As Elemental Technologies CMO Keith Wymbs puts it in a statement reported by European online publisher VideoNet,  “In the media and entertainment market, particularly in the pay TV segment, it’s difficult for proprietary solutions vendors to build out an ecosystem that is robust enough to gain widespread traction. As a result, proprietary codecs have never made serious inroads. Microsoft’s VC-1 codec came the closest, but that initiative has waned due to broad acceptance of H.264.”

Elemental is prepared to consider any new codec if there’s sufficient demand from Elemental customers, Wymbs says. “But for technology vendors like us to make this kind of resource commitment, the demand needs to be widespread,” he adds. “For codecs, that typically means it’s being driven by a standard of some sort.”

V-Nova executives seem to be pretty clear-eyed about what they’re up against, but they offer many reasons for their optimism. “We solve problems no other coding technology provider solves,” says V-Nova CEO Guido Meardi. After five years working in stealth mode with a consortium of 20 partners worldwide, the company is well-positioned to make its case, Meardi adds, noting, “We wanted to come out with products, not ideas.”

“Perseus is a software upgrade that works on current infrastructure, including current encoding and decoding hardware, workflows and CDNs,” he says. “Software operates as a plug-in to encoding COTS (commodity off-the-shelf) servers. Multiplexers are untouched.”

Where end-user devices are concerned, citing the Wyplay example, he adds. “For set-top boxes, Perseus can be implemented as an over-the-air upgrade on top of existing chipset libraries. For connected devices, Perseus works as a plug-in to media players.” VisualOn’s newly announced integration of Perseus with its multi-device OnStream MediaPlayer+ client is a case in point, he notes.

V-Nova is also making the case that encoding with Perseus eliminates the need to perform multiple encodes on each asset to support all the bitrates used in ABR streaming for each class of devices. All it takes is one Perseus encode per asset, which is then decoded by whatever codec and to whatever resolution level is supported at the device end. For example, Meardi says, if a device can only decode MPEG-2, that’s what it will do on the Perseus-encoded asset, ignoring everything else.

Everything V-Nova claims could indeed have a revolutionary impact on the marketplace, as McKinsey’s Nattermann suggests. But the company’s limited explanations of how the technology works combined with the absence of testing on a wide scale makes it hard to analyze the validity of its claims.

Still, enough has been revealed to piece together how the technology might achieve the capabilities touted by Meardi. A starting point for development of the technology was to take advantage of today’s massively parallel CPU/GPU processing capabilities, which were not available to developers of the block-based frame-to-frame correlations and pictorial differences between those correlated blocks that the MPEG Motion Vector Prediction process uses to determine where new information needs to be added to the dataflow.

Perseus algorithms do away with block-based correlations to allow multi-core silicon to work simultaneously across the entire image, thereby identifying all correlations and differences between them much more efficiently – with a degree of comprehensiveness that can support completely lossless encoding if users so choose, according to the company. By eliminating the block-based approach, Perseus achieves ever greater efficiencies with higher resolution and higher framerate transmissions, since block-based inefficiencies mount as higher resolution brings more pixels into play for correlation analysis and as fewer changes are registered from frame to frame as framerates increase.

But, apparently, Perseus is sufficiently compatible with the underlying Fourier Transform mode used with MPEG to allow MPEG decoders to translate the information in the Perseus-encoded stream for applying decoding algorithms based on block-oriented Motion Vector Prediction. While V-Nova says 30 patents have been created around the Perseus platform, it also appears the company is utilizing some elements of MPEG technology on which patents have expired, notes Tom Morrod, senior director for consumer electronics at IHS.

“V-Nova’s first claim is that Perseus is entirely novel in process and structure,” Morrod writes in a recent blog. “In reality this means that it doesn’t infringe upon any currently enforceable patents, most notably for existing compression standards such as MPEG-2, H.264, HEVC, VC-1 or JPEG-2000; that Perseus is protected by at least one of V-Nova’s 30 claimed patents; and that there is no example of prior-art (previous patent or implemented example) of the patent before publication of V-Nova’s filings….It could be no coincidence that V-Nova has come out with compression technology as many core video processing patents expire and become license-free.”

As to how Perseus accomplishes the single-encode approach to assets in a multi-format distribution environment, V-Nova officials point to the hierarchical nature of the encoding process where data is allocated progressively to support ever more granular levels of image articulation, which allows each device decoder to identify and process just the data essential to rendering the stream to required levels of quality on that device. “This guarantees rapid, seamless deployment and an extremely high return on investment,” Meardi says.

Faroudja

Operating on a completely different video processing track that requires no changes in encoding techniques, Faroudja keeps coming up with innovative ways to cut bitrates and improve quality. As previously reported,  Faroudja applies pre-encode and post-decode processing functions that are ancillary to existing encoders and device codecs to produce a 35-50 percent reduction in bitrates for live and on-demand content in any given encoding environment with no decrease in quality.

These performance levels were born out in a demo at the NAB Show, where a large TV screen showing a 1080p HD stream running at 7 Mbps over H.264 was paired with one showing the same stream with Faroudja processing applied running at 4 Mbps, with no discernable difference in quality between them. The comparative performance was also demonstrated on tablets and smartphones.

Now Faroudja has added some additional solutions which can be used individually or in various combinations to improve performance with 4K UHD as well as HD content. One solution, for example, performs debanding and deblocking on the encoded stream so that only meaningful distinctions across the whole picture from one frame to the next are processed by the encoder.

Another solution restores bandwidth that would otherwise be consumed by the encoded stream by identifying pictorial elements where compression is needlessly applied to insignificant nuances that aren’t noticeable to viewers. By shifting resources from these elements to elements where improvements have greater impact on the viewer’s perception of picture quality, the Faroudja technique delivers a better picture while reducing total bandwidth consumed at any given bitrate.

“We’ve had a great response from people who have seen these demos,” says Bill Herz, COO and vice president of business development at Faroudja. “We’re now working with potential customers to package our solutions in ways best suited to working with their existing infrastructures.”

The scope and depth of this interest will determine how quickly Faroudja productizes its solutions. At the pre-encode processing end, customers will need to install new equipment or assign existing COTS servers to run the Faroudja algorithms.

At the receive end where post-processor functions are less intensive, the platform can utilize existing hardware with cooperation on firmware upgrades from IC manufacturers. Or, rather than waiting for Faroudja-capable devices to become available, customers could achieve significant bandwidth gains by implementing the post-processing functions on CPU/GPU resources at edge distribution points.

Clearly, none of the technologies discussed here will have an immediate impact on the market’s progress toward delivery of high-value premium content to every type of device. But with a growing need to add 4K UHD resolution and, with it, High Dynamic Range quality of experience enhancements, content distributors have no choice but to move beyond the capabilities of their installed MPEG-2 and -4 infrastructures.

What the most efficient, cost-effective approaches to doing this turn out to be is impossible to say at this point. But it seems inevitable that one or more of these new options will be major factors supplementing or supplanting HEVC in moving the market where it wants to go.

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Confusion over How to Manage UHD/HDR Interplay Intensifies

Sree Kotay, chief software architect & EVP, technology design & development,  Comcast

Sree Kotay, chief software architect & EVP, technology design & development,
Comcast

Waiting for HDR Could Incur Strategic Risks

By Fred Dawson

May 1, 2015 – With ever greater exposure in industry circles, high dynamic range video technology is driving a rapidly building consensus among some service providers that HDR needs to be made the priority over 4K Ultra HD as the transformative force in viewing experience.

One signal as to how thinking is evolving among MVPDs (multichannel video programming distributors) was delivered recently by Sree Kotay, chief software architect and executive vice president for technology design and development at Comcast. Speaking on a panel at a private event hosted by Imagine Communications at the NAB Show in Las Vegas, Kotay voiced concern that subscribers taking Comcast’s new UHD service were not particularly impressed by what they were seeing.

“HDR has a much greater impact on user experience,” Kotay said. “We’re going to be putting much more of our attention on HDR.”

Kotay, who spearheaded development of the Comcast UHD service, expressed the frequently heard view that viewers with UHD sets can’t really see much of a difference at normal viewing distances between content delivered in HD 1080p resolution and content that has been upscaled to the 3,840 x 2,160 pixel resolution of 4K. But, according to people working on the previously announced next steps in Comcast’s UHD service evolution, preparations to expand the service with introduction of a 4K-capable X-1 set-top are still moving forward, which attests to the complications that go into formulating a next-gen TV service strategy at this early stage in UHD development.

“There are now a lot of doubts about going to UHD services without HDR,” said Envivio vice president of products and solutions Boris Felts, during an interview. “People question whether it’s worth the effort just to prove you have UHD service without delivering the benefits of HDR.” Said an executive at another supplier of UHD and HDR processing solutions, speaking on background, “It’s about 50-50 between customers who are going forward with UHD and those who say they want to wait for HDR.”

It’s easy to see why opinions are split. On the one hand, as noted by entertainment technology consultant and former Paramount executive Robert Kisor, “The big improvements [in viewing experience] will be with HDR. The picture stands out whether it’s used with UHD or HD resolution.”

Moreover, Kisor added while speaking at a Verimatrix event at the NAB Show, the impressive HDR experience can be delivered in HD without incurring the bandwidth squeeze imposed by the amount of information that has to be sent with a 4K UHD signal. Given that HDR-capable 4K UHD TV sets are designed to upscale HD 1080p to take advantage of the higher resolution capabilities, the upscaled HDR HD picture will be a stunning improvement over 4K UHD-formatted video that is not enhanced with HDR.

Discussing the relative bandwidth impacts of 4K UHD and HDR during a recent meeting at CableLabs, Daryl Malas, the organization’s principal architect for video applications technologies, told ScreenPlays, “Depending on the type of content, 4K consumes roughly 30 percent more bandwidth than HD on the same encoder. The increase for HDR is in the range of 10 to 15 percent.”

But there’s a downside to holding back on offering UHD services in favor of putting all the eggs in the HDR basket. By all indications, the market has to wait for a new generation of TV sets that can truly deliver on the promise of HDR. If that’s the case, the question becomes whether there’s any advantage from an MVPD perspective to proceeding with development of UHD services ahead of HDR.

A careful weighing of the market trends lines and competitive environment seems to argue for pressing ahead with UHD.

Just how far today’s 4K TV sets are from delivering a satisfying HDR experience was vividly on display at the NAB show. Commercially available or soon-to-be-available 4K sets billed as having luminance and color ranges sufficient to support HDR actually delivered viewing experiences that fell woefully short of the mark set by prototype displays with much higher luminance and color ranges.

For example, a new 65-inch Vizio display entering the market a little later this year was the centerpiece of the Dolby Vision section in Dolby’s booth at NAB. Dolby Vision has been widely interpreted as a high-end version of HDR pegged to enabling luminance and color dynamics far beyond the current generation of TV sets, in contrast to other HDR solutions that are designed to work at the outer limits of current display capabilities.

But the Vizio model on display at the Dolby booth turned out to be in the latter category with a luminance range of 800 nits (candelas per square meter), the commonly used measure of the difference between the darkest and brightest frames delivered by a given display system. This is well short of the 4,000-nit range Dolby has touted as the contrast limit for its first commercial iteration of Dolby Vision but well beyond the 100-nit luminance the TV industry has adhered to as part of the ITU REC 709 standard set some 20 years ago. The rendering of movie sequences shown on the Vizio set, which used the DCI P3 color range set for motion pictures rather than the full ITU REC 2020 range targeted by Dolby, was impressive but lacked the stunning realism enabled by more advanced sets showing HDR sequences on the show floor.

This was true even though the Vizio display utilized local dimming mechanisms to control LED backlighting in different zones or aggregations of LEDs rather than uniformly controlling backlighting across all LEDs, as is the case with most UHD LED systems currently on retail shelves. As noted by John Couling, senior vice president of Dolby’s e-media business group, the more advanced backlighting technique allows the display to approach the 0 nit level of total blackness, which is critical to expanding the overall dynamic range.

Explaining how an 800-nit display system could be characterized as a showcase for Dolby Vision, Couling said it was a misunderstanding of Dolby’s position to suggest Dolby Vision is strictly a super high luminance alternative to other HDR modes. “We’ve always been looking at bringing this technology to market using available display technology,” he said. “Our goal was to create an approach to HDR that would work in the current environment but also offer a solution that could take advantage of future display systems to deliver an even more compelling picture.”

Dolby is pressing this message in many forums, Couling said, including the newly formed UHD Alliance, which, along with some motion picture studios and premium video distributors, includes many CE manufacturers, some of whom are offering their own HDR technologies. “We don’t think it makes sense for the market to adapt to an HDR platform specifically designed to the limitations of current technology and then have to adapt to another version of HDR to maximize performance on future sets,” he said. “We believe our solution allows you to deliver the best possible picture across a broad range of product styles and displays now and well into the future.”

Dolby’s approach is designed to deliver a basic REC 709 video stream with a metadata overlay that conveys the additional information for generating the enhanced HDR images on compatible display systems. The two-layer technique allows content formatted to these enhanced HDR specifications to be viewed on non-compatible UHD TV sets as well, but it requires use of 12-bit coding, whereas the single-stream HDR techniques, typically topping out at 1,000 nits, use 10-bit coding and therefore consume less bandwidth.

To provide the messaging required to support dynamic ranges extending to 4,000 nits and the rendering of the 68.7 billion colors enabled with 12-bit encoding of the REC 2020 gamut requires a new type of transfer function, which serves to map the grey scale signal strength of the display system to the color gamut and dynamic range of the HDR-optimized content. Dolby, Philips and the new Blu-ray Disc Association UHD standard, slated for release later this year, use the Electro-Optical Transfer Function (EOTF) defined in the Society of Motion Picture and Television Engineer’s 2084 standard, while HDR systems with a 1,000-Nit luminance ceiling can use an enhanced version of the existing gamma function that has long been used with REC 709 displays.

But, when it comes to the quality of experience on the current generation of luminance-limited displays, these nuances don’t mean much. Just as disappointing as the Vizio Dolby Vision demo, in terms of how these displays stack up against high-luminance displays, was the picture delivered by a Samsung UHD LED display attuned to that vendor’s HDR technology and operating at a slightly broader luminance range than the Vizio set.

Like the Vizio demo, the Samsung HDR picture, on display at an encoding vendor’s booth on the NAB Show floor, lacked the real-life quality one expects with HDR. Plus, it introduced “judder” impairments – uneven or jerky video playback that arises from movement of objects, edges or detail from one frame to the next – that weren’t noticeable on the Vizio display,

As explained by a senior engineering executive speaking on background at the encoder’s booth, increases in contrast, sharpness of detail and motion speed introduced by HDR can cause judder, especially with increased screen sizes. “We wanted to show our encoding efficiency with HDR,” the engineer said, “but I’m not sure this display is delivering the message we wanted to convey, through no fault of our own.”

In contrast to these current-display renditions of HDR, prototype displays operating in the 2,000-nit or higher luminance ranges delivered stunning pictures that easily stood out from everything else, even when perceived from well outside the display areas. One dramatic display that far out-shown HDR on any current-generation screens could be seen at Ericsson’s booth, where video clips shot with a Sony FCB-EH4300 HDTV camera appeared on a 2,000-nit display capable of rendering the full REC 2020 color gamut.

Even though the clips were shot by an HDTV camera and no special post-production HDR processing was applied, the display system produced a picture that was vastly superior to any of the HDR-processed video appearing on current-generation UHD displays.  A similarly dazzling display of contrast and color range was on display with a high-luminance system operating in Cannon’s booth.

The message in all this is HDR is not so much about specially produced or post-tweaked content and variations in approaches to HDR technology as it is about a new generation of TV sets that will far out-perform today’s displays. In contrast, 4K UHD has not lived up to its billing, in part, because the real pictorial difference to be achieved with 4K requires use of content shot with 4K cameras. So far, with the exception of some original series offered by Netflix, distributors have relied on upscale processing of TV programs shot in HD and films predating use of 4K cameras.

“People are a bit down with 4K because they’re not showing its full potential,” noted Jean-Pierre  Henot, CTO of Envivio. “When you use the right cameras, 4K pictures are sharper, look much better.” In any event, Henot added in an interview, “For those who are contemplating extending 4K to include HDR, that’s something we can deliver. It would be a great step forward to make HDR part of the user experience.”

But, as Bob Kisor pointed out, while there are a handful of TV models that can support one or another of the various HDR formats competing for market traction, “it will be sometime next year before things settle out, at the earliest.” Having a Blu-ray UHD standard in effect by year’s end may help, he added, but, when it comes to implementing HDR support in new displays and determining which type of transfer function should be implemented on chipsets, there’s a lot to be sorted through. “Metadata processing is a big issue,” he said, in reference to how the transfer function works.

Meanwhile, 4K UHD sets continue to build market penetration. “More than 50 percent of the TV sets at 40 inches and above sold at retail are 4K sets,” noted Elemental Technologies CMO Keith Wymbs, another speaker at the Verimatrix conference. Last year, he noted, orders for 4K-level compression systems sold by Elemental “approached ten percent of our business. This year it’s much more. We’re on course to triple or quadruple that share.”

That’s a clear signal from a leading supplier of compression systems that 4K UHD services will soon have a much greater presence in the market than has been the case, raising the risk for those who wait for HDR to take hold. By this time next year, Wymbs said, “Despite the ambiguity on UHD, there will be multiple channels of UHD service available in the U.S.”

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Coupling HDR with UHD Sets Parameters for Next-Gen Pay TV

Scott Mirer, VP, device partner ecosystem , Netflix

Scott Mirer, VP, device partner ecosystem , Netflix

Progress in Standards-Setting Process Clarifies Roadmap for MVPDs


By Fred Dawson

March 30, 2015 – Notwithstanding the disruptive intrusion of high dynamic range (HDR) technology into distributors’ preparations for Ultra HD services, the next-generation TV picture is starting to gain some much-needed coherency, thanks to progress in standards development on a number of fronts.

Two key developments in this vein are finalization of UHD standards by the Blu-ray Disc Association and release of an updated set of recommendations for protecting high-value UHD content from Motion Picture Laboratories (MovieLabs), the research and development joint venture founded by leading Hollywood studios. Adding to the momentum is the UHD Alliance, a consortium announced at the 2015 Consumer Electronics Show that brings together several key ecosystem players, including DirecTV, Dolby, LG Electronics, Netflix, Panasonic, Sharp, Sony Visual Products, Technicolor, Disney, Fox and Warner Bros.

HDR, which combines greater luminosity, deeper contrast and a broader color gamut to dramatically enhance the TV viewing experience, has added another set of elements to the Rubric’s Cube of issues that must be resolved by MVPDs (multichannel video programming distributors) as they evaluate how best to implement UHD services. In fact, HDR, which isn’t dependent on 4K-level resolution, offers such a powerful improvement in picture quality, many experts believe HDR should be used to enhance HD as well as UHD programming.

Thomas Wrede, vice president of reception systems at satellite distributor SES, echoed the point and went a step farther at his company’s UHD conference in London last month. “I think that this introduction is too big a topic to be just linked to Ultra HD,” Wrede said, according to press accounts. “So maybe we need to decouple the launch of Ultra HD, initially at least, from HDR, also because HDR is very relevant for HD as well.”

But it’s the impact on UHD that is the priority in industry-wide efforts to exploit the benefits of HDR. Some cable operators, for example, rather than decoupling HDR and UHD, are wondering whether they should shift focus from just getting UHD off the ground to making sure they can leverage HDR to bring a truly differentiated viewing experience to subscribers.

“We’re seeing a split developing among our customers between those who want to focus on UHD and those who believe the better approach is to figure out how to get HDR into their UHD services,” says an executive whose firm provides support for next-gen MVPD services. Speaking on background, he adds, “So we’re making sure we have both those bases covered.”

New Content Momentum

There’s a lot to cover when it comes to setting all the formatting, encoding and other workflow parameters for distributing HDR-enhanced UHD content. But MVPDs must be prepared, given the momentum among content owners and manufacturers toward resolving key issues that will contribute to making HDR UHD content available, possibly by year’s end and certainly at a rapidly escalating pace in 2016.

In a recent interview with consultant Benjamin Schwartz posted on the CTOi Consulting website, Thierry Fautier, vice president of video strategy for Harmonic Inc., stressed the challenges distributors face in arriving at an end-to-end template for delivering UHD services. But, he added, there’s no getting around the fact that consumers will have access to HDR UHD content.

“[T]he technologies are being set up and should be ready in 2016 to make live large-scale interoperability testing during the Rio Olympics and also have the first services to OTT or on Blu-ray Disc that supports the HDR and WCG (Wide Color Gamut),” Fautier said.

Netflix, for example, has publicly committed to begin streaming HDR-caliber content this year, starting with its Marco Polo original series. Netflix has been deeply involved with Dolby as that firm has developed backing for its high-end HDR technology known as Dolby Vision, but Netflix executives have indicated the OTT distributor will also be able to support HDR UHD in formats more suited to early rollout, now targeted for at least nine other series besides Marco Polo.

Speaking on an HDR panel at CES, Scott Mirer, who oversees the device partner ecosystem at Netflix, underscored the advantage OTT providers have over traditional distributors. “HDR is something that can move at Internet speed and not the speed of typical TV standards,” Mirer said. “I don’t think there is any holding this back.”

Things are moving rapidly on the studio front as well, said JoDee Freck, senior vice president for mastering and technical services at Lionsgate Entertainment. Freck predicted studios will bring HDR into the re-mastering process as they prepare their high-end catalogs for UHD.

And there’s great interest in being able to bring HDR into the initial creative process, Freck added. Noting responses from directors and cinematographers to viewings of HDR content, she said, “They are all excited. They want dailies on site to see what they’re shooting so, down the line, their vision will be easier to attain in different color spaces, as well as the blacks.”

Warner Bros. has already formatted three of its movies, Into the Storm, Edge of Tomorrow and The Lego Movie, for viewing onDolby Vision displays with more on the way. Twentieth Century Fox has announced an exclusive deal to make some of its movies available for viewing on displays using Samsung’s Open HDR. The studio showed clips of Life of Pi and Exodus: Gods and Kings in a joint demo with Samsung at CES.

Perhaps the biggest early driver to availability of content will be a new generation of

UHD Blu-ray players, which the Blu-ray Disc Association has announced will be in stores by the 2015 holiday season. With agreement on Blu-ray UHD standards, which include specifications for HDR, and the firming up of MovieLabs’ specs for protecting newly released movies, owners of UHD TV sets can look forward to having a better viewing experience then they’ve had so far with Blu-ray HD content, which most UHD sets automatically upscale to higher resolution, and with the trickle of UHD content now available from a handful of OTT and MVPD suppliers.

Buyers of UHD TV sets equipped to support one of the HDR formats will be able to experience the full impact of HDR with any Blu-ray UHD content that has been formatted for HDR. Owners of UHD sets without HDR capabilities who buy the new Blu-ray players will get the full 4K resolution benefits that come with having access to such content.

The Standardization Impact

The availability of UHD Blu-ray players and content formatted to the new standard should help set a benchmark for consumer expectations, which MVPDs can target as they work out the encoding bitrates and bandwidth allocations they’ll need to deliver a competitive next-gen TV service. Similarly, with MovieLabs’ latest release, operators now have a clearer idea of what the protection requirements will be for high-value motion picture content.

MovieLabs, whose founding members are Disney, Paramount, Twentieth Century Fox, Sony Pictures, Universal and Warner Bros., has updated the content protection recommendations it issued in 2013 without major changes. Based on “extensive interactions with industry partners and organizations that are working to adopt requirements in the Enhanced Content Protection Specification,” MovieLabs said it was publishing version 1.1 of the specs “primarily to clarify the intent of the original requirements.” Accordingly, content protection vendors are now in the market with forensic watermarking systems which distributors can deploy with assurance this hurdle to obtaining licensing rights to recently released movies has been cleared.

Many other UHD standardization issues are underway around the world, all of which factor HDR into the equation. These include the ITU’s pursuit of a global UHD standard; the U.S. broadcast industry’s development of ATSC (Advanced Television Systems Committee) 3.0; Europe’s enhancement of the DVB (Digital Video Broadcasting) standard for over-the-air distribution of UHD content; development of HDR production standards by SMPTE (the Society of Motion Picture and Television Engineers); work on a new HDR syntax for the encoding standards developed by the ISO’s Moving Picture Experts Group (MPEG); the end-to-end UHD agenda of the Harmonic-led Ultra HD Forum, and the efforts of the new UHD Alliance.

The Two-Track Approach to HDR

Amid all these efforts HDR has taken on a more practical dimension for consideration as a near-term enhancement to UHD, in contrast to how HDR was initially positioned by proponents like Dolby and Philips. For example, MovieLabs’ 2013 Specifications for Next-Generation Video established HDR contrast and color ranges in line with high-end approaches that set a bar too high for current LED (light-emitting diode) LCD (liquid crystal display) technology to meet. Since then, as evidenced at CES 2015, another tier of HDR proposals has emerged with broad support for parameters in line with what’s doable without waiting for a new generation of chipsets and displays.

At CES, most of the major brands had HDR-enabled UHD sets on display touting labels such as Wide Color LED from LG Electronics, Dynamic Range Remaster from Panasonic, X-tended Dynamic Range from Sony and SUHD from Samsung. These systems typically support a dynamic contrast range from close to absolute black to about 1,000 candela per square meter or “nits,” which is to say, the equivalence of the luminosity generated by 1,000 candles in a space roughly equal to a large TV screen.

This compares to the current standardized contrast range of just100 nits, which reflects the limitations of the cathode ray tubes that prevailed when that standard, known as ITU REC 709, was set 20 years ago. But 1,000 nits is far below the peak 4,000-nit luminance Dolby has set for the first phase of Dolby Vision, which was on display at CES via prototype systems from Toshiba, Hisense, Philips and Vizio. Ultimately, Dolby wants the Dolby Vision dynamic range to go all the way to 10,000 nits, which is the luminance peak set by the MovieLabs specifications and reflects what Dolby found in focus group studies to be about the limit of what viewers are comfortable with.

But even at the lower luminance peak, Dolby Vision requires a new type of display system that uses individually modulated LED semiconductors, which can be switched across multiple steps of luminance from 0 nits to the chosen peak level of brightness. In contrast, the current generation of LCD displays, particularly those with better local back-lit contrast controls, can be repurposed with firmware upgrades of current-generation SoCs at the factory to support HDR platforms operating in the 1,000-nit range.

One thing providing a big boost to the ability of LED LCD’s to support high contrast ratios is a technology known as “quantum dots,” which has been widely embraced by manufacturers as an alternative to much costlier OLED (Organic LED) displays. Rather than relying on the usual filtering process to generate multiple colors from LED backlit displays, which wastes a lot of light energy, manufacturers employ semiconductor nanocrystal technology – the quantum dots – to emit light at very specific wavelengths as they are stimulated from unfiltered blue-light LEDs. With its adoption of the high-contrast quantum dot technology, Samsung last year went so far as to say it was abandoning production of OLEDs.

Besides enhanced contrast range, the other big point of debate in HDR standardization is how far the color gamut should be extended beyond the 16.78 million colors supported by REC 709. The ITU’s REC 2020, used in the new Blu-ray UHD standard and the MovieLabs specifications, encompasses 1.07 billion colors with 10-bit encoding and 68.7 billion colors with 12-bit encoding.

But many proponents believe a more reasonable target to shoot for is the color gamut devised by SMPTE several years ago with the DCI P3 standard, which is the color range that cinema projectors are pegged to and which, therefore, is the color range used in the filmmaking postproduction process. With 10-bit encoding DCI P3 encompasses a range of about 750 billion colors.

Fortunately, by virtue of the overlay-approach Dolby and Philips have taken in conveying HDR parameters to display systems, it’s possible to incorporate the higher and lower dynamic ranges and their attendant color gamuts within an all-encompassing set of standards. These high-end systems deliver a basic REC 709 video stream with a metadata overlay that conveys the additional information for generating the enhanced HDR images on compatible display systems. The two-layer technique allows content formatted to these enhanced HDR specifications to be viewed on non-compatible UHD TV sets as well.

The Blu-ray Disc Association has taken the high-end/low-end HDR approach in setting its new UHD specifications. According to press reports, the new BDA specs, to be released later this year, will support an open HDR standard using 10-bit HEVC encoding and a new transfer function developed by SMPTE known as SMPTE 2084 while making provisions for Dolby Vision and the Philips plan as enhancement options that can be layered onto the basic platform using 12-bit encoding.

The Transfer Function Hurdle

The UHD Alliance appears on track to follow this course, where, at the lower tier, a single open HDR standard will be chosen setting parameters for a “premium” HDR option. In fact, the impetus behind the formation of the alliance was Samsung, which has made its version of HDR license free.

But there may be a significant difference between the approaches taken by the BDA and the UHD Alliance with regard to transfer functions, which have to do with mapping the grey scale signal strength of the display system to the color gamut and dynamic range of the postproduction master. Presently two approaches are under consideration: an enhancement to the traditional gamma function, also known as the Opto-Electric Transfer Function (OETF), used with REC 709 video or the aforementioned SMPTE 2084, also known as Electro-Optical Transfer Function (EOTF), which is designed to support operations in the REC 2020 domain at the highest dynamic ranges under consideration for HDR.

While enhanced OETF is meant to support HDR systems operating in the 1,000-nit range, SMPTE 2084 greatly adds to the flexibility of those systems as well as higher-range systems to support optimal HDR parameters. At the same time, SMPTE 2084, also embraced by MovieLabs, will require new cameras that can support the necessary changes in how light is encoded, which will add costs.

Unlike the Blu-ray UHD standard, there may be a dividing line in whatever emerges from the UHD Alliance between a baseline and a “premium” version of HDR based on the levels of HDR performance that can rely on the enhanced gamma function versus performance levels that require use of SMPTE 2084. This would greatly assist distributors who want to get rolling with HDR-enhanced UHD sooner than later by ensuring bitrates can be mapped to the baseline HDR requirements without having to accommodate the requirements of SMPTE 2084.

There’s no getting around the fact that the emergence of HDR as a near-term influence on consumer expectations complicates MVPDs’ preparations for UHD services. But by paying close attention to ongoing developments in the standards-setting processes they at least should be able to incorporate HDR into their UHD planning with some degree of assurance as to where the industry is headed.

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Vyve Broadband Illuminates Realistic Path to Rural Growth

Vin Zachariah, SVP, residential services, Vyve Broadband

Vin Zachariah, SVP, residential services, Vyve Broadband

The Question Is Whether New Regulations Are Going to Block that Path


By Fred Dawson

February 23, 2015 –  With what might best be described as cautious exuberance, mid-tier MSO Vyve Broadband is pursuing an ambitious development agenda that could serve as a lesson in rural broadband economics for anyone who cares to understand the forces that undergird sound growth strategies in the hinterlands.

Founded in 2012 as BCI Broadband by two former Bresnan Communications executives with funding from Brown Brothers Harriman, the company got underway in 2013 with acquisition of Tier 3 operators Allegiance Communications based in Shawnee, OK and James Cable, dba Mediastream, based in Waycross, GA. Since then Vyve, which adopted the new name a year ago, has been focused on upgrading services across a footprint encompassing 300,000 households in Georgia, Oklahoma, Louisiana, Tennessee, Kansas, Wyoming and Colorado.

Over its short lifespan the company has been able to implement a 140-channel all-HD digital TV service, increase broadband speeds with offerings ranging from 25-105 mbps, launch an advanced digital voice service, introduce TV Everywhere, build a commercial services unit and make significant headway toward consolidating headends in key states with interconnection of systems via fiber ring networks. With many of these initiatives still to be completed across all properties, there’s no slowdown in sight.

“We only took charge in the summer of 2013,” says Vin Zachariah, Vyve’s senior vice president of residential services.  “2014 has been a year of construction, buildout and a lot of back-office integration. 2015 is going to be a really busy year.”

And one fraught with uncertainty as Vyve, along with every other player in broadband distribution, tries to figure out the implications of new FCC Internet regulations and as it continues to deal with surging programming costs and the need to deliver what customers want at affordable prices. While some federal government officials may think they have a better approach to determining and meeting rural market needs, it’s hard to imagine a more effective, aggressive way to gauge and address demand than the market-driven strategy pursued by Vyve and other forward-thinking rural service providers.

As Zachariah explains, there are a lot of moving parts to figuring it all out and creating a response to demand that is economically sound. For example, when it comes to setting broadband speeds, the company’s new baseline 25 mbps, priced at $49.99, is double what’s been on offer to residents in its markets to date. With the other options set at 50 and 105 mbps, priced at $69.99 and $89.99, respectively, the question isn’t whether the data rates are high enough; it’s whether the company will have the latitude to price the service profitably.

“We’ve spent a lot on infrastructure and CPE, installing new CMTSs (cable modem termination systems) and swapping out DOCSIS 2.0 for 3.0 modems,” Zachariah says. “There’s a lot of talk about rushing to 1-gig service, but I’m not sure we see the demand. We can’t ignore capital costs by providing service for which there’s little or no demand.”

With an aggressive commercial services unit now in place, the broadband demand calculation includes business needs. “We’ve built up a strong sales team devoted to this side of the market, which isn’t typical among smaller operators,” he says. “This is a big growth area for us.”

If the demand is there for higher speeds, Vyve will go after it, he adds. For example, fiber connections offering higher speeds to businesses are now part of the commercial offering.

But it would help if the company had a clearer idea of its latitude to set prices. “Right now prices are based on speed,” he notes, “but, eventually, we might prefer to go to usage-based pricing.” Unfortunately, as he noted in an appearance at the SNL Kagan Summit in the fall, “There’s a lot of trepidation over how that will be received under the new regulations.”

On the pay TV side of the ledger, Vyve is in the midst of assessing market reaction to the dramatic shift in the service profile since it took over its acquired properties. Where, before, many customers were on all-analog service, today they’re getting an all-HD lineup with no analog.

One interesting clue to Vyve’s commitment to taking the market where it wants to go is its role in fostering TiVo’s engagement with Evolution Digital, which led to enabling Evolution’s HD universal digital transport adapters to work with TiVo’s UI service, including advanced content discovery capabilities. Early last year Vyve became the first MSO to bring TiVo and Evolution together in a commercially available service.

The combining of TiVo with the Evolution DTA has allowed Vyve to eliminate the need for costlier set-tops. It is using the DTA to serve all TVs in the home, while leaving open the option for people who want DVR capabilities to get them with an integrated set-top DVR supplied by Pace, which is another CPE vendor that has integrated with TiVo.

Whether Vyve goes farther with TiVo toward use of its whole-home media gateways or engagement with new capabilities such as TiVo’s planned network DVR service remains to be seen. For now, what matters is that Vyve has been able to market an all-HD service with advanced navigation supported by a terminal that costs about $50.

But while this strategy has significantly reduced the costs of mounting a cutting edge service in the rural marketplace, Vyve, like other pay TV providers, is struggling with the economics of pay TV service with a willingness to play hardball when it doesn’t see a clear financial benefit to accommodating ever-rising licensing and retransmission fees. Last year the company dropped all Viacom channels and has had no regrets since, Zachariah says.

The bottom line for Vyve is its pay TV business has to remain viable on its own, which means it will not shirk in passing on increasing costs of programming to subscribers, as long as the programming is deemed to be a contributor to the overall value proposition. With multiple increases in retransmission fees on the horizon, “we feel pretty strongly that we’re going to stand up to this,” he says. “And whatever rates we accept we’ll pass through to our customers.”

While some MSOs see value in offering a highly discounted small bundle of pay TV channels packaged with high-speed data, Vyve isn’t ready to go there. “We don’t have a discounted video offer and have no plans to do that,” he says. “We’re very adamant that we’re not going to subsidize our video business from our data business.”

At the same time, while customer reaction to the all-HD pay TV service has been “very positive,” the company recognizes it will have to be responsive to consumer demand as business models evolve. “Once we rationalize our video products and figure out the pricing and value for everybody, there’s going to be a need to look at that (small, lower-cost service bundles),” he says.

“It’s hard for the whole industry to deal with consumer expectations and the question of how to get video service down to $20 to $30,” he adds. “There’s no way to do that with any margins.”

At least not within the confines of the current pay TV business model. But an all-IP strategy could create a lot more flexibility.

Last year Vyve launched TV Everywhere service by tapping into the turnkey authentication and back-office integration platform created by Ohio-based Massillon Cable. The platform, offered through the National Cable Television Cooperative, amasses participating cable companies’ subscriber data to allow consumers to log in and access any programming licensed to a given operator for distribution over broadband to connected devices.

And now Vyve is looking into the possibility of offering VOD over broadband, rather than supporting a traditional VOD service, which would require deployment of set-tops with two-way capabilities. It’s one way to begin opening a path to all-IP TV services, which is “a path we want to be on,” Zachariah says.

The consolidation of operations through interconnection of little systems to centralized headends via fiber rings is a key step to making such a path possible, he adds. So far, consolidation projects have been completed in Oklahoma and Georgia with Louisiana next on the list.

Clearly, when it comes to government goals to foster broadband expansion in rural markets, the move to all-IP video services would have the effect of expanding broadband throughput. Yet the cloud hanging over the industry with the implementation of Title II regulation of broadband makes it hard for companies like Vyve to map such plans. “We’re very much thinking about the long term, but it’s hard to make decisions,” Zachariah says.

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Turnkey Cloud Services Promise Faster Track in IP TV Migration

Mark Hyland, SVP, sales, QuickPlay Media

Mark Hyland, SVP, sales, QuickPlay Media

QuickPlay Prepares to Offer End-to-End Shared Content, Facilities and Processing Solution

By Fred Dawson

January 29, 2015 – As MVPDs in growing numbers embrace cloud-based solutions to take some of the pain and costs out of various steps in the evolution to next-generation video services, the prospects appear to be improving for more ambitious end-to-end turnkey services that could greatly accelerate service transformation at all levels, down to the smallest MVPDs.

MVPDs’ reliance on cloud-based managed services has been steadily increasing with the emergence of software platforms that facilitate execution of various tasks associated with video processing, extensions of advanced navigation, personalization and other middleware-supported functionalities to every type of device, virtualization of CPE functions and much else. Now the question is whether MVPDs are ready to leverage a shared-cloud support environment to execute the entire process of migrating to all-IP TV operations, from content ingestion, processing and storage through to distribution of multiscreen streams over dedicated facilities directly into their access networks.

One supplier that believes the market is ready to support such solutions is QuickPlay Media. Over its 11-year history QuickPlay has expanded from providing managed service support for delivering content to mobile devices into a multi-platform support operation with a modularized portfolio of managed functions that it shapes into a customized multiscreen service with a dedicated set of content offerings for each customer.

Now says Mark Hyland, senior vice president of sales at QuickPlay, the company is preparing to bring all its capabilities together into an end-to-end turnkey solution that leverages shared access to hundreds of live programming channels and thousands of VOD titles as well as to all the underlying facilities and functions that go into getting all that content to end users.

“This isn’t something we’ve been talking about publicly,” Hyland says. “But the momentum is growing for this as a logical next step for us. We believe we have an opportunity to catalyze the shift to multiscreen delivery of pay TV service over IP by providing shared access to pre-encoded, prepackaged content for different distributors.”

There’s a growing need for such a catalyst as migration to all-IP multiscreen premium service becomes a strategic necessity for every type of MVPD, he says. “This presents a real challenge to pay TV providers, especially smaller companies,” he adds. “People need a way to deliver a grown-up version of OTT service that goes well beyond what we’ve seen so far with TV Everywhere.

QuickPlay is also getting a push in this direction from content suppliers, Hyland says. “After they’ve given us one copy of their content to manage for a particular customer, they don’t want to have to do it again with the next customer,” he explains. “Making that content available to multiple customers takes a lot of the operational complexity out of supplying content to distributors.”

In so doing, Hyland notes, QuickPlay is moving into a space already occupied by providers of solutions tied to shared access to content such as Deluxe Digital Distribution, a unit of Deluxe Entertainment, Vubiquity and Verizon Digital Media Services, but with key points of differentiation. “They all have that shared-access model in mind, but we see an opportunity to compete effectively based on the expertise we’ve developed in providing an extensive portfolio of managed services to companies like AT&T, Verizon, Rogers, Bell Canada and TELUS,” Hyland says.

For example, he notes, QuickPlay is providing backend support, including transcoding, stream packaging, content protection and distribution for both AT&T’s U-verse online multiscreen service and its mobile TV service. This includes processing for distribution of 240 live channels as well as on-demand titles offered in different package iterations by the AT&T services. The companies have also partnered to create an in-vehicle entertainment service delivering live and on-demand content to automotive manufacturers who collaborate in AT&T’s Drive Studio, the first connected-car innovation center in the U.S. to be opened by a wireless carrier.

Along with providing the workflow elements essential to creating a multiscreen service for AT&T, QuickPlay has provided a foundation for OTT distribution that sustains TV-caliber performance through to the end user, Hyland notes. “We transport over a couple of heavy-duty fiber lines out of the San Diego datacenter into the AT&T network,” he says.

QuickPlay leverages integrations and business affiliations with Akamai, Limelight and other CDN suppliers to ensure high-quality OTT distribution to AT&T customers wherever they are, he adds. “We’re also integrating with Alcatel-Lucent’s Veloxis CDN technology,” he says. “They’re an increasingly important partner for us.”

The distribution architecture along with everything else QuickPlay has put in place to support robust multiscreen service performance for AT&T and other customers can be leveraged to support a new shared-access model, Hyland says. “We now have thousands of titles running through our system without human intervention,” he notes.

But there’s more to do. “We’re building up our VOD and linear assets, including overcoming a lot of roadblocks associated with localization and customization of content targeted for specific geographic areas,” he explains. “And we’ll have more [datacenter] locations for redundancy.”

With datacenters located in Germany, Singapore and India as well as San Diego, QuickPlay is well positioned to pursue the new strategy on a global basis, Hyland adds. The newest of these facilities, in Chennai, India, is designed to support growing demand for cloud-managed multiscreen services in that part of the world, including a soon-to-launch service by an unannounced customer that will tap a catalog of 40,000-50,000 titles.

While QuickPlay has developed various functional solutions in house to facilitate customers’ multiscreen service needs, it’s focus is on building the best possible shared tenancy managed service framework by integrating best-of-breed solutions into its workflow, Hyland says. “Our workflow platform is core to everything we do,” he says. “We wrap best-of-breed technologies together with our own into those work processes based on each customer’s needs.”

For example, he notes, QuickPlay, which announced its own network DVR platform in mid-2013, is now working with Alcatel-Lucent to integrate that vendor’s nDVR solution into the workflow. In some instances, as with transcoding solutions supplied by Harmonic, Envivio and Media Excel, QuickPlay may have several partners customers can choose from.

To expedite third-party solution integrations QuickPlay’s Next Generation Experience Solution provides an extensive array of developer tools (SDK, Developer Sandbox, RESTful APIs) to allow any application or front-end solution to be readily integrated with QuickPlay’s Managed Video Service. Most recently the company added tools supporting development of Android TV applications to run on its platform.

The Android TV package, which includes a reference user experience for live and VOD services, has drawn in partners such as Intellicore, Comigo and Oregan Networks, reports QuickPlay CEO Wayne Purboo. “The open approach we are taking with our Next Generation Experience Solution will help providers offer the best premium user experience, powered by Quickplay’s extensive discovery and content management back office, along with a virtual head-end that provides 200+ programmer interfaces, hundreds and thousands of titles and nearly 700 live channels,” Purboo says.

In its partnership with Comigo, QuickPlay is making available that vendor’s cloud platform to allow operators to manage the TV experience on any screen, including iOS as well as Android screens. As previously reported, the Comigo platform makes it easier to provide personalized content recommendations, social engagement and interactivity related to the viewed content. Quickplay handles all of the adaptive streaming and content management, including DRM solutions like Microsoft PlayReady, user entitlements, dynamic advertising insertion, banner ad support, multi-language support, and featured content from over 200 premium content providers.

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As LTE Broadcast Tests Another Idea Bears Watching

Rich Redmond, chief product officer, GatesAir

Rich Redmond, chief product officer, GatesAir


By Fred Dawson

 
As mobile operators weigh whether to bet big on LTE Broadcast technology the challenges ahead may soon prompt many to take a hard look at an altogether different approach to mitigating the impact of video consumption on their network resources.

Amid much publicity surrounding the launch of LTE Broadcast tests worldwide, there’s another idea percolating below the radar promoted by broadcast transmitter supplier GatesAir which could offer a lower cost and faster path to broadcasting popular content to mobile users. The concept, soon to undergo testing in Paris, entails use of broadcast TV transmitters operating in the UHF band to transmit LTE as well as TV signals, thereby avoiding use of the LTE infrastructure to enable bandwidth-saving point-to-multipoint distribution of live programming to mobile customers.

Critically, the LTE-delivered content flow is not tied to the TV broadcaster’s content in the UHF TV tower broadcast model. Mobile operators will be able to use the transmitter to deliver whatever content they may license for broadcast distribution, irrespective of which TV channel is being broadcast from the same radio. The huge difference between the two approaches starts with the fact that a mobile operator can reach an entire metro area with point-to-multipoint content delivered from a single broadcast transmitter.

Recent statements from top mobile carrier executives and a flood of press releases have put LTE Broadcast, formally known as evolved Multimedia Broadcast Multicast Service (eMBMS), in the limelight at a moment when it’s far from clear how long it will take before the ecosystem essential to making eMBMS a core component of mobile video service strategies materializes. eMBMS capabilities must be embedded in device chipsets, which means carriers will have to cycle through the current generation of smartphones and other mobile-connected devices before there’s a mass market base for eMBMS.

Verizon Wireless, which has publicly affirmed deployment of eMBMS across its entire LTE footprint, plans to begin introducing LTE Broadcast service by the second quarter of next year, when the carrier anticipates enough devices will have eMBMS-capable chipsets to represent a meaningful target base. Most of the smartphones now sold in Verizon stores are equipped with LTE Broadcast chipsets, the company says.

But the real benefits of LTE Broadcast, beyond early uses for minimizing congestion in stadiums and other closed environments when most people will have their devices tuned to the same live video coverage, are tied to reducing congestion from live program streaming over the wide area mobile network, which will require a mass market base. Moreover, there is a significant licensing issue when it comes to distributing live premium content ubiquitously over a mobile carrier’s footprint.

AT&T chief strategy officer John Stankey during an appearance at the Oppenheimer Technology, Internet & Communications Conference in August, alluded to the issue as he described AT&T’s intention to begin rolling out multicast capabilities on its LTE network in 2015. While  “customers want to be able to watch and entertain themselves wherever they are, under their terms,” Stankey said, “the reality of the industry today and how content is licensed and sold doesn’t fit elegantly into that model.”

A more localized approach to mobile distribution of live TV programming may be less fraught from a licensing standpoint, especially if local broadcast stations were able to participate with a substantial upside to the business model. This is one of the benefits mobile operators could realize from pursuing the Tower Overlay mobile broadcast strategy proposed by GatesAir, formerly a unit of Harris Broadcast and now operating independently following the acquisition and restructuring of Harris by an investment team led by Charlie Vogt.

Vogt, along with serving as CEO of Imagine Communications, the other piece of the Harris acquisition, is a member of the GatesAir board of directors. Speaking about the Tower Overlay solution when it was first announced in the spring, Vogt commented, “The broadcast model has always been the most reliable, scalable method for one-to-many delivery of high-quality video and audio, and the Tower Overlay model brings that same wireless spectrum efficiency to the mobile universe. This breakthrough innovation offers a compelling business case for broadcasters and mobile service providers alike.”

Commercialization of the concept is a good 12 to 18 months away, according to Rich Redmond, chief product officer at GatesAir. But, in many respects, it may not have as steep a hill to climb as eMBMS. While the Tower Overlay strategy doesn’t begin to have the backing that eMBMS has in the mobile sector, it’s starting to catch the notice of major operators, Redmond says.

“We’ve had some dialogue with AT&T and Verizon,” he says, noting interest is especially strong in Europe among the likes of Orange, Telecom Italia, Holland broadcaster NPO and TDF, a Paris-based provider of radio and TV transmission services. TDF and GatesAir are slated to launch a trial of the technology from the Eiffel Tower in January as part of TDF’s experimentation with various solutions offered through the DVB-T Broadcast Multimedia Mobile initiative.

Tower Overlay, which is based on technology developed at the Technical University of Braunschweig’s Institute for Communications Technology in Braunschweig, Germany, is closer to commercialization in Europe owing to the fact that DVB-T2, the second-generation DVB standard for terrestrial broadcast, provides for what is known as Future Extension Frames (FES), which makes it possible to generate the LTE waveform from a broadcast transmitter without interfering with the primary DVB waveform.

“Such capabilities are a focus of development of the ATSC 3.0 standard in the U.S.,” Redmond notes. “When everybody talks about next-generation ATSC, mobile is a big subject.”

Development of ATSC 3.0 is well underway with multiple proposals for the physical layer of the standard now pending before the Advanced Television Systems Committee, including one jointly developed by LG Electronics, LG’s Zenith research unit and GatesAir known as FutureCast. The main thrust of ATSC 3.0 is development of support for Ultra HD, including use of HEVC compression and an over-the-air RF modulation technology, most likely OFDM (orthogonal frequency division multiplexing), that will enable higher bit rates than can be accommodated over 6 MHz broadcast channels with today’s HD-optimized ATSC standard.

The chosen physical layer will also provide means of ensuring signal robustness, as is the case with FutureCast, which, among other things, uses an advanced forward error correction system to maintain signal quality. As demonstrated in a recent Madison, Wisconsin field trial of FutureCast over Quincy Group’s WKOW-TV outlet, the standard will likely support enough throughput per 6 MHz channel, topping 25 mbps, to support a 16 mbps UHD signal and a couple of lower bitrate streams to deliver high-quality signals to tablets and smartphones.

The latest test, serving as a demonstration to the press, analysts and broadcasters, followed a larger-scale test in Madison this past summer where data from scores of reception sites, including challenging reception areas inside buildings, in fast-moving vehicles and at locations ranging from downtown to 50 miles from the transmitter, validated system performance. “Based on what I’ve seen in these FutureCast tests, the new standard will enable exciting new business models for broadcasters and exciting new services for viewers,” says Brady Dreasler, chief engineer for Quincy Group.

FutureCast, it should be noted, as a physical layer proposed for all TV spectrum allocations, including VHF as well as UHF, is not in and of itself a permutation of Tower Overlay. The latter is designed to take advantage of the fact that certain LTE spectrum allocations reside in the general UHF region occupied by UHF stations, which, for one or the other application, extends from about 470 MHz to about 800 MHz.

Thus, the content configured for reception on mobile devices by FutureCast is derived from the core TV channel being transmitted, whereas Tower Overlay allows the LTE broadcast to stream content independently of the TV channel. But what makes FutureCast or other proposed physical layers for the ATSC 3.0 standard important to Tower Overlay is the fact that most ATSC 3.0 proposals include provisions for FES. With FES as part of ATSC 3.0, which is likely to be very similar to DVB-T2 in other respects as well, the Tower Overlay will be able to work with UHF broadcasts conforming to ATSC 3.0 much as it has with DVB-T2 broadcasts, Redmond says.

To make this possible, along with the FES component in ATSC 3.0, there will need to be what GatesAir and its allies refer to as an LTE-A+ expansion of the 3GPP LTE Advanced standard, which they are promoting within that body. This extension of the standard would make it easier for LTE-A+-compatible devices to adjust to the high-power transmission used with terrestrial broadcast.

But there’s no need to add new radio receivers to the devices insofar as most LTE-capable devices are already equipped to interoperate in the UHF realm, although some models may not support some of the more recently added LTE spectrum slices, Redmond notes. “We’ll need some middleware signaling extension to the LTE standard, but there won’t be a need for new chipsets.”

“We’re demonstrating this is a viable technical solution with significant business upsides for both the station owners and the operators,” he says. “From a wireless carrier perspective it’s like having a megacell to deliver your multicast signals across the local market. It’s a very flexible, cost-effective way to avoid overloading your existing LTE infrastructure.”

Rather than dropping a lot of money on the network upgrades essential to getting LTE Broadcast off the ground, MNOs could take advantage of the shared radio resources to deliver whatever portion of the local live video traffic they might want to offload from their existing cell sites. “The big thing we see here is the carrier doesn’t have to bring spectrum or more hardware,” Redmond says. “They just pay for the use.”

There’s no getting around the fact that there are significant hurdles to be cleared by both LTE eMBMS and the Tower Overlay concept. But it may well be that some carriers at least will find the latter strategy offers cost and business model benefits representing a better course.

1

Mid-Market MSOs’ Pay TV Angst Triggers Plans for Radical Action

Ed Holleran, president & CEO, Atlantic Broadband

Ed Holleran, president & CEO, Atlantic Broadband

Operators Explore Leveraging Broadband to Mitigate Shrinking Video Margins

By Fred Dawson

December 17, 2014 – Foment in the mid-to-low-tier cable MSO ranks is moving rapidly from angry reaction to escalating programming costs to serious exploration of broadband-based business models that would afford operators flexibility to pursue much lower cost approaches to providing video services.

In a handful of cases operators are contemplating going so far as to abandon cable programming distribution altogether in favor of creating a broadband experience where consumers can tap OTT sources for their entertainment by paying for access rates that will support high-end HD and even UHD-caliber signals. More commonly, the inclination is toward leveraging a new generation of cloud-based platforms to deliver mixes of cable channels and OTT content that can be accessed through advanced universal navigation systems on virtualized set-tops, where cloud-based DVR and other functionalities could radically reduce CPE costs and help smooth the way to all-IP delivery over time.

Probably the biggest camp is occupied by those whose commitment to pay TV is tempered by the new headwinds but who have yet to determine what steps beyond current initiatives they might take to deal with what has become an impossible situation. These operators are more open to new ideas than ever before, including the possibility of eliminating cable channels and broadcast stations they deem too costly; dropping premium networks that choose to go direct to consumer; offering extremely cut-rate basic packages bundled with high-speed data, or moving to the all-broadband approach.

“The business certainly is going to continue to change,” said Atlantic Broadband president and CEO Ed Holleran, speaking at the recent SNL Kagan Multichannel Summit in New York. “Consumers’ wallets aren’t growing fast enough to keep up with the bundle.”

Much of the new thinking is driven by the ascendance of broadband as the cable service most in demand. “We now have a different perspective on how we’re viewing the business,” said John Pascarelli, executive vice president of operations at Mediacom Communications, another speaker at the SNL Kagan Summit. “It used to be our customers would buy video and we’d sell them other services. What’s happening today is consumers are buying Internet, and we try to add other pieces. People have to have an Internet connection, and video is becoming too costly and, therefore, less essential.”

Indeed, as observed by SNL Kagan and other analysts, the third quarter of 2014 marked the first time there were more cable broadband than cable pay TV households. Kagan’s latest measures and projections as revealed at the Summit vividly reflect both the stress operators are under on the pay TV side and the opportunities ahead in broadband.

For example, MSOs Comcast, Time Warner Cable and Charter have experienced a drop in weighted average estimated margins on pay TV services from 23.3 percent as of Q2 2012 to 16.1 percent in Q3 2014, noted Robin Flynn, research director at SNL Kagan “The economics of the industry have shifted,” Flynn said, which has put the spotlight on “the tremendous importance of the high-speed data revenue stream.”

While Kagan projects revenue from U.S. cable pay TV service will increase slightly as a function of rising prices over the next ten years, going from $56.6 billion today to $59.5 billion in 2024, the company predicts the number of cable pay TV subscribers will drop from 53.5 million today to 46.9 million ten years from now.

This isn’t just a cable phenomenon. U.S. multichannel household penetration, counting telco and DBS as well as cable, is projected to drop from 85.1 percent today to 76.7 percent in 2024. “This is a departure from our earlier projections,” Flynn said.

Broadband, especially for cable, is another story. Margins as tabulated for the aforementioned three MSOs have remained high over the past two years, registering 58.4 percent in Q2 2012 and 59.6 percent in Q3 2014, according to SNL Kagan. Looking ahead, the researcher predicts the cable broadband subscriber count will go from 54.9 million today to 63.1 million in 2024, with revenues over the same period going from $27.5 billion to $39.4 billion.

Those revenues and attendant margins could go even higher were operators to follow the advice of some Wall St. analysts, who believe the cable industry has room to raise prices either on a flat-rate basis or by setting usage fees to capture revenues from customers who exceed allotted monthly limits within their chosen broadband tiers. Operators have plenty of opportunity to increase monetization of broadband, but they’re “not doing it fast enough,” said Marci Ryvicker, managing director of equity research for media and cable at Wells Fargo Securities.

However, as Ryvicker and others at the Summit noted, the threat of regulation under Title II of the Telecommunications Act as promoted by President Barack Obama adds an element of uncertainty to the broadband upside. Operators, she and others suggested, may hesitate to take a more aggressive approach to monetization out of fear such steps will be used against them in the argument for tougher regulations.

It’s definitely a question on investors’ minds, said Craig Moffett, partner and senior analyst at MoffettNathanson. “Will there be an implied constraint on broadband pricing because everybody is walking on egg shells?” he asked at the SNL Kagan Summit. “It’s a very real question, and it could change the return perspective [on investments].”

Citing the need for usage-based billing to deal with high-level congestion in peak hours, Vin Zachariah, senior vice president of residential services of Vyve Broadband acknowledged there was “some trepidation” over whether such pricing strategies could be impacted by new rules. Atlantic Broadband’s Holleran voiced the industry consensus on the proposed Title II approach when he said, “The idea of broadband becoming regulated under a 1930s telephone regulations framework is unimaginable in terms of what it could do to the business.”

But setting aside such concerns, Holleran suggested the broadband opportunity was strong enough to offset setbacks on the pay TV side. “Broadband service providers will continue to grow,” he said, noting the opportunity rests on adding more subscribers as well as generating new revenue from higher prices. “We’ll be fine unless regulations upset things.”

Indeed, how big an impediment the regulatory threat might be remains to be seen. As Moffett observed, final resolution on the regulatory question could take five to six years before any FCC decision is fully vetted in the courts. And there could be legislative shoes to drop with Republicans taking over both houses of Congress and a presidential election just two years off.

Moreover, if operators move to really big broadband pipes any Title II restrictions on attempts to collect “fast lane” fees form the likes of Netflix will be mitigated by the success of best effort in sustaining high levels of consumer experience with all Internet-delivered content. “I assume net neutrality whether it’s through the FCC without Title II or with Title II or a new Cable Act,” said Steven Weed, CEO of northwestern U.S. operator Wave Broadband, which is predicating its aggressive expansion strategy on a pure broadband play offering 100 megabit and 1 gigabit access options in the residential and commercial markets. “It’s built into our models, so it doesn’t change our business at all.”

“I agree,” said Stephen Jeschke, vice president of GTCR, the investment group behind Rural Broadband, another acquirer of cable systems that is building its future on 1-gig connectivity.  “As long as we provide the best and biggest pipe into the home, the rest is noise. Nothing built into our models is expecting anything different [from strong net neutrality regulation].”

Where traditional pay TV is concerned, two major trends have combined to put the squeeze on the business: rising programming costs and consumers’ willingness to substitute OTT content for pay TV. Making matters worse from the OTT side are moves on the part of HBO Go, CBS and others to offer direct-to-consumer subscriptions without requiring sign-up with a pay TV distributor.

While there have been long-running disagreements in cable and analyst circles over how big a threat OTT will turn out to be, confidence among the optimists is clearly waning. Referring to TV programmers who have long expected that Millennial generation “cord nevers” would become pay TV subscribers once they start their own families, Moffett commented, “Based on my conversations with media companies over the last six months, their conviction [that aging Millennials will become pay TV subscribers] is a lot shakier than it was six months ago.”

“There’s not enough data on this question,” said Wells Fargo’s Ryvicker. “This is why programmers are experimenting with direct-to-consumer. They don’t want to disrupt the pay TV marketplace, but they want to be out there if the Millennials don’t come back.”

SNL Kagan predicts there definitely will be an impact from the substitution of OTT viewing for pay TV subscriptions. Within four years, 12.5 million or 10.2 percent of U.S. households will be substituting OTT for pay TV compared to 6.8 million or 5.7 percent today, Flynn said. Cord cutting was a major factor in the researcher’s previously cited revised projections for multichannel penetration over the next ten years, she noted.

Meanwhile, the immediate pain incurred from rising programming fees has become the primary driver behind the search for alternative business models at the Tier 2 and 3 levels. “You can’t even recapture all of the increases from consumers,” said Mediacom’s Pascarelli. “If I passed on 100 percent of my wholesale cost increases, we would see a significant increase in the disconnect rates and a more immediate consumer shift to OTT services.”

Echoed Atlantic Broadband’s Holleran: “We can’t pass through all the expense increases. High-speed data with the wide margins we have there has been subsidizing the margin erosion in video. I know if I didn’t have the HSD business, the whole video thing would have come to a head long ago.”

This has led to fairly radical action in some quarters with threats of more to come. After CableOne earlier this year took what other operators saw as the courageous step of dropping all Viacom properties from carriage, the notion no longer seemed so improbable. Vyve Broadband decided to follow suit and has so far had no reason to question the decision, Zachariah said.

“We as a company made the second national decision not to carry Viacom,” he told the Summit gathering. Noting that whatever subscriber losses have been incurred must be weighed against money saved, he said, “We’d do it again. In most markets we’ve added more channels than we took off. Viacom in our markets is not a particularly good brand.”

Adding to the fee crunch is a sharp rise in broadcaster retransmission fees, which by all accounts are likely to keep climbing. Pascarelli suggested it’s no longer automatic that his company will continue carrying the same number of broadcast stations as before. “We have to evaluate every deal as it comes across the table, and determine how much of the content is available to our customers from other sources,” he said.

“Underscoring the prospects for a wide-scale showdown with broadcasters, Zachariah said, “We expect multiple [retransmission] rate increases over the next few months. Operators feel pretty strongly that we’re going to stand up to this.” This could mark a sea change from the tendency to absorb some of the rate increases on the bottom line rather than passing everything through to the consumer. “Whatever rates we accept, we will pass through,” Zachariah said.

Another area where operator resolve is stiffening is on the premium channel front. By going directly to consumers with an OTT subscription offer, networks may be creating a disincentive for operators to keep carrying them.

HBO Go as an OTT offering may not be “the worst situation for us,” Pascarelli said. “We make very little money on the premium market. If anything it’s a loss leader.”

“Cable companies don’t make money off premium services,” Ryvicker confirmed. “Time Warner has to figure out how to price HBO Go without cannibalizing its traditional business.”

“If I’m not getting a return on our channel allocation for HBO, I’ll repurpose the capacity to something that makes money,” Pascarelli said. “The channels on our systems are valuable real estate,” he added.  “If the premium services want to go direct-to-consumer, we can certainly use the bandwidth they occupy to launch faster and more profitable broadband services.”

Acting on that threat could result in far more damage to the premium networks than to the operators, he suggested. “Think of the costs they’ll incur,” he said. “We spend a lot of money to build that business. If they have to collect debts, market customers, connect them – it will take that experience with the cannibalization of their cash cow for them to look at it a different way.”

Battling back on all these fronts may net some protection from margin erosion in pay TV, but many operators are looking beyond such steps to explore what might be done through broadband to put them on firmer ground in the pay TV business. Atlantic Broadband, for example, has already begun offering a low-cost service package bundling HBO and local broadcast with high-speed data and “some OTT” video, something Comcast has done with its Internet Plus bundle, which is priced at about $50 per month.

“We took a page from the Comcast playbook,” Holleran said. “That’s an example of finding more affordable choices for consumers. I can’t say that won’t continue. We’ll all find our way through this, but that’s the direction.”

As previously reported, Midcontinent Communications, serving some 300,000 pay TV customers in the upper Midwest, has taken a first step in a direction that could well be taken by many other Tier 2 players. The company is testing a cloud-based middleware system supplied by aioTV which, in conjunction with use of a low-cost “pass-through” terminal that sits between the set-top and the TV, will allow the operator to offer a highly personalized blended service that makes OTT content available with traditional pay TV on a universal navigation system.

Adding to its flexibility to exploit broadband in the development of new service models Midcontinent recently announced a “Gigabit Frontier Initiative,” which envisions making gigabit access available to some 600,000 homes and 55,000 businesses within the next three years, starting in Fargo, Bismarck and Grand Forks, ND and Sioux Falls and Rapid City, SD . The company, already at the forefront of high-speed offerings with 200 megabit service available at about $106 per month in many markets, said broadband consumption has been doubling in its markets every 15 months.

Moving to broadband as a unified delivery platform promises to transform operators’ video service options as well as lower costs. By exploiting the power of IP cloud technology to support a highly personalized service of blended pay TV and OTT content that offloads the expense of supporting whole-home DVR while delivering a uniform viewing experience across all devices, operators have an opportunity to deliver a unique offering to subscribers where the perceived value could mitigate any fallout from the absence of certain channels or broadcast stations

This is why interest in cloud-based platforms on offer from a growing number of vendors is intensifying, said the head of an engineering company that provides technology selection and integration support for Tier 2 and 3 operators.  “Our clients realize that have to change their approaches to the business,” the executive said, speaking on background.

Plus, by eliminating the need for legacy channel space, operators make it easier to expand broadband capacity. “If you can sell higher speed Internet for $60-$100 per month, you can fill in for a lot of what you’re losing on the pay TV side,” he noted.

Many companies, he added, are looking at ways to cluster together to share the “headend-in-the-cloud” and high-performance distribution costs that would allow them to stream content to their local distribution hubs, where signals could be distributed at TV-caliber quality to each subscriber for viewing on whatever device they’re using at the time. “These centralized strategies need to happen,” he said.

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