Charter Considering RDOF Grants

Charter let the world know that it plans to pursue RDOF grant funding in its most recent 8-K filing with the Securities and Exchange Commission. The company says that it might pursue grant funding to build to ‘multi-million passings’ involving ‘multi-billion investments’. It’s an interesting strategy. Charter already serves rural county seats and other towns across the country which puts them close to many of the areas where RDOF funding is available.

The RDOF grants cover the most rural and remote pockets of customers in the country. While there are some small rural towns included in the RDOF grant footprint, most of the customers covered by the grants are truly rural, consisting of farms and scattered homes in rural counties.

Charter will have to make some technology choices about how to serve rural America. The company can win the most money in the grant process if they file as a gigabit-speed provider. Gigabit speeds are available today with fiber technology and also with the hybrid fiber-coaxial networks operated by Charter and other cable companies. The RDOF grants can be awarded to technologies that support speeds over 25/3 Mbps. However, the grant includes incentives to favor ISPs willing to use faster technologies.

Charter could pursue slower technologies, like fixed wireless, but that funding is harder to win. To date, none of the big cable companies have ventured into wireless technology, other than a few trials. It’s always been a bit of a mystery why Charter and other cable companies haven’t erected wireless antennae at the fringes of their network to cheaply capture customers just out of reach of the HFC networks. My theory has always been that big cable companies are not nimble enough to handle drastically different technology platforms since all of their processes are designed for around coaxial and fiber technologies.

Charter is likely considering building fiber-to-the-home networks if they win RDOF grant funding. The hybrid fiber-coaxial technology that cable companies use in urban areas is poorly suited to serving scattered rural customers. The signal on an HFC network has to be boosted every two miles or so, and every time the signal is amplified some of the effective bandwidth carried on the network is lost. It would be a major challenge to maintain gigabit speeds required by the grants on a rural HFC network. It would only be possible with lots of fiber and tiny neighborhood nodes serving only a few homes. Charter has often cited the technology challenges of uses HFC technology in low-density areas as the reason it doesn’t expand outward from existing markets – and those reasons still hold true.

Charter claims to have expanded to add 1.5 million homes to its existing networks over the last two years, and in the 8-K filing says these are mostly rural customers. However, from what I’ve heard, most of these new Charter neighborhoods are in small subdivisions surrounding existing Charter markets. Charter has not been building rural networks to reach 1.5 million farms.

Charter and the other big cable companies have quietly introduced last-mile fiber technology into their networks. When cable companies build into new subdivisions today, they mostly do so with fiber technology.

It would be interesting if Charter’s strategy is to use the grant money to build fiber to farms. I know plenty of other ISPs considering the same business plan in places where there is enough RDOF grant funding available to make a business case.

There is no guarantee that Charter will ultimately win any grant funding and filing the grant short form on July 15 only gives Charter the option to participate in the auction in October. However, if the company bids in the auction, it will be good news for markets where Charter would build fiber technology. The big downside to the RDOF grant process is that in markets where no ISPs propose to build gigabit technology, the funding could end up going to satellite broadband providers – and there is no rural neighborhood that would prefer Viasat over Charter.

The Future of Coaxial Networks

My blog devotes a lot of time looking at fiber deployment, but since the majority of people in the US get broadband from cable companies using hybrid fiber/coaxial (HFC) technology, today’s blog looks at the next generation of changes planned for HFC.

DOCSIS 4.0. The current generation of HFC technology is DOCSIS 3.1 This technology uses 1.2 GHz of spectrum over coaxial cable. DOCSIS 3.1 has several competitive drawbacks compared to fiber. First, while the technology can deliver gigabit download speeds to customers, the dirty secret of the industry is that gigabit speeds can only be given to a limited number of customers. With current node sizes, cable companies can’t support very many large data users without sacrificing the performance of everybody in a node. This is why you don’t see cable companies pricing gigabit broadband at competitive prices or pushing it very hard.

The other big drawback is that upload speeds on DOCSIS 3.1 are set by specification to be no more than one-eighth of the total bandwidth on the system. Most cable companies don’t even allocate that much to upload speeds.

The primary upgrade with DOCSIS 4.0 will be to increase system bandwidth to 3 GHz. That supplies enough additional bandwidth to provide symmetrical gigabit service or else offer products that are faster than 1 Gbps download. It would also allow a cable company to support a lot more gigabit customers.

The big drawback to the upgrade is that many older coaxial cables won’t be able to handle that much bandwidth and will have to be replaced. Further, upgrading to 3 GHz is going to mean replacing or upgrading power taps, repeaters, and other field hardware in the coaxial network. CableLabs is talking about finalizing the DOCSIS 4.0 specification by the end of 2020. None of the big cable companies have said if and when they might embrace this upgrade. It seems likely that many of the bigger cable companies are in no hurry to make this upgrade.

Low Latency DOCSIS (LLD). Another drawback of HFC networks is that they don’t have the super-low latency needed to support applications like intense gaming or high-quality video chat. The solution is a new encoding scheme being called low latency DOCSIS (LLD).

The LLD solution doesn’t change the overall latency of the cable network but instead prioritizes low-latency applications. The result is to increase the latency for other applications like web-browsing and video streaming.

This can be done because most of the latency on an HFC network comes from the encoding schemes used to layer broadband on top of cable TV signals. The encoding schemes on coaxial cable networks are far more complex than fiber encoding. There are characteristics of copper wires that cause natural interference within a transmission path. A coaxial encoding scheme must account for attenuation (loss of signal over distance), noise (the interference that appears from external sources since copper acts as a natural antenna), and jitter (the fact that interference is not linear and comes and goes in bursts). Most of the latency on a coaxial network comes from the encoding schemes that deal with these conflicting characteristics. The LLD solution bypasses traditional encoding for the handful of applications that need low latency.

Virtual CMTS. One of the more recent improvements in coaxial technology was distributed access architecture (DAA). This technology allows for disaggregating the CMTS (the router used to provide customer broadband) from core routing functions, meaning that the CMTS no longer has to sit at the core of the network. The easiest analogy to understand DAA is to consider modern DSLAM routers. Telephone companies can install a DSLAM at the core of the network, but they can instead put the DSLAM at the entrance to a subdivision to get it closer to customers. DAA allowed cable companies to make this same change.

With virtual CMTS a cable network takes DAA a step further. In a virtual CMTS environment, the cable company might perform some of the CMTS functions in remote data centers in the cloud. There will still be a piece of electronics where the CMTS used to sit, but many of the computing functions can be done remotely.

A cloud-based CMTS offers some advantages to the cable operator:

  • Allows for customizing portions of a network. The data functions provided to a business district can be different from what is supplied to a nearby residential neighborhood. Customization can even be carried down to the customer level for large business customers.
  • Allows for the use of cheap off-the-shelf hardware, similar to what’s been done in the data centers used by the big data complies like Google and Facebook. CMTS hardware has always been expensive because it’s been made by only a few vendors.
  • Improves operations by saving on local resources like local power, floor/rack space, and cooling by moving heavy computing functions to data centers.

Summary. There is a lot of discussion within the cable industry asking how far cable companies want to push HFC technology. Every CEO of the major cable companies has said that their eventual future is fiber, and the above changes, which each bring HFC closer to fiber performance, are still not as good as fiber. Some Wall Street analysts have predicted that cable companies won’t embrace bandwidth upgrades for a while since they already have the marketing advantage of being able to claim gigabit speeds. The question is if the cable companies are willing to make the expensive investment to functionally come closer to fiber performance or if they are happy to just claim to be equivalent to fiber performance.

The Beginning of the End for HFC?

coax cablesWe’ve spent the last few years watching the slow death of telephone copper networks. Rural telcos all over the country are rapidly replacing their copper with fiber. AT&T has made it clear that they would like to get out of the copper business and tear down their old copper networks. Verizon has expressed the same but decided to sell a lot of their copper networks rather than be the ones to tear them down. And CenturyLink has started the long process of replacing copper with fiber and passed a million homes with fiber in urban areas in 2016.

Very oddly, the dying copper technology got a boost when the FCC decided to award money to the big rural copper owners like Frontier, CenturyLink and Windstream. These companies are now using CAF II money to try to squeeze one more generation of life out of clearly old and obsolete copper. Without that CAF II money we’d be seeing a lot more copper replacement.

I’ve been in the telco industry long enough to remember significant new telco copper construction. While a lot of the copper network is old and dates back to the 50s and 60s, there was still some new copper construction as recently as a decade ago, with major new construction before that. But nobody is building new telco copper networks these days, which is probably the best way to define that the technology is dead – although it’s going to take decades for the copper on poles to die.

This set me to thinking about the hybrid coaxial networks (HFC) operated by the cable companies. Most of these networks were built in the 60s and 70s when cable companies sprang up in urban areas across the country. There are rural HFC networks stretching back into the 50s. It struck me that nobody I know of is building new HFC networks. Sure, some cable companies are still using HFC technology to reach a new subdivision, but nobody would invest in HFC for a major new build. All of the big cable companies have quietly switched to fiber technology when they build any sizable new subdivision.

If telco copper networks started their decline when companies stopped building new copper networks, then we have probably now reached that same turning point with HFC. Nobody is building new HFC networks. What’s hanging on poles today is going to last for a while, but HFC networks will eventually take the same path into decline as copper networks.

There will be a lot of work and money poured into keeping HFC networks alive. Cable companies everywhere are looking at upgrades to DOCSIS 3.1 as a way to get more speeds out of the technology – much in the same way that DSL prolonged copper networks. The big cable companies, in particular, don’t want to spend the capital dollars needed to replace HFC with fiber – Wall Street will punish any cable company that tries to do so.

Cable networks have a few characteristics that give them a better life than telephone copper. Having the one giant wire in an HFC network is superior to having large numbers of tiny wires in a copper network which go bad one-by-one over time.

But cable networks also have one big downside compared to copper networks – they leak interference into the world and are harder to maintain. The HFC technology uses radio waves inside the coaxial cable as the method to transmit signal. Unfortunately, these radio waves can leak out into the outside world at any place where there is a break in the cable. And there are huge numbers of breaks in an HFC network – one at every place where a tap is placed to bring a drop to a customer. Each of the taps and other splices in a cable network are sources of potential frequency leakage. Cable companies spend a lot every year cleaning up the most egregious leaks – and as networks get older they leak more.

Certainly HFC networks are going to be around for a long time to come. But we will slowly start seeing them replaced with fiber. Altice is the first cable company to say they will be replacing their HFC network with fiber over the next few years. I really don’t expect the larger cable companies to follow suit and in future years we will be deriding the networks used by Comcast and Charter in the same way we do old copper networks today. But I think that somewhere in the last year or two we saw the peak of HFC, and from that point forward the technology is beginning the slow slide into obsolescence.