Editorial : The Differences Between RBOCs and Cable MSOs

With the demise of many CLECs and the reduction in spending by Tier 1 telcos, billing and OSS vendors are trolling for other big fish, and cable MSOs are the target du jour. It’s true that the telco and cable industries share some similarities. Both experience modest competition to date; a handful of players control 90 percent of the market; both industries wish to be independent of their network infrastructure vendors; both need highly scalable billing and OSS platforms; and more.

Given that, however, they are vastly different. Here are my top 10 things you should know about the differences between RBOCs and cable MSOs from a billing and OSS vendor perspective.

1. No Legacy OSSs

Cable companies virtually have no OSSs for residential video services. They have billing systems, but no service provisioning or fault management systems to speak of. For the most part, network monitoring for many small to mid-size MSOs is a middle-level manager with a TV on his or her desk. When the set goes dark, the manager becomes aware of a network problem. Alternatively, when subscribers call to complain about a service outage, the network manager goes to a map and starts sticking push pins into the map as a way to identify the reported trouble spots. In fact, cable companies up until now would refer to OSS as the service management system. Finally, the customer service profile ID is associated with a street address and not a personal name. The bottom line regarding next-generation residential cable OSS is that vendors will be coming to a green field.

2. Cable Will Be IP-Centric

The RBOCs’ involvement with IP voice services in the residential market is minimal. A convincing case has yet to be made for replacing Class 5 local circuit switches with IP softswitches, and most RBOC DSL customers use a non-RBOC ISP. Softswitches will eventually be the platform for cable telephony, and cable companies will be the ISP of choice for cable subscribers. The complex job of IP address management for a range of CPE (customer premise equipment such as set-top boxes, remote media gateways, IP phones, and so on) will require QoS-based IP billing and OSSs!

Consider the temporary assignments of IP addresses. Do you block off a set of IP addresses based on customer data rate subscription plan (X number of addresses for gold, X number for silver and X number for bronze level of bandwidth)? Or do you assign blocks or IP addresses based on fiber node (500 households specific to a geographic location), or by service package (subscriber gets voice and Internet access so they get a discount) or by subscriber multimedia set-top box functionality? By the way, a cable operator like any other ISP must show 80 percent IP address utilization to the American Registry for Internet Numbers. On top of this, consider open access where a customer could use another ISP (Juno, Earthlink, MSN, etc.) IP address. There’s no throwing multiple subscriber IP addresses at this problem, and it will require unique QoS-based IP billing and OSSs!

3. Complex Technology

Due to federal regulations, RBOCs don’t own nor are they responsible for CPE. Their network service ends at their termination box inside your house. Cable companies for the most part own the set top and the cable modem. They will also own the soon-to-be-deployed IP remote media gateway. Billing information most likely will have to be gathered from home CPE, and OSSs will have to be tightly integrated. Would a cable operator want to have independent or smokestack OSSs for voice, video on demand and Internet access interacting with a single multifunction (voice, data, and video) set-top box?

4. CLEC Business Model

Cable companies go after RBOC business customers with a separate CLEC operation. The only thing in common between consumer or video entertainment infrastructure and the cable operator’s CLEC business unit operations is the fiber backbone network. On the other hand, RBOCs use the same infrastructure, billing and OSSs for business and residential customers. The jury is still out on whether to integrate residential and business billing and OSS like Cox Cable or to create separate residential from business like Comcast. My feeling in the long run is a separate billing/OSS model is the way to go. Residential voice service will be IP based and businesses will want metro fiber Gigabit Ethernet, unbundled ILEC loops, number portability and IP VPNs (both MPLS and IPSec based).

5. New Service Orientation

The only thing RBOCs have added in their residential market offering that has created new revenue is DSL Internet access. Nothing on my radar screen sees anything else new for consumers anytime soon, other than RBOC long-distance service. Meanwhile, cable companies have a good shot at doubling or tripling revenue in three to four years with new services. In addition to providing Internet access, cable modems can be used for telephony, electronic programming, real-time video on demand, interactive TV and more. Cable modems are outselling telco DSL 2-to-1, and Cox Communications is now the 12th largest telco, with 400,000 cable telephony subscribers to date. New services require new billing and OSSs. Cable MSOs will be investing in new service infrastructure while the RBOCs, relatively speaking, are on hold.

6. No Regulatory Carrots

RBOCs were required to open their networks to IXCs for equal access as a result of the break up of AT&T in 1984 and their OSSs as a result of the Telecom Act of 1996. In contrast, there’s no carrot on a stick hanging over cable companies to open their networks for open access to ISPs. Yes, Time Warner agreed to open access as part of its AOL merger deal with the FCC, and also AT&T Broadband agreed to it as part of its acquisition of Media One. However, what the FCC didn’t count on was that after a Time Warner or AT&T customer paid for a modem connection, Time Warner or AT&T Internet access would be free—whereas if customers wanted anyone else’s ISP service, they would have to pay $20 per month extra. The FCC was asleep at the wheel again; there is no open ISP access in the cable industry. Bottom line is that there are no OSS opportunities in cable created by FCC rulings like the ones in the telco world.

7. Standards

The RBOC world is full of standards, but other than for set-top boxes the cable world is a standards vacuum. Cable companies don’t want OSS standards. For example, if there was an order entry OSS standard in cable, then the FCC would have a starting point to mandate open ISP access. Yes, the cable industry has CableLabs, but that’s not a standards organization. Rather, it is a nonprofit research and development consortium owned by the cable MSOs. The accredited standards body in cable today is the Society of Cable Telecommunications Engineers (SCTE), with a tradition of focusing exclusively on outside cable plant. We are going to see each MSO creating its own OSS pseudo-standards.

8. Autonomous Units

In the RBOC world you don’t see a wire center or switch manager selecting services to be offered in a local market or establishing operational procedures unique to a market. However, local cable operations within an MSO do just that—they have a lot of autonomy. They can select the channel programming and more. So, if you’re designing cable billing and OSS systems for next-generation cable TV, beware of multiple MSO OSS pseudo standards and even more pseudo standards within an individual MSO.

9. Outsourcing

The cable industry loves outsourcing, whereas RBOCs have massive internal IT departments and love to control as much as possible in house. Convergys, CSG and others make big bucks billing for the cable companies and may continue to do so for the years ahead. Excite@Home was an early winner with cable companies, because it offered operators a jump start into the high-speed Internet access business without requiring them to hire ISP customer service or IT people. However, they dropped Excite@Home because it was siphoning off revenues that they believed they could retain by doing things themselves. The lesson learned: cable companies are likely to outsource OSSs in the short term, but watch out for internal OSSs to be taken back in the long run.

10. No Long-Term Competition

In the long term RBOCs will have lots of competition, and cable will not. RBOC DSL will never be able to offer premium movies on demand; 1.5 Mbps just is not going to deliver the quality demanded by the movie studios, and the economics of two-way interactive TV via satellite or 3G wireless will keep it from being competitive. Cable, however—because of its ultra broadband two-way capacity—will beat out any other competition delivering voice, data and entertainment video. So billing and OSS vendors, be patient, because cable will be delivering these new services eventually.

These are my top 10 differences between RBOCs and cable MSOs. If you need a better understanding of cable and telco technologies, we offer “Understanding Telecommunications Technologies for Non-Engineers,” a seminar offered at a number of convenient sites on various dates. For details please check out www.telestrategies.com or call (703) 734-7050.