Investors and owners should consider their options
By Jack Burton and Jay Rolls
Broadband Success Partners
2022 promises to be another “white hot” year for telecom M&A. Yes, fiber deals will continue to grab the headlines. But, cable assets are also worthy of your attention. Depending on their current condition, coax and HFC networks can be upgraded to enable service providers to deliver 1 Gbps services and beyond without making the move to Fiber-to-the-Home. In many cases, this can be done at a reasonable cost and with a modest level of effort.
If the system currently supports DOCSIS 3.0 but not 3.1, that upgrade can be made at the headend for only about $10 per home passed. With this change, 1Gbps download service can be offered and delivered.
A modern cable plant (of least 750 MHz) can be upgraded to 1.2 GHz using amplifiers and nodes along with mid-split upgrades. This will allow for download speeds well beyond 1 Gbps and upload speeds approaching 300 Mbps. This can typically be achieved at a cost below $75 per home passed.
If symmetrical Gigabit speeds are necessary to meet customer needs and/or to be competitive, then changing to a high-split is required. While the act of making this change is no more difficult than going to a mid-split, incompatibility of in-home equipment, particularly legacy video set-top boxes, make this a more expensive consideration at $100 to $200 per home passed.
As long as there is enough downstream spectrum to accommodate the video services displaced by the new upstream band, and if 1 Gbps speeds will suffice for the next several years, there may be no need to make further upgrades. Such an investment should even allow for the deployment of a 2Gbps downstream product, if the operator desires.
Upgrades taking the plant to the new spectrum made possible with DOCSIS 4.0 to achieve more than 2 Gbps downstream may require extensive plant changes, including a move to Distributed Access Architecture. With DAA, many of the functions performed at the cable headend are moved out to the HFC nodes in the field. DAA is required to both achieve improved data transmission performance in the plant and to use a minimum amount of headend space for new transmission equipment. More nodes may also be required. Such upgrades could exceed $300 to $350 per home passed, plus the cost of new CPE for customers.
To deliver more than 2 Gbps downstream and 1 Gbps upstream, the plant bandwidth will also need to be extended from 1.2 GHz to 1.8 GHz with an ultra high split. This will enable at least 4 Gbps downstream and 2 Gbps upstream. This requires new taps and other passives and might also involve full subscriber equipment replacement and a change to the in-home architecture. It may also be time to consider IPTV over DOCSIS instead of continuing to use QAM video. Such a move could enable the cable plant to eventually support up to 10 Gbps symmetrical. Changing the passives and in-home architecture could add another $100 per home passed, plus the cost of new CPE and wiring for customers. To this, add the cost of an IPTV conversion, if pursued.
Since the cost to upgrade is only one part of the financial analysis, we strongly recommend that present and prospective investors consider the total cost of ownership inclusive of the forecasted operating expenses for power, preventive maintenance, and repair. Factoring in those elements will cause the decision pendulum to swing in the direction of fiber. But it may not land there as the obvious choice. The technical and business variables differ in each situation. One size does not fit all. As we like to say: “FTTH or next generation HFC? It depends.”
Jack Burton & Jay Rolls
Broadband Success Partners