Satellite first, FTTH (much) later

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Not all crazy ideas are crazy.

Netflix is talking about delivering ultra high definition content to its subscribers, using the 4K video format currently under development. Real time streaming of 4K content will require something like a 100 Mbps to 1 Gbps connection. Or it could be downloaded, over time, to in-home hard drives at slower speeds.

Either way, it would strain existing networks. A gigabit is only possible with fiber. In theory, cable modem service can support 100 Mbps speeds, but only for a very limited number of homes in a given area and only intermittently over long periods of time. Just supporting a constant 10 Mbps stream for a day or two is problematic.

That’s why any nationwide 4K content distribution is likely to first come via satellite.

HBO, for example, could make a satellite stream of 4K content available to a national market of 120 million homes today, for more or less the same cost as deploying that service via a cable or FTTH system that serves a town of 20,000 homes. Even if you factor in the cost of the satellite capacity, it’s still in the same ballpark as building a small FTTH system.

Satellite companies, such as DirecTv and DISH, were the first and most aggressive HDTV content providers in the late 1990s. They made satellite broadcasting’s economies of scale work to their advantage. As more homes bought HDTV sets, the balance starting tipping toward cable companies and they upgraded plant, so they could provide HDTV within their systems, first on a broadcast basis and then, as HDTV penetration grew, as an on demand service.

Eventually online companies, like Netflix, got into the HDTV game. But only because demand for megabit-class Internet service grew to the point where it could be deployed to and adopted by the majority of U.S. homes. HDTV was only one of many factors driving that demand.

It will take ten to fifteen years for the price of 4K technology to drop and consumer adoption to rise to current HDTV levels. At that point, it will be a demand driver for FTTH networks. In the meantime, look to satellite companies to lead.

Comments (3)

3 Responses to “Satellite first, FTTH (much) later”

  1. Steve, you are seriously mixing apples and oranges. Layers and boundary points are being confused both technically and from a business model perspective. A review of how DVD/HD/flat panel evolved (ie from the edge), as well as how the internet scaled in the late 1980s and 1990s due to expanded calling areas (LATAs) (whereby the core became the edge) proves that Netflix could be a real cable killer if the FCC supports it in its effort to get around layer 2-3 bottlenecks.

    HBO and satellite will definitely play roles, but on-demand Netflix is the new DVD and real disruptor to the vertical cable model and high-cost video bundle.

    • Steve Blum says:

      I don’t think we disagree, Michael. Core Internet traffic management is as important to the video market as the last and middle miles. But Netflix is doing a fine job of eating cable’s lunch without gigabit throughput or 4K content. My point is that we’ll see a relative handful of 4K homes spread over a continental sized market for the next few years, which is satellite’s sweet spot. The disruption will continue regardless.

  2. rconaway says:

    Talk about a technology in need of a customer. Most people can hardly tell the difference between 720 and 1080 now. Until 80″ TV’s become the norm along with giant living rooms, it’s a waste of effort. Our economy is going backward and with real unemployment at 14%, half the people in the country on the government dole one way or another, and the other half scared to death about getting taxed out of business or losing their jobs, I doubt that this technology will penetrate more than 1% of the country in 8 years.

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