If you don't currently read Robert X. Cringely's column on PBS.com, you had better rectify that ASAP. A few weeks ago, he wrote on the coming crunch that's going to cripple cable networks unless they make some big changes. The in-depth analysis gives you a good feel for how close to the brink Big Cable has come.
Cable operators currently have about 750MHz worth of signal to play with. The big problem, however, is that the old analog channels (which they are required by FCC mandate to carry through 2012) consume 6MHz a pop. For a typical 70-channel package, you can kiss a solid 420MHz of bandwidth goodbye. So what's the capacity of that remaining 330MHz? Each 6MHz channel can roughly be translated into 28-40Mbps depending on the QAM implementation or from 1.54Gbps to 2.20Gbps of total bandwidth per node. Most cable nodes serve at least 500 users though Cox Communications is trying to get that down to 250 per node.
So what's left? An average of anywhere from 3-4.5Mbps of bandwidth per user on the node. Most standard digital channels consume about 2Mbps a pop whereas SDTV channels like ESPN can chew through 5-8Mbps each. It gets even worse once you factor in analog premium channels and PPV; now you're up to 600MHz or more consumed just by video or an average of 1.4-2Mbps per user on the node. It doesn't take rocket science to figure out that even with SDV, cable can't possibly deliver what it promises.
This also goes a long way towards explaining why "digital" cable often looks as bad as analog video. An uncompressed HDTV signal runs about 80Mbps; compressing it by a factor of 40:1 is bound to result in a lot of quality loss, especially since cable operators haven't made the move from MPEG-2 to MPEG-4 like satellite operators have been doing. It's also worth noting that satellite companies have been increasing their capacity at a much better rate than cable systems, though they still can't meet their HD goals.
Cringely prescribes a technology as old as the Internet to fix the issue: IP multicast. The idea is that data gets cached at the router level in order to efficiently spread data to a large number of nodes. It's a technology perfect for video distribution but due to its high bandwidth requirements and router load, it's been all but ignored for decades. It's an obvious solution, though it doesn't really help cable operators solve the problems imposed by the analog crunch. Even if they shelled out the big bucks to move every subscriber to digital cable at no extra cost, they're still mandated to maintain the old analog channels for existing cable-ready televisions. The next four years that they have to carry those signals will be "make-or-break" for them all.
It's only going to get worse. As systems like Verizon's FIOS and AT&T's U-Verse pick up speed, the pressure is on to ramp up speeds as quickly as possible. There's also the looming crunch from increased Video-on-Demand (VOD), more Internet distribution of video, increased telecommuting, and the striking writers going direct-to-viewers. This spells a strong possibility that we'll have more data than we can handle (nay-sayers aside) though it seems to come less from the backbone and more from the last mile.
The real solution is one that Verizon already figured out: shell out the big bucks to go all-fiber ASAP. (It's already paid off in some markets.) AT&T tried to cheap out and go with FTTN and VDSL, a play that's managed to get them a measly 6Mbps. Qwest is setting the investment bar even lower, a paltry $300M compared to Verizon's $23B overhaul. There's really no excuses either. Fiber gear keeps getting cheaper, the installation media is to the point where it's even more suitable for home installations and even some smaller companies are proving that fiber works. Motorola has also been trying to get cable operators to move aware from HFC and on to fiber.
In the meantime, we're being left in the dust. Japan is poised to have more FTTH subscribers than VDSL ones, China now has more broadband users than any other country and Singapore has plans to build a UTOPIA-style national fiber optic network capable of 100Mbps or greater. Frustrated at a lack of progress at the federal level, some states like New York and California are taking matters into their own hands.
So why all the focus on broadband? Because cable operators make almost all of their profit on it. Television service is, at best, a break-even proposition. The focus on VOD and offering more expensive digital tiers is an effort to try and boost profitability. In the meantime, cable modems are subsidizing the video and voice operations in a big way. That's the real reason that cable operators have been clamping down so hard on "excess use" and P2P users. It also explains their increased aggressiveness with long-term contracts, a relatively new thing in the cable markets. Churn costs big bucks and they can't afford to lose juicy customers.
The terrifying truth about telecommunications is that it's very close to collapse. Cablecos and Telcos aren't willing to make the investments needed to support the next-generation services but they're intent on trying to offer them anyway. Sooner or later, it's going to catch up with them in disastrous fashion.