Competitors Battle over MDUs

Competitive pressures and advancing technologies are converging on the multiple dwelling unit (MDU) market.

Competition continues in the wake of sustained telco video initiatives and the upholding by a Federal Court of Appeals in May of a ban on cable operators arranging exclusive service contracts with owners of MDUs.

The technology drivers include passive optical networking (PON) equipment, bendable fibers, and niche video, high-speed data and telephony equipment designed for applications that—while niche—generate up to tens of millions of dollars in bulk account revenue for some larger MSOs.

Must-haves

Driving this business are expectations from consumers that services in all MDUs resemble those found in single-family residences.

“Services like HD and high-speed Internet are must-haves for MDUs. They must be at parity with their competition. Maybe not the best out there, but not an inferior service. It’s a parity issue,” said Bruce Leichtman, principal for the research group, LRG.

It’s an issue that has become top of mind for both MSOs and its competitors, such as Verizon’s FiOS and AT&T’s U-verse, as they jockey for position in this market.

The market is worth fighting for, with nearly half of all U.S. apartment residents saying the availability of broadband influences their rental or buying decisions, according to the National Multi-Housing Council.

Hotel chains also figure in the mix. (For more on the hospitality market, click here.)

“We’re seeing new flat screens with bad analog feeds, and guests are bringing their own content and devices with lots of Internet streaming…. It’s a big issue,” said Doug Rice, EVP and CEO for the Hotel Technology Next Generation group (HTNG).

MDU technology

MDUs are the larger market. “About one fourth of the U.S. households are in MDUs,” said Michael Weston, director of marketing for Verizon Enhanced Communities, said. “It’s a long-term investment. But now we can do fiber to the desktop and minimize the distance…using smaller (ONTs).”
 
In July, Verizon began extending its FTTP offering into more MDUs by deploying router-sized GPON ONTs from Motorola and Alcatel-Lucent.

“It means we can go deeper into MDUs with tighter, bendable fiber,” Weston said. “Within 18 months, the ONT will be the size of a deck of cards, (further) reducing the space requirements.”

Space constraints and need for scaling requirements leads service providers to distinctive technical solutions. Bendable fiber is one. Introduced in mid-2008, Corning’s ClearCurve was pitched as a fit for the MDU market, where a typical installation could require a dozen 90-degree bends.

Bend-insensitive fiber has been around longer than that, however. Draka Communications, which collaborated with 3M on its One Pass Fiber Pathway product introduced at the FTTH Conference in Houston last month, introduced its BendBright fiber in 2002. (For more on 3M’s One Pass, click here. For more on discussion at the FTTH event on how to fiber MDUs, click here. For additional discussion of bend-insensitive fiber, scroll to bottom of this article on PON technologies.)

What is new is the drive to bring fiber not only to an MDU, but also through the hallway and into individual units. But fiber is not the only technology playing in this space.

ATX Networks is one vendor with a host of specialty products addressing MDU applications (including hospitality) ranging from analog and digital video deletion and insertion to digital voice switches for intercoms to amplifiers and nodes to connectivity, filters and power converters.

Another vendor with a reputation for custom engineering, Vecima Networks developed its Terrace MDU gateway as a multi-channel QAM to RF converter that acts like one very large digital-to-analog (DTA) terminal device. Reportedly, Comcast has signed an agreement to deploy Terrace.

Software helps reduce the operational costs of Terrace, a compact and complicated device.

“There’s lots of parallel processing, de-modulating, de-crypting, all in a box 20 inches x 30 inches. It’s essentially a headend in a bread box, with fixed capital costs and future-proof because it’s re-configurable with software that requires only a network software adjustment,” said Richard Blenkinsop, VP of marketing and business development for Vecima.

Still more fiber

While Verizon has deployed its FiOS technology to residential and MDU and small-to-medium-sized business (SMB) endpoints, MSOs have been pushing fiber deeper, via GPON, EPON and cable-friendly RF over Glass (RFoG) access technologies, as well.

“The MDU, hotel and SMB markets are heating up,” said Shane Eleniak, EVP of marketing and business development for Alloptic. “MSOs are using the SMB market to push fiber into MDUs, and they are paying more attention to that market.”

Alloptic’s family of access devices work in multiple settings. “There’s lots of RFoG-type technology, micro-nodes, even in hotels. And with 8-16 apartments per micro-node, it’s even more economical for MDUs. The business case is there for MDUs,” he said.

Yet participants in these markets have no illusions about the technical and business challenges that lie ahead.

“Owners of apartments are asking for optimum choice for their customers. But how do we structure them so each customer has maximum flexibility of choice?” said Jim Honiotes, principal and COO for LCR Enterprises, a consultant to cable’s MDU market. The problem is that “no one thought beyond one set of coax and twisted pair.”

“But there is also lots of opportunity to grow into the MDU market as long as cable continues to innovate and head towards an all-digital lineup.”

Competition

The market has become an active battleground in the competition between MSOs and telcos, with vendors playing the role of fiber access arms dealers

“Technology is continuing to evolve with fiber, PON infrastructure and upgraded paths to PON, and the applications of core technologies like wall-plate placed ONTs, which look like CATV jacks but with PON behind them. And innovations at the MDU level are the key because of the high density,” said Steve Hersey, senior director of customer marketing for Motorola Access Networks.

Yet for competitors vying for market share in this space require some deft maneuvering, solutions compatible with their existing triple-play infrastructure and a commitment.

“It will take dedication to the MDU market for MSOs, similar to what the residential market has been,” said Tom Williams, VP of marketing and business development for ARRIS. “The MDU market can’t take a back seat to residential, and will require some tenacity.”

The stakes are rising. “The MDU, hotel and small business markets are very important to us, and competition is likely to grow,” Verizon’s Weston said.

“We’ve launched video services to small businesses like doctor’s offices and bar settings. There are challenges to network planning, but we’ve always seen the development of FiOS as a consumer and small business play. Now, it’s been accelerated.”

Just how quickly service providers accelerate their moves into these markets will likely determine who gets what market share, given that business and bulk accounts tend to churn more slowly than those on the residential side.

Influencing those moves will be the development of fiber transport and equipment designed for the voice, video and data applications that consumers now expect wherever they happen to live or temporarily reside.

—Craig Kuhl and Jonathan Tombes