The largest cable MSO (Multiple System Operator) in the U.S., Comcast Corp. (CMCSA) is all set to deploy switched digital video (SDV) in its hometown, Philadelphia, using Motorola Inc. (MOT) devices.
Earlier in June, Comcast stated in a Federal Communications Commission (FCC) filing that it will abide by the agency’s SDV policy and will start rolling-out SDV from the second half of 2010 and more aggressively in 2011.
SDV technology distributes digital video content through cable network in a cost-effective manner so that additional activities can be performed using the free bandwidth. SDV will enable Comcast to send a multicast stream of a 3DTV channel when a customer in a given service group select it for viewing.
Comcast is aggressively reclaiming 40 to 50 of its existing analog channels to free up spectrum for DOCSIS 3.0 technology. Deployment of SDV will also free up bandwidth that can be used by Comcast to offer more than 150 high-definition TV channels (HDTV), HD video-on-demand programs and DOCSIS 3.0.
We believe deployment of SDV is in line with Comcast’s decision to offer more IP-based video and overall service convergence, implementation of managed IPTV services and shifting toward more targeted advertisement.
According to our view, major SDV equipment manufacturers that may benefit from Comcast are Cisco Systems Inc. (CSCO) and Motorola since these two companies are the two initial SDV platform suppliers of Comcast for its trial run. Arris Group Inc. (ARRS) and Harmonic Inc. (HLIT) will also benefit from additional edge QAM business from Comcast.
SDV pioneer BigBand Network Inc. (BBND) may also be a possible beneficiary due to its enhanced SDV platform, supported by an innovative software solution called Converged Video Exchange (CVEx). With CVEx, cable MSOs can deliver both real-time and on-demand video services to IPTV set-top boxes, personal computer and mobile handsets.
We believe SDV technology will prove to be beneficial for Comcast based on its excellent track record of a bandwidth-efficiency tool. Major Cable operators such as Time Warner Cable Inc. (TWC), Charter Communications Inc. (CCMM), Cable Systems Corp. (CVC) and Cox Communications Inc. are aggressively deploying SDV. Industry sources predicted that SDV may be deployed to about 90 million homes in the U.S. by end 2012 from 35 million homes at the end of 2009.
We maintain our long-term Neutral recommendation for Comcast. Currently, it has a short-term Zacks #3 Rank (Hold).