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Network DVR Comes Cheaper Than Thought

When Cablevision Systems Corp. chief operating officer Tom Rutledge announced the company’s network digital video recording test in March, he maintained that it costs less to record programs for customers inside the company’s network than to put a digital video recorder set-top in each home.

Turns out, those costs could be far less.

Richard Doherty, an analyst with Seaford, N.Y.-based The Envisioneering Group, said that with storage costs dropping, by next year Cablevision could provide network DVR service for less than $100 per home, compared to the $300 or more it costs to put a digital video recorder in each household.

“Centralized storage is getting cheaper,” said Doherty, who predicted per-terabyte costs will drop to $500 in 2007 from the $1,000 to $1,500 range today.

In late March, Cablevision announced plans for a network-based digital video recording test, where it would provide 80 gigabytes of storage, enough for up to 45 hours of content, for each of its digital subscribers.

If, for instance, 1 million homes signed up for the service, Cablevision would need to build a data center and fill it with servers to house 80 million GB of data, or 80,000 terabytes. (Cablevision currently counts 1.9 million digital subscribers.) At Doherty’s $500-per-terabyte cost estimate, that’s $40 million for servers to store 80,000 GB of video content.

Compare that to the $300 million cost of buying a digital video recorder for 1 million subscribers — and that doesn’t account for set-top maintenance costs, Doherty said, since the hard drives in some boxes might fail over time, requiring replacement.

And each install or replacement requires sending out a technician in a truck, which costs the company $50.

“Given the enormous popularity of digital video recorders, and the expense associated with purchasing and deploying conventional DVR devices, we believe we’ve developed a smarter and more elegant approach,” Rutledge said in announcing the test.

Instead of buying hundreds of thousands of DVRs from Scientific Atlanta, Cablevision is buying server hardware and software from Arroyo Video Solutions, based in Pleasanton, Calif., to launch its network DVR test.

“Our architecture was built in anticipation of all the stuff we’re seeing right now,” said Arroyo CEO Rick DeGabrielle, citing Cablevision’s plans, as well as Time Warner Cable’s “Start Over” and “Look Back” network-recording initiatives.

The rollout is something of a coup for Arroyo. It has announced video-on-demand server deployments with Time Warner Cable in Portland, Maine, and Wilmington, N.C. The company said it has other deployments, but cannot release the names of those markets.

“We do content acquisition, storage, distribution, streaming and personalization,” DeGabrielle said. “We can ingest and store content, create one or more copies and are able to stream that content instantaneously.”

With Cablevision, “if 1,000 customers want the same thing, we’ll have 1,000 copies of the same program,” he said.

Arroyo’s standard vault server can ingest 200 standard definition 3.75 Megabit streams coming in simultaneously, DeGabrielle said. That translates to about 4,500 hours of content. “We could take any number of servers and can make those servers act as one server,” if an operator needs more ingest capacity, he said.

With network digital video recording, no one knows exactly how many programs subscribers will chose to store on a weekly basis. Cablevision has set a current limit of 80 GB of storage, so Arroyo will configure its system to handle the 80-GB full-capacity requirement.

VOD EVOLUTION

Digital recording on a network, in effect, is a video-on-demand service, with the content streamed back to viewers on their request. As VOD technology has evolved, operators have separated the storage function from the streaming function, DeGabrielle said, to give them greater flexibility for upgrades.

Launching a network DVR service automatically increases a cable operator’s storage needs on day one, when the service is launched, DeGabrielle said. It may take time, however, for usage, and thus streaming capacity, to grow, so operators can add stream capacity as usage increases, he said.

The streaming devices Arroyo sells can handle up to 3,000 on-demand streams simultaneously, he said. For Cablevision, when a consumer plays back a recorded program, it will look like any other VOD selection Cablevision might send from its headend to the home.