Transitioning from Analog to Digital in Student Housing Bulk Video

by Katie Sloan

Henry Pye
RealPage Inc.
Providers are reducing or eliminating analog TV channels – a transition that could prove costly for off-campus student housing and multifamily communities that offer bulk video services.

Providers are reducing or eliminating analog TV channels – a transition that could prove costly for off-campus student housing and multifamily communities that offer bulk video services.

Over the next few years, almost every cable operator (MSO) will significantly reduce or completely eliminate its analog television channels.

The cost of new service tiers and digital set-top boxes could be significant for off-campus student and other multifamily communities offering bulk video services.

To compete with telecommunications companies such as Verizon and AT&T, as well as private cable operators (PCOs), the MSOs need bandwidth for high-definition programming and other services. The most cost-effective way to find bandwidth is to harvest analog channels. Depending on the compression standard, deleting one analog channel makes room for 12 or more digital standard-definition channels or two to three HD channels.

Currently, most MSOs maintain between 10 to 35 analog channels. However, these exclude many popular channels.

Truncate the Lineup or Upgrade to Digital?
For student housing, preleasing begins as early as September for the following academic year. With 51-week leases, this means owners market bulk video service to prospective residents whose leases will not end for nearly two years. As a result, if an MSO suddenly reduces or eliminates analog channels, owners have marketed a service offering that no longer exists. An owner must then either give residents the truncated analog lineup or upgrade to a digital bulk offering.

In most circumstances, residents will balk at a truncated lineup when they were marketed far more. And, depending on the bulk service agreement, the owner won’t save any money; the bulk fee may remain the same despite the reduced channel lineup.

Upgrading to a digital bulk offering generally requires a digital set-top box or CableCARD at every television. Some residents will have digital cable-ready televisions or equivalent PCs, but set-top boxes will be a necessary component of any digital service for the near future. With basic set-top boxes retailing for between $6 and $8 per month, digital service can significantly affect a bulk video budget.

Further complicating matters, many MSOs have used the analog-digital conversion to reorganize and/or simplify their programming tiers. Thus, the MSO may have no digital equivalent to the previously offered analog bulk lineup. The next tier of service could be a costly 100-160-channel digital lineup.

The cost of upgrading from analog to digital bulk differs widely depending on the MSO and region. There are at least six different scenarios. Averaging these scenarios, we estimate an additional cost of $5.50/bed/month. For a typical 200-unit, 600-bed, off-campus student housing community this equates to more than $3,000 a month.

Many MSOs are bullish on transitioning analog channels to digital and are moving full speed ahead. Others say the transition will be gradual, though recent moves indicate a faster schedule. Often, the smaller the market, the more imminent is the transition. Cable systems with less capacity have an even greater need to free up bandwidth. Smaller markets, including many college towns, often have between 20 and 50 percent of the capacity of large urban systems. Smaller towns are also far less likely to have aggressive franchise boards or other organizations to oppose a dramatic reduction in analog channels.

Direct Broadcast Satellite Systems Becoming Obsolete
Multifamily owners using direct broadcast satellite (DBS) systems deployed by PCOs or telcos are finding that their systems are already outdated or will be in a few years. While newer DBS systems are promising and competitive, the upgrade cost is significant.

To delay or avoid the expense of upgrading, many PCOs and ILECs knowingly provide uncompetitive services—an acute problem for student housing offering bulk video programming. Though bulk video services are inevitably moving toward all-digital programming, many DBS deployments cannot provide basic digital programming. There may only be 30 to 60 bulk analog channels with no digital programming or premium services such as high-definition content and digital video recorders.

Moreover, many analog DBS bulk video offerings have been assembled piecemeal to obtain the best possible pricing. These situations offer no simple upgrade and the programming cost can easily double. In addition, because DBS programming providers have been slow to embrace bulk digital services, their bulk pricing for set-top boxes is relatively high.

Multifamily owners need to be extremely careful when negotiating these agreements. While owners with DBS systems may have more options and will often be able to time the transition from analog to digital, the potential cost and pitfalls may be greater than some MSO-forced transitions.

What Can Owners Do?
At a minimum, owners with bulk video service from an MSO should talk to the provider about its plans. If the MSO plans to convert portions of the bulk analog lineup to digital, an owner should negotiate the terms of any digital bulk video solution as far in advance as possible. Obviously, the existing contract for bulk video services will determine the dynamics of the negotiation. As soon as possible, an owner should work with knowledgeable counsel and/or consultant to ascertain how the current contract addresses costs and liabilities for a bulk digital video service.

Owners with bulk video service via DBS should determine the competitiveness of bulk and premium services and system and determine the cost to eventually provide digital bulk. Future bulk video service agreements with any provider should either include set-top boxes and bulk digital video service from the beginning or specify the cost and corresponding responsibilities for later in the contract term.

Owners should always consult with counsel and/or consultant when addressing such issues in a new agreement or renewal, and they should ensure that liabilities relating to bulk services are adequately addressed in every resident’s lease. Finally, whenever possible, a transition from analog to bulk digital service should be made at move-in to simplify the task of managing many digital set-top boxes at one time.

Henry Pye is Vice President of Resident Technology Solutions for the RealPage. You can reach him at [email protected].

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