Blind spread-spectrum watermarking schemes with correlation based detection algorithms suffer significantly from host signal interference. Improvements are possible when considering the host signal as side-information to the watermark encoder. Costa showed that, in a specific case, host signal interference can be avoided completely. The scalar Costa scheme, which operates on structured codebooks based on scalar quantizers, performs relatively close to the ideal Costa scheme in terms of maximum rate of reliable communication (capacity) over a channel with AWGN attack. The concept of amplitude limited channels in conjunction with repetition of the signal constellation is also known in the communications community by the name modulo channel, which has been studied into great detail. Starting from the modulo channel, which implies a constraint on the amplitude in the receiver, we model the watermarking scenario based on scalar quantizers. The capacity of this model is presented and compared to the theoretical results for SCS watermarking in the case of AWGN attacks. A final analysis of SCS in terms of optimality, based on the results with the modulo channel, shows that even binary SCS is near optimum for one-dimensional (symbol-by-symbol) embedding in terms of capacity
for an i.i.d. Gaussian host signal and an appropriate AWGN attack.