[opendtv] Re: FCC on multichannel distributor competition
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Mon, 15 Oct 2007 09:06:26 -0400
Catching Up...
At 6:25 PM -0400 10/2/07, Manfredi, Albert E wrote:
> Craig's approach is to create a similar local monopoly in
OTA as we have with the MVPDs. Mine is to go the other way.
Since it is impractical to have competition among cable
systems in any given location, perhaps it is in these cable
systems that "content and carriage" need to be strictly
separated.
Here's a f'rinstance.
What if the umbillical services were strictly forbidden from creating
content (exception of local news and weather, perhaps), or from making
revenue from the ads in the content. What if their revenues came from
the fees they charged to the content providers, for distributing the
content, and perhaps also from a pure connection fee they charged to
subscribers.
No problem with charging customers a connection fee for the infrastructure.
But...
While I agree with the idea that the content providers should be
paying for carriage, the reality today is just the opposite - the
subscribers are paying the carriage fees.
I don't think the solution is to add more restrictions to a certain
class of carrier versus another or to totally separate content and
carriage.
Where would we be today if the cable industry had not made the
investments to develop content? We probably would still be watching
four or five broadcast networks.
What we need is real competition, not a regulated market where the
government imposes rules that distort normal market operation. If you
look at the U.K. the same networks that operate here in the U.S. are
PAYING for the right to be carried on Freeview. And this is true in
almost every country except fr the U.S. where the political clout of
broadcasters allowed us to evolve into this mess via must carry and
retransmission consent
Furthermore, I DO NOT agree that it is impractical to have local
competition for the delivery of entertainment bits. We already have
cable and DBS in every market, and Telco IPTV in many markets. What
we DO NOT have is competition between these distribution systems.
Rather tan broadcasters becoming part of a competitive market for the
delivery of video bits, they are the main reason that we do not have
competition. All of the Subscriber systems are acting as the billing
and customer service agents for the big media conglomerates and their
broadcast affiliates. Rather than compete with one another, they
choose to operate as an oligopoly, forcing customers to pay FAR MORE
than the cost of carriage. Rater than being compensated for
carriage,the conglomerates are imposing subscriber fees, in addition
to historically high commercial loads in the programming.
This could not happen in a competitive marketplace.
The reason I believe that we need to create a utility model for the
spectrum is to break up the power that is wielded by the media
conglomerates who control broadcasting today. The spectrum can easily
support a viable multi-channel competitor, as we have seen in the
U.K. But there is no incentive to do this as it would force real
competition in the marketplace, and the conglomerates would not be
able to continue their double dipping in the U.S.
The second reason to set this up as a utility is that it would make
it possible for virtually ANYONE to create a viable business in the
spectrum, paying the utility market rates for the delivery of their
bits. Linear time and channel programming is not going to disappear
in the hear future, but watching content synchronously as it is
broadcast is going to continue to decline for all but live programs.
And there is a wealth of possibilities for new forms of content and
information services that can be delivered in the broadcast spectrum.
And the third reason for the utility is that you need a mechanism for
redistribution of revenues from the large profitable market areas to
the less profitable rural markets so that we can properly fund the
development of a seamless infrastructure that serves everyone, not
just the major markets.
Now the content creators would benefit from the multichannel system
simply because they get more coverage and they have more spectrum than
they can get OTA. They also benefit from any other additional
distribution medium, including their OTA medium, simply because it
allows for more eyeballs in their Nielsen ratings. Content owners get
all the ad income.
This makes no sense at all. They already have virtually 100%
coverage for their broadcast networks - this is guaranteed by the
regulators. In addition, they have virtually 100% coverage (among
subscribers) on the multi-channel systems for the rest of the
networks they own, and they get the carriage companies to collect
billion$ in subscriber fees for them. The subscriber has no choice in
this matter, UNLESS they choose to pay only for the cheap basic cable
package, which coincidentally contains all of the local broadcast
stations.
If you want some of the content in the extended basic tier, you must
pay for ALL of it. This issue is at the very core of the class action
suit and the movement to force cable and DBS to offer programming ala
carte.
Bottom line, how can the conglomerates get more eyeballs than they
have now? Only by getting people to spend more time watching TV, or
by following those who are spending less time watching TV to the new
media where they are choosing to spend their time (aka YouTube,
iTunes, and other Internet entertainment and information services).
The network operators have an incentive to improve their plants, because
this allows them to offer more content choice, therefore more revenues
from the content owners. Not to mention other unrelated things, like
telephone and Internet.
The incentive already exists for this. In fact, cable, DBS, and the
telcos are the ones making most of the investment, not the
conglomerates. These services have spent more that $100 billion in
infrastructure upgrades since the DTV transition began. Broadcasters
have spent less than $10 billion on the DTV transition.
This would be more in line with the original CATV systems, and I think
it could restore equilibrium. Furthermore, the affiliates, who much like
the cable systems would create only limited content (e.g. news and
weather), would have the option of renting out space just like the cable
companies do. The OEOs would do whatever the company thinks is best.
OTA, they are already competing directly with other broadcasters.
Please get over this notion that broadcasters compete with one
another. Yes they play the ratings game and still try to find one of
those blockbuster programs that delivers a big audience, but they are
doing NOTHING to develop new businesses in the spectrum that might
lead to growth again in the broadcast industry. The reality is that
their core business continues to decline rapidly, but they are able
to compensate because the regulators are letting them bring in
millions in new revenues from subscriber fees to help make up for the
loss of carriage revenues once paid by the networks to affiliates.
Meanwhile the conglomerates are consolidating their grip on content
and working to gain favorable legislation so they can control how we
consume it and make us pay even more via direct payment for program
downloads.
This is a classic case of an oligopoly using the government to prop
up a business that could not exist in this form without the force of
government to overcome the normal operation of a competitive market.
Obviously, cable and DBS would object. It gives them less of a grip. But
to me, this is how you balance out the various media.
Get a grip Bert. Cable and DBS have little power, other than their
direct relationship with subscribers and their billing
, which the conglomerates use to collect direct payments for ad
supported content. They are willing collaborators in a system that is
responsible for U.S. TV viewers paying billions more than viewers in
the rest of the world for their entertainment fixes.
Regards
Craig
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