[opendtv] Re: News: The Internet revolution is about to be televised

On Wed, 23 Feb 2005 09:52:07 -0500, Craig Birkmaier <craig@xxxxxxxxx> wrote:
> At 2:34 PM -0600 2/22/05, John McClenny wrote:
> >No one is going to implement the system without walls without being
> >able to capture the same profit as a walled system.  How much more are
> >people willing to pay for a naked high bandwidth/high volume network
> >connection?
> >
> 
> They may have no choice.
> 
> In reality, cable MSOs are undermining their own walled gardens as
> they improve the bandwidth of the cable modem services that ride on
> the same wires. Once you have 5 Mbps, you are able to deliver almost
> any content in real-time -and anything in non real time.
> 
> A 10 Mbps telco broadband service is relatively easy to achieve, and
> with fiber to the curb that could be 50 Mbps.

The Cable IP networks are designed for high speed access with bursty
traffic.  It will not stand the load of continous delivery of TV video
to lots of TV sets.  The problem isn't so much at the edge, but closer
to the core of the network.  They are not currently sized for this
large, continous load,

The pricing we pay for broadband is based on relatively small amounts
of data used per month.  The BitTorrent users, although few in number
and transfering relatively small amounts of data, are major loads on
ISP networks.  To build a network that can sustain even an MSO
equivalent video load with mulitcast and unicast VOD is neither cheap
nor easy.  Look at Broadband reports and all of the high data volume
users getting kicked off of cable systems when they hit some usage
caps.  Now make everyone a high data volume user and the system
collapses.

> The real issue here is carriage versus content. Today the money we
> sent to cable and DBS covers both - we just don't know how this money
> is split between the content conglomerates and the carriage
> conglomerates. And we don't know how much revenue is generated above
> and beyond the stuff covered by subscription fees - how much revenue
> is generated via VOD, ad insertions, VoIP and other services that are
> not part of those subscriber fees.

Right now the money paid for content subsidizes the carriage.  Both
the MSOs and telcos leveraged existing infrastructure to add IP
connectivity.  Moving their networks to the next size level involves a
lot of forklift upgrades if you want to build an infrastructure that
can handle the general any content to any person case.  What are we
willing to pay for this?

If we separate the carriage from content, we have capped the potential
revenue for the carriage provider while forcing them to bear all of
the risk of building and supporting the network.  The business id iffy
enough under the current setup, remove any hope of incremental revenue
and the networks will not get built.  Unless, of course, we let the
governments build and subsidize the networks, but that is another
discussion.
> The reality is that with sufficient bandwidth you can deliver or sell
> everything on the list above. In some cases a service may be
> delivered via multiple media, as is the case for satellite radio,
> which is also being delivered via the Internet and Dish networks. And
> in some cases content may be moved among a variety of devices for
> consumption - like an iPOD.

I think the reality is that you cannot build a business case for a
truely open network at this time.  Too much risk and not enough
revenue.

> So the real question becomes one of the relative costs of buying
> bundled packages versus buying stuff ala carte. The politicians and
> regulators would have us believe that ala carte pricing will be much
> more expensive. But this fails to account for the bloated prices we
> are paying for may of the bundled services.  And it fails to account
> for the actions of a real marketplace, if one were allowed to exist.

Ala carte pricing brings more transparency to content pricing.  It
would raise rates for, say ESPN, because the base of subscribers would
be smaller.  Under the current system, I am subsidizing ESPN viewers
if it is part of the base package and I don't use it.  The longer term
advantage of ala carte is reducing the pricing power that the content
providers have right now by allowing consumers to make more
incremental choices.

> 
> I do not think that the walled gardens are going away any time soon.
> I do believe that subscribers may benefit from the ability to pay
> only for the channels they want. And I believe that there will be a
> significant shift toward the direct sales of popular content via the
> Internet.
> 
> You can buy multiple episodes of many popular TV shows on DVD today -
> I ate at a Cracker Barrel last night. In the store they were selling
> DVDs with Bonanza, Andy Griffis, and other old shows for $5.99. I can
> easily imagine subscribing to a popular TV show directly, rather than
> getting it via a walled garden. These shows may have content that is
> not in the version that is edited for content and stuffed with
> commercials.  In other words, this is not a total change in the old
> business models, but an evolutionary change based on the ability to
> market directly to individual and homes, including the advertising
> side of the equation.
> 
> I suspect that the telcos may adopt some kind of hybrid. Enough
> bandwidth to buy services from outside their walled garden, alongside
> the traditional walled garden services that will be sold ala carte or
> in tiers. The real value of any distribution infrastructure will NOT
> come from pushing bits to the masses. The real value will come from
> pushing localized and personalized bits to subscribers.

The problem is still delivering a lot of unicast streams through a
network.  Multicast is the equivalent of broadcast TV - everybody see
the same set of channels and I only have to send them out once.  If we
allow anybody to view any random content from the internet and display
it as TV, the difficulty of handling this large, random amount of
realtime data becomes overwhelming - beyond what a cost effective
network can sustain.  Sizing the network for the worst case increases
the costs for the light users, effectively subsidizing the heavy
users.

I don't think that we will se real ala carte since it so complicates
the channel ordering process.  I do think that we will so more
granular small groups of related channels sold together.

> This is a classic Catch 22 situation. You cannot compete unless you
> can offer a viable broadband service, and that automatically means
> that you cannot build walls around the service, despite the fact that
> you may be offering walled garden services.

You still have the wall between PC and TV content.  It isn't going
away anytime soon.

Doc McClenny
 
 
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