[opendtv] Re: The rationale for retrans consent from local broadcasters

  • From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Tue, 06 Oct 2015 07:43:13 -0400


On Oct 5, 2015, at 9:52 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx>
wrote:

No, Craig. It made economic sense to get broadcaster content on all the TV
distribution media that people were using. "Superior" has nothing to do with
it.

Yes broadcasters wanted to be everywhere, but they were already on cable
without additional compensation. CATV was just a means to extend the reach of
broadcasters...

But that changed when the cables started to deliver additional programming, and
to make matters worse, the cable industry entrepreneurs had the nerve to charge
subscriber fees to help their fledgling networks make ends meet. The
broadcasters saw dollar signs.

In some unarguable ways, the OTA medium continues to be "superior" to the
others. For instance, it is the most survivable. People bought cable because
it has access to way more frequency channels than OTA could offer, so
broadcasters wanted to get on that bandwagon too. It's simple.

People bought cable because it was a superior medium. You did not need tall
outside antenna masts and antenna rotators, as I had to use at the last two
homes where I had no access to cable. And you did not have to endure snow and
noise.

As cable added more programming, people started to subscribe to move beyond the
limited content available from the broadcasters, and to access content without
the restrictions imposed by the FCC.

But the reason broadcasters move to the MVPDs was about money.

It is unarguable that the ATSC standard was designed for those old clunky
outdoor antennas, and did not reach as many homes. If you wanted to do the
outdoor antenna thing, in many cases you could get great pictures; in many
cases you could not. Remember Mark Schubins' famous apartment?

The fact remains that superior broadcast technology was available, and the ATSC
ignored it, because they understood that the real goal was to get the standard
mandated so they could collect the royalty money, and the broadcasters could
collect the subscriber fees from the MVPDs that became the pipe into more than
90% of U.S. Homes.

All of these new options are filled with the same library
content from the oligopoly,

Even if that were true, the mere fact that you have numerous competing
sources are now available to everyone is a huge plus. (Remember? One
supermarket in town can set whatever huge markup they please. Multiple
competing supermarkets cannot.

Sorry Bert, but there has been plenty of competition since the VCR. The ONLY
content that is limited in access is the live linear streams from the
oligopolies. The stuff most of us pay for.

All these new sources that are using the Internet are complementary, unless you
refuse to pay anything, in which case you get to watch some shows on a delayed
basis. You still have to pay to get the best stuff.

Around and around we go.) And in fact, some of these sources are now also
creating original content, and they ARE NOT members of the congloms.

This is a minor breakthrough, but it comes out of the same playbook. As the
President of WGN stated, you need some original content to get people to come
to your service.

There is one source that built an empire around this business model - HBO. They
have done this by leveraging each advance in technology to reach their paying
audience. But keep in mind, even HBO and Netflix are dependent on the same
talent pool, the same production companies that everyone uses to create high
quality content. And everybody supplements their original content with content
from the congloms. For HBO the majority of their content is recent Hollywood
movies.

But we still need reasons to pay for this access other than
convenience. Audiences are built with new original content,
not reruns.

Really? So, movie "channels" like HBO, Netflix, and Amazon are pointless,
were it not for their original content? They wouldn't build any audience?

Movie channels are a dime a dozen. They started by competing with the VCR and
blockbuster. I can download movies from Apple or Amazon or buy a DVD. The
original content is the bait to get you into their service. Everyone builds the
backbone of their service by licensing content from the congloms.

There are exceptions in the MVPD bundles. Discovery, HGTV, Food Network and
other special interest channels create their own low budget original content.
They can do this thanks to the subscriber fees, just as Netflix can afford to
create content now that they have more than 50 million subscribers.

Says who, Craig? The way the marketplace works, more people get into the
business, although more than likely, they will have to tighten their belts.
Substantiate your idea that this can't happen or isn't happening. It happens
all the time.

Competition usually drives prices down. In this case, competition is driving
prices up, because the scarce resources are controlled by a handful of
oligopolies, protected from anti trust by the politicians.

This has nothing to do with any perceived neutrality mandate.
That already existed in practice,

Bullsh*t. It "existed in practice," until the Internet began to carry
competing content. We've been around this circle a ton of times, and Craig
insists on going back to square 1.

Sorry Bert, but the marketplace worked this stuff out. The only issues were in
properly provisioning the interconnect points and building out the edge
networks to handle the huge increase in demand for bits.

There is no reason to recreate the existing MVPD model via
the Internet, as this model is being replaced thanks to
technical evolution.

Halleluja. Progress.

You totally misinterpreted what I said.

We don't need rerun channels in a world where almost every popular program is
available from an Internet server. And we no longer need to sit in front of a
TV connected to a cable or Dish. Thus there is no reason to recreate the old
MVPD business model on the Internet.

Instead, a new MVPD model is moving to the Internet. This model still offers
the most popular sources that offer live linear channels with original content
(i.e. slimmer bundles), and it now offers access to the program libraries on
demand. And we get to watch the content we are paying for anywhere we have
Internet access.

This is what happens with technology evolution. Yes we have more providers, and
this may help to bring prices back down a bit. But this is mostly due to the
ability to finally bypass expensive choke points like the MVPD Set Top Boxes.
We will continue to pay as much or more for the content, and now we pay the
cable company for the broadband instead of the in-band TV service.

A brief aside. We have a tree service coming today, and I discovered that our
cable wire had come off of a sub pole close to the house. I pulled a string and
got a Cox service guy out the same day to install a new drop to the house. I
guess the old cable drop, probably 30 years old, was barely adequate to deliver
the digital services - the analog signals were marginal at best. With the new
drop the analog channels look almost as good as the digital HD. And my
broadband performance improved dramatically. I was getting about 25 Mbps on
average. The first speed test with the new cable came up at 63.99 Mbps. Last
night during prime time it dropped to about 59 Mbps.

Sorry, the article noted that capital dollars have gone
down for potential competitors, not the cable monopoly.

Craig makes things up again, to fit his narrative. This is the quote, Craig,
exactly as I wrote:

http://www.bloombergview.com/articles/2015-09-17/it-s-still-pretty-great-to-be-a-cable-company

"But cable operators' biggest capital expenditures are on the set-top TV
boxes that they lease to customers. It makes sense that they would be buying
fewer of those in light of both the changed regulatory situation and the rise
in cord-cutting, but that isn't exactly the same as signaling a big decline
in investment in broadband infrastructure. In any case, it seems unlikely
that cable companies would be making big merger bets just because they're
hoping for a favorable court decision down the road."


You were close, however, as usual you left out the relevant part of the
paragraph:

One possibility is that they think net neutrality isn’t long for this world.
Economist Hal Singer of the Progressive Policy Institute argues that falling
capital expenditures by broadband providers (the cable companies plus AT&T
and Verizon) since the Feb. 26 net neutrality decision are hurting the
economy and will make it hard for the FCC to defend its ruling in court on
cost-benefit grounds. But cable operators’ biggest capital expenditures are
on the set-top TV boxes that they lease to customers...

Title II has already caused a reduction in broadband investment. The cable guy
who installed my new drop yesterday said as much. They are moving out new
investments because they have such a superior product today. And potential new
competitors are sitting on the sidelines hoping that the courts will overturn
the Title II decision.

And once again, the FCC was given the authority to open up the market for STBs
in 1995. It has only taken twenty years, and the Internet to create a bypass to
this MVPD cash cow. I would hope that the MVPDs are reducing investment in
their brain dead boxes, as Apple and Google and Amazon can offer a better TV
experience for less than $70.


So, go ahead and retract your previous comment that "the cabled MVPDs do have
franchise agreements, contracts with content owners, and local, State and FCC
regulations they must obey." MVPDs can, in fact, drastically change their
business model, Craig, and some already have.

It's a fact. No reason to retract. We've been over this many times. They do not
have the rights to offer a nationwide service. That's a whole new ballgame. As
we have seen, the content conglom is moving carefully and slowly into this
space. I expect this to change next year, after. The FCC order relating to
Internet MVPDs is released.

They have a great future, since the FCC just entrenched their
monopoly with Title II.

Sorry, Craig, but nothing in Title II says your service must be a local
monopoly. It's just that if your service is NOT a local monopoly, then Title
II might not be as absolutely essential.

Exactly backwards. Regulation creates and entrenches the monopolies.

Regards
Craig

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