Digital TV Facts: The Latest

If ABC can stream ad-supported prime-time shows on the internet one day after they air, and make money doing so, why wouldn’t the network do the same with video on demand?

That question—and it’s a dangerous one, potentially—is posed by Michael Willner, CEO of cable operator Insight Communications. For now, it may be just hot air. But let’s for a moment take this exercise, however speculative, up to the next level: If a broadcast network can distribute its shows via the net and VOD, for how long does it remain a broadcast network? For how long does the network still need its affiliates?

Affiliates won’t go away anytime soon. They have local ties and broad audience reach, including mandated cable carriage. They may soon gain additional cable channel slots for multicasting—slots that are otherwise very difficult to come by. They have 24 hours of air time to fill each day, and when they aren’t showing network programming, they’re promoting it.

But what favors affiliates most, perhaps, is sheer inertia. Our whole system of television, initially designed with an inherent bias in favor of local broadcasting, has grown up around them. Networks are in the habit of distributing their programming in this way, and audiences are in the habit of watching it this way.

Habits can change, though, and eventually they will. That process has probably already begun. I really wonder about this: Are affiliates on the verge of a long struggle for their very survival?

Earlier:
• Will TV’s new rules serve big players or public?
• To make multicast TV local, stations need viewer content

• Link: Broadcasting & Cable

The House passed the telco-backed national video franchise bill in a 321-101 vote. The strong network-neutrality amendment from Rep. Ed Markey (D-Mass.) was defeated 269-152. But the piffling one from Rep. Lamar Smith (R-Texas) was approved 353-58, proving once again that Congress isn’t afraid to stand up for nothing.

• Links: New York Times, Washington Post

The way we watch television for many years to come may be determined by lobbying and rulemaking currently underway in Washington. FCC chairman Kevin Martin, according to several reports, is ready to propose new regulations that would give local stations additional channel slots on cable systems. In Congress, meanwhile, new telecom legislation is in the works, including proposals for national video franchises.

Why should cable companies be required to carry local stations’ multicast channels? The FCC, broadcasters and some members of Congress have various legal theories or rationalizations. Near as I can tell, they come down to this:

1. The public interest is served by:

• the availability of free television, which provides news and information to the public;

• the availability of local television, which informs viewers about their local communities;

• the availability of a diverse television programming, which gives voice to many points of view and enriches public debate.

2. Multicast must-carry fosters the continued existence of free, local TV while enhancing programming diversity.

While I pretty well agree with point No. 1 (in theory, anyway), I do not see multicast must-carry as the best or only way to accomplish it.

Let’s stop and think about this. A multicast carriage requirement would just fast-track a new, hastily constructed wing onto the sprawling muddle of existing broadcast regulations. If we’re to have sensible regulation that truly serves the public, regulators must start to recognize over-the-air TV in its current context—shrunken, if not marginalized—and stop seeing it as the dominant television platform that it was in the 1950s. Let me be clear, though: What’s shrunken is the reception of TV over the airwaves, which is down to perhaps 15 percent. Broadcasters are not marginalized, however; they remain very powerful, largely because they were granted privileged access to most viewers through cable TV and now enjoy wide carriage via satellite TV services, too.

From its earliest regulation, broadcast television was treated as a scarce resource because of its use of public spectrum, which is finite. But television, especially in the broader sense of any video content accessible from our homes, is no longer a scarce resource, and it no longer even requires use of the broadcast spectrum.

Broadcast television may seem to be modernizing—after 13 years and billions of dollars, TV broadcasts will go all-digital in 2009. But let’s be honest: we aren’t ushering in “Tomorrow’s TV Today!”—as the FCC breathlessly calls it on its promotional website for DTV. In techie terms, we’re cutting over from an old legacy system to a newer legacy system. But we’re still on big iron. Broadcast TV is the equivalent of a mainframe, controlled by various sys admins in Washington. And despite the interactive capabilities built into digital broadcast TV, most Americans watching TV over the air will use their TV sets as dumb terminals. What’s more, the cutover to digital TV is unlikely to lead to a resurgence in over-the-air viewership, and may in fact contribute to further declines.

Is it not odd, if not bizarre, that simply because some small slice of a community watches a particular television station over the air, the federal government gives the owner of that station the right to claim space on a cable system? Video over the internet, though dwarfed by TV, is growing at a very fast rate. When 15% of people watch net video, some of which is locally produced, will we then say that YouTube should have guaranteed space on every cable system?

The changes in the video section of the marketplace of ideas need to be recognized, and the nation’s regulatory environment must be sorted out and made to serve today’s public. If we truly value free, local, diverse TV programming, we should insist that our representatives in Washington find a way to make free, fast broadband available to all Americans, while enshrining net neutrality principles that preserve an open internet. Technical challenges remain before internet video can challenge broadcast TV, and broadcast TV won’t, and shouldn’t, go away. But rather than doling out special favors, we need to look to broadcasters to justify their own relevance. Most have more than sufficient resources to ensure their continued viability.

As new legislation begins to take account of changing technology, will the public interest take center stage? Not with this Congress, it seems. Moves toward telecom “reform” are being driven by the demands of industry lobbyists, especially representatives of large phone companies seeking national video franchises that would compete with cable TV. Here, from Drew Clark, is a troubling tidbit:

If Bell advocates of the [House] telecom measure are not able to generate support against a neutrality amendment, the measure could slip to next week, said industry sources.

Telecom lobbyists want to crush net neutrality before allowing legislation that regulates telecommunications companies to go forward. This is an outrage.

Most Americans watch TV for several hours each day. Do you suppose many are even aware of what’s taking place? I wonder at our chances of getting new regulations that will benefit the public in other than incidental ways.

The possibility that DirecTV and Dish Network will join forces is taken seriously by an Oppenheimer analyst, who downgraded DirecTV Group shares to “Neutral” from “Buy,” citing risks related to a potential merger with EchoStar.

In such a scenario, DirecTV may not be the only suitor, according to analyst Thomas W. Eagan.

Who might the others be? Perhaps AT&T or a major cable TV player, in the eyes of some industry analysts.

• Links: Business Week, Cable World

Although his MSN Video portal draws more visitors, Bill Gates admits he sneaks over to YouTube to watch Harlem Globetrotter clips.

“If we did YouTube, we’d be in a lot of trouble,” he joked—admitting that many of the shows are in questionable copyright territory.

The latest web video rankings from Nielsen/NetRatings (unique visitors, February 2006):

1. MSN Video, 9.3 million
2. YouTube.com, 9 million
3. Google Video, 6.2 million

Gates on internet TV:

It “blows away the broadcast model,” Gates said, predicting that “this is the year all the pieces” will come together and eliminate the “dividing line between TV and the Internet.” Asked about the traditional broadcast model, he bluntly pronounced, “It’s gone. It was a hack.”

The Microsoft chairman, whose company provides IPTV software to AT&T, tells Gary Arlen that when it comes to net neutrality, he’s “in the middle.”

• Links: IP Democracy, Nielsen/NetRatings [pdf]

We know what’s prevented the FCC from mandating cable TV slots for the new local digital multicast channels (an issue chairman Kevin Martin now wants to reopen). Not what, but who: The two Democrats on the FCC who, until last week’s Senate confirmation of Bush nominee Robert McDowell, had equal say with Martin and the commission’s other Republican member.

Public interest requirements for local broadcasters should take precedence over cable carriage of the new broadcast television channels, according to Democratic commissioners Jonathan Adelstein and Michael Copps. I agree. Station owners’ demands for cable carriage of their primary television signals already have a privileged legal status, predicated upon the notion that local TV serves a public purpose. (A countervailing notion is predicated upon the actual viewing of local television programming.)

Without strong, enforceable local-content requirements, why should the FCC carve out more cable real estate for broadcasters? What stands in the way of more local programming is the cost of producing it. Weather and local news (much of it repurposed) fill air time on some multicast services, but the primary source of content will probably be—as with most broadcast programming— networks and syndicators.

What if broadcasters drew on the talents of their viewers? Content produced or selected by users is fueling the internet video boom—and threatening further erosion of local-TV viewership. As networks and producers gain new ways to reach into viewers’ homes, bypassing the affiliate gatekeepers, local stations will feel increasing pressure to justify their existence. The barrier to wider acceptance for YouTube and its kin, and internet video in general, is the perceived inconvenience in terms of platform and usability, not to mention bandwidth. But what’s easier to use than broadcast TV, which happens to have abundant bandwidth? Independent-minded creators of net video might cringe at the very thought of being coopted by TV. But many would relish the opportunity to put their work before more eyeballs.

If viewer-produced mashups found a mainstream audience, perhaps a few of the powers-that-be in television—or Congress—would even think twice about decimating citizens’ fair-use rights by enacting the broadcast flag.

Would down-and-dirty user production values ever make it on a broadcast channel? I’ll be the first to admit that I don’t know. But user-created content needn’t cost stations anything, and where better to experiment with innovative forms of local programming than on these new channels that most people have yet to even discover?

Earlier:
• Digital TV multicasting: More local channels for free

A week’s worth of reminders that television’s ever-expanding universe is up for grabs:

• More video ads move online, rivaling TV (Washington Post):

…Google video ads’ low cost and ease of use for advertisers—they can upload their video and pay online by credit card—should be a concern for television networks.

“If you want to buy an ad on TV, boy, it will take you forever,” [Sascha Zorovic, an analyst with Oppenheimer & Co.] said. “You’ve got to find the right person, set up a meeting, maybe go to New York.”

• Mobile TV use leaps 40% in first quarter (Hollywood Reporter [sub.])

• Internet TV viewing makes big jump (Blogcritics)

• TV downloads: The current options (TechCrunch)

• Disintermediation: The future of TV distribution? (erikso.com)

• Key Senate Democrat unveils draft telecom bill (National Journal)

A change in strategy could be afoot for AT&T’s IPTV service, according to a Cowen & Co. analyst.

AT&T’s “Project Lightspeed” fiber- to-the-node (FTTN) architecture may be experiencing challenges and even if deployed could be un-competitive, said analyst Tom Watts in a note to investors. Watts expects AT&T to move to a fiber-to-the-curb (FTTC) or fiber-to-the-home (FTTH) architecture for selected markets, similar to Verizon Communications’ FiOS.

Broadband Reports on the fiber-to-home option:

The technology continues to drop in price, and Verizon has started using pre-installed home Coax to reduce installation costs even further. And since little has been deployed, AT&T doesn’t have much to lose by running fiber the rest of the way to customers’ doors.

Last word from AT&T is that they remain committed to Lightspeed’s copper-for-the-last-mile VDSL2 plan (although they do run fiber to the premises in some subdivisions). Sticking to the status quo means they’ll probably come up short in the HD department compared with satellite or cable TV—or over-the-air TV in most cities, for that matter. If U-verse can’t lure upper-end subscribers, would they rather compete on price? They didn’t commit billions to this initiative with the intention of being the cut-rate option.

• Links: Forbes, Broadband Reports

Alan Weinkrantz is taking AT&T’s IPTV service for a test drive, and he’s invited the world—including AT&T chairman Ed Whitacre—along for the ride. In his SAtechBlog yesterday, Weinkrantz told us about his phone call to customer service to order installation of the 200-channel U-verse product at his home in San Antonio. The city is home base for AT&T, and in recent months the company has been signing up local in-home testers for the video service, part of its $4.6 billion Project Lightspeed initiative.

Lightspeed has been beset by delays and glitches in the early going, which is hardly a surprise given its complexity. More ominously, many analysts wonder whether the hybrid fiber and copper network will be capable of delivering a video product that can compete with cable or satellite TV. On the net, some consumers now bristle at the idea of letting AT&T track their television viewing habits after the company has apparently provided phone call and internet usage records to the government without warrants, perhaps in violation of federal law.

Whitacre, who may be in need of some levity right about now, should monitor Weinkrantz’s frequent “Memo to Ed” asides—including his invitation for Whitacre to join him and his HDTV salesman for lunch at Hooter’s.

One nugget caught my eye in Weinkrantz’s post about his conversation with an AT&T call center rep:

I pressed her various times as to whether this was HDTV, and she was very clear that it was not HD. She told me that in about five months, they would bring out another set of set top boxes that would deliver HD quality. She did tell me that while it was not HD, it would be a very good quality picture, and I would not be disappointed.

While AT&T has long planned to include high-def programming as part of the service, HD remains one of the big question marks about Lightspeed because of network speed constraints. We should watch to see what kind of HD service they offer initially. Will it be delivered over Lightspeed, or will they offer HDTV programming via satellite, through their partnership with Dish Network (which might explain the new set-top boxes)?

• Link: SAtechBlog

It’s upfront season, when broadcast and cable TV networks put on a really big show for advertisers in hopes of winning commitments to buy spots on their fall schedules. This “bizarre ritual” is “very old-school,” according to Jon Fine. What’s most bizarre, perhaps, is that the networks’ annual dose of manufactured magic continues to deliver the goods despite ad-skipping TiVo users and the growth of the internet:

If you expect an imminent earthquake in TV spending to shake this year’s upfronts—well, stop. Even though the rites come amid a steady string of digital TV initiatives and the onward march of digital-video-recorder [DVR] use, the nastiest thing people will say about the event is that dollars may drop slightly.

Are advertisers and their agencies lazy, bedazzled or in denial—or does traditional TV still command such reach that its share of the ad spend remains justified?

• Link: BusinessWeek

The future of television in the United States may be shaped by the outcome of the “net neutrality” debate. As interested parties describe—or spin—their favored legislative remedies, preplexed onlookers can almost be forgiven for losing sight of exactly which turf each side is trying to defend.

Advocates of neutrality want to bar telecom providers from giving certain kinds of internet traffic preferential treatment—no slowing down Google at the behest of premium payments from Yahoo, for example. Preserving the internet as it works today has a certain laissez-faire connotation—and neutrality opponents have aimed straight for it. They want to stake their own free-market claim by decrying attempts to regulate their ability to determine varying tolls for various kinds of internet traffic.

Defenders of net neutrality are wringing their hands over the potential for public confusion. One sign: This week, Peter Rothberg’s used his blog on The Nation’s web site to warn readers away from an anti-neutrality ad running on that very site:

Companies like AT&T, Verizon, BellSouth and their trade associations are spending millions every week to mislead and misinform the American public through tricky ad campaigns such as these.

As the invaluable group Free Press reports, their latest attempt to hoodwink Internet users is a cutesy cartoon at www.dontregulate.org—a clever piece of industry propaganda that is riddled with half-truths and conveys a fake populist message that sounds plausible, while undermining the work of genuine public and consumer advocates.

• Link: Act Now

American consumers can get more TV shows via the internet, and more internet video via TV, thanks to months of dealmaking among industry players. But despite all this much-publicized flirting, my computer and my TV set remain far from married. What gives?

Richard Siklos takes stock of why convergence isn’t here yet:

For various reasons, watching TV programs delivered by the Internet on regular TV looks like it will remain tantalizingly out of reach for all but the most enthusiastic gadget junkies for some time….

David G. Sanderson, who heads the media consulting practice at Bain & Company, offers four reasons most people won’t be downloading their favorite shows onto their TV’s any time soon: limitations in broadband infrastructure, the degree of readiness among electronics makers to provide a product with mass appeal, the behavior of consumers and the agenda of the players in the TV ecosystem.

I’ll buy that, almost.

The crux of the problem, in my mind, is broadband infrastructure. If the internet could deliver enough bandwidth to your home to provide a cable TV-like experience—scores of different programs available instantly—the other issues would be solved in fairly short order. The set-top boxes that would connect your TV to the net would appear, providing a kind of TV tuner for the internet. If it’s easy enough to use, consumers will come on board. Business models will develop, most won’t work and most early investors will lose their shirts, but eventually people will figure out ways to make money from this.

But the infrastructure problem is a very difficult one, and it does involve “the agenda of the players in the TV ecosystem.” One way to discern their agendas will be to watch the wrangling over net neutrality and telecom legislation.

• Link: New York Times