Digital TV Facts: The Latest

Americans’ access to internet content and subscription TV services are two key issues at stake today as the Senate Commerce Committee prepares to vote on a major revamp of the nation’s telecom laws. Senators have proposed more than 200 amendments, and the telecom, cable, media and technology industries will be watching closely.

Network neutrality advocates, including Sen. Daniel Inouye (D-Hawaii), remain unhappy with the latest version of the bill from Commerce Chairman Ted Stevens (R-Alaska).

“The new draft’s provisions on net neutrality utterly fail to protect consumers and preserve an open Internet,” Inouye said in a statement.

“Under the current language, network operators will have the ability to dictate what the Internet of the future will look like, what content it will include and how it will operate.”

Streamlined video franchise procedures could speed the arrival of new television services provided by telephone companies in more American homes. The danger is that existing consumer protections will be stripped away and promises of increased competition will not benefit all Americans:

On video franchising, Inouye and Sen. Conrad Burns, R-Mont., have sought to require Bell operators to provide pay-television service to all neighborhoods, regardless of income.

Along the same lines, Sens. John Kerry, D-Mass., and Barbara Boxer, D-Calif., plan to file an amendment to require that new providers build out their high-speed networks throughout entire franchise areas. “Kerry and Boxer feel that the Senate should not legalize cherry-picking of cable service,” a Kerry aide said.

How much can a 159-page bill, thick with regulatory arcana, really matter? Well, just look at how much is being spent by some of the industries attempting to influence the political process:

Verizon Communications, SBC Communications Inc., AOL Time Warner, General Electric Co./NBC, News Corp./Fox, Viacom Inc./CBS, Comcast Corp., Walt Disney Co./ABC, and the National Association of Broadcasters, the National Cable & Telecommunications Association, and the United States Telecom Association together gave nearly $45 million in federal political donations since 1997. Of that total, $17.8 million went to Democrats and $26.9 million went to Republicans.

These eight companies and three trade associations also spent more than $358 million on lobbying in Washington, since 1998, when lobbying expenditures were first required to be disclosed.

Much more than just money is on the line, according to the nonpartisan government watchdog Common Cause:

What is at stake is not just how much consumers pay for access to the Internet or their cable TV, but rather the fabric of American civic discourse—how ideas get communicated or are stifled, whether citizens will have a way to get the information they need to govern themselves.

Stevens believes he has the votes to pass the bill, according to Reuters.

• Links: internetnews.com, National Journal, Report on fallout from 1996 Telecom Act from Common Cause [pdf], Reuters

If the broadcast flag isn’t quite coercive enough for your taste, Sen. John McCain (R-Ariz.) hopes to make it even more so. How? Through an amendment linking it to that, ugh, a la carte pricing scheme he loves so much that he wants to make it future First Lady.

The flag is an anti-piracy measure that saddles consumers and technology innovators with costly burdens. The advocacy group Public Knowledge has an action alert out on the broadcast-flag provisions in Sen. Stevens’ (R-Alaska) telecom bill:

The most recent version is worse than any before, without any real exceptions for fair use. Even worse, this time it’s paired with an Audio Broadcast Flag that will cover digital and satellite radio too. Government technology mandates all around!

Actually, the one good thing about McCain’s amendment is that it possibly undermines the flag. If a station won’t permit its affiliated cable networks to be sold separately, it wouldn’t get the alleged protections of the flag. Isn’t that better?

Ehh. The aftertaste lingers.

• Links: Multichannel News, Public Knowledge

FCC, you just forget about making anyone carry more than one channel per local station—that’s the message from Sen. Jim DeMint (R-S.C.). Satellite TV services like Dish Network and DirecTV would not be forced to carry local multicast digital TV channels for stations that they must carry, under DeMint’s planned amendment to Sen. Stevens’ telecom bill.

FCC Chairman Kevin Martin’s efforts toward requiring cable carriage of multicasts ran aground this week, but DeMint isn’t taking any chances, it seems. I haven’t seen the amendment, but I’m wondering: Would it eliminate the only existing “multicast must-carry” requirement? In case you’ve forgotten, it applies to Alaska and Hawaii, where direct-broadcast satellite services must carry local digital TV stations, including multicasts and HD, by June 8, 2007.

Earlier:
FCC chair’s multicast plan draws more fire from Congress

• Link: Multichannel News

Two planned broadband TV services have each devised unusual strategies to acquire programming, which involve the purchase of two small cable TV systems. Titan Global Entertainment plans to launch a nationwide IPTV service, and eWAN 1 Inc. plans to stream live TV to its own handheld player. The path ahead is not without obstacles, according to Multichannel News:

These would-be Internet TV operators may face a buzzsaw of legal issues in moving content out-of-market, beyond existing geographic boundaries.

Existing contracts held by the cable acquisitions could open the door to negotiations for IPTV retransmission or, apparently, give the new owners alternate-platform rights contained therein. The latter scenario is called into question, though, by comments from a Turner Broadcasting spokesperson and a media lawyer, both quoted in Karen Brown’s article.

Turner is part of Time Warner, a corporate umbrella that contains several of the most popular cable networks as well as the nation’s second largest cable operator. Big players in the subscription-TV ecosystem may naturally be expected to marshal their forces against audience erosion from upstart internet-TV services. While AT&T and Verizon have the mass and the means to get programming deals, much smaller competitors like eWAN and Titan will need to be both resourceful and creative. If HBO and CNN are off limits, perhaps rather than trying to duplicate cable and satellite TV offerings they can instead focus on deals with independent producers.

Without net neutrality protections, though, small TV-over-IP ventures may be stopped in their tracks. Should the corporations that control the pipes—already having the advantages of size and vertical integration—be free to shunt everyone else’s video traffic off to the internet’s slow lane? This is why we need real, non-discriminatory net neutrality measures that go beyond what is in the latest draft of Sen. Stevens’ telecom bill.

• Link: Multichannel News

Dan Rather, giving a thumbs-down to the pencil-sharpening gig offered by CBS brass, is “seriously considering” a deal to host a weekly news program on Mark Cuban’s HDNet. In fact, he may decline offers from two major networks and instead sign a three-year contract with a channel that’s less famous than its outspoken owner.

Brilliant! If 16-year-olds are so bombarded by new media that they can no longer even identify the big broadcast networks, it would seem that Rather, by actively securing his continued obscurity, has slyly put himself ahead of the game.

Seriously, though. Why shouldn’t Dan Rather find a place where, on a smaller stage, he will be free to do the work he loves? Viewers would benefit from a new outlet for meaningful journalism, and Rather may even find a kind of redemption.

• Links: New York Times, Broadcasting & Cable

Dish Network and DirecTV would be permitted to downconvert the local channels they deliver to subscribers, under a revised draft telecom bill from Senate Commerce Chairman Ted Stevens (R-Alaska). Along with cable companies, the direct-broadcast satellite providers would be free to convert high-definition signals to standard definition under the latest draft.

The new version remains toothless on net neutrality (as before, the FCC would have to “study” the issue), though Stevens is said to be open to stronger requirements.

Among other changes, the new draft adds a broadcast-flag provision with language from Sen. Daniel Inouye (D-Hawaii).

• Links: National Journal, Multichannel News

Dish Network and DirecTV will market high-speed internet access to their subscribers under separate deals each has signed with the same broadband provider.

The internet service will be provided via satellite by WildBlue Communications. Satellite TV subscribers will need to purchase an additional dish to get broadband service. Dish, a unit of EchoStar, plans to offer the service to its customers in rural areas.

High-speed internet service, often bundled with video (and sometimes phone service) by its cable TV and telephone company competitors, has been a hole in the direct-broadcast satellite companies’ product offerings. Since they don’t have a line into the home, they have had to form partnerships with telecommunications companies and others to provide the service.

• Link: Reuters

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.

DirecTV viewers now have at their fingertips a list of the ten most popular programs in their area at any given time. The new feature from the satellite TV service, comparable to the “most viewed articles” box on many web sites, lists most-watched shows, whether from local or national channels.

As a fan of Google’s Zeitgeist (a weekly list of search trends) I’m intrigued by the notion of a real-time TV pulse-check. Though looking at these things serves only to remind me that I am strange…and perhaps we’re coming to a time when audience fragmentation will make most of our choices seem strange to one another, viewing or otherwise.

DirecTV’s “What’s Hot!” list may provide a window into what remains of the mass television experience. Give me the mass, though, and it makes me want to slice and dice demographically—to see what attracts the attention of people like me, and people unlike me. I, of course, don’t want to be sliced and diced (who does?); narrower data would raise too many privacy concerns. The top-ten list is tabulated anonymously, according to DirecTV.

The list is available to DirecTV subscribers on News Mix (channel 102) and Sports Mix (channel 104).

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

When cable or satellite TV services suspend popular channels over pricing disputes, viewers aren’t the only ones who take notice. Investors are approaching basic cable networks with caution, according to Kagan Research, in part because the days of automatic renewals are on the wane.

“Five years ago, no one would ever have thought a cable or satellite platform would drop a channel as big as Lifetime,” [says analyst Derek Baine.] “But earlier this year EchoStar did just that. Eventually Lifetime’s carriage was restored but only after a very acrimonious battle.”

Cash flow margins for channels are on the rise, while cash flow from cable operators’ channel business has declined:

“Cable operators are digging in their heels because they are tired of the value shifting from cable to the programmer,” Baine explains.

Nevertheless, subscriber growth at major cable companies is attracting Wall Street’s favor, according to Mediaweek:

…the top multiple-system operators reversed a six-year trend by adding basic video subscribers in the first quarter of 2006.

All told, cable added more than 220,000 basic subs in the quarter, thanks in large part to aggressive pricing initiatives that some observers said are designed to boost share prices.

Cablevision is a star performer:

Cablevision enjoyed its eighth consecutive quarter of basic sub growth, adding 39,000 new customers in first quarter. Once they take the bait, Cablevision subs tend to sign on for more advanced digital services. The company’s digital penetration is a whopping 68 percent, and average monthly revenue per basic sub for first quarter was $104.24, up 14 percent over ’05 (both figures are industry highs).

• Links: Kagan, Mediaweek

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)