Breaking Up The TV Cartel Is In The Public Interest

The Justice Department is making moves toward unwinding the stranglehold that today cable cartel has on the US TV marketplace, especially with regard to anti-competitive practices against non-cable players, like Netflix, Amazon, and Apple.

Justice Department Is Said to Investigate Cable Companies Over Internet Video - Brian Stelter and Edward Wyatt via NYTimes.com

The Justice Department is quietly investigating the cable industry’s behavior toward nascent online video competitors as part of an inquiry into possible anticompetitive practices by cable companies.

The investigation raises the prospect that the government’s antitrust lawyers will intervene in the complex and rapidly changing business of entertainment distribution. In the meantime, it raises new questions about an industry that has no shortage of them already.

Answers are probably not immediately forthcoming. As is typical in cases like this, the Justice Department declined to comment on the investigation or to confirm that it is taking place. But people with direct knowledge of the investigation who were not authorized to speak publicly confirmed, as first reported Tuesday night by The Wall Street Journal, that the department was examining broad changes in the marketplace for online video, including the use of Internet data caps by cable companies.

One of the issues involves whether those limits to the amount of video, audio and other data that users can download are discriminatory against Netflix, YouTube and other new digital video competitors. Comcast, in particular, has come under scrutiny for its past use of data caps and other network management practices.

The US model for today’s Old TV distribution is based on a/ free broadcast TV (which a declining number of people take advantage of) and b/ for fee cable (and satellite) TV (that a dominant and growing proportion of the population rely on). 

Local governments grant cable companies the right to a cable monopoly (usually a duopoly) in a geographic area, allowing them to charge a fee for TV service. Likewise, the US government allows similar models for satellite companies. The Multichannel Video Programming Distributors (MVPD’s) like Comcast and DirecTV also provide internet access to their customers, which at first they saw as simply an additional source of revenue. But now that we can stream video over the web, it’s become a huge competitive threat to their entrenched interests.

One result is the intransigence of cable companies regarding unbundling channels. Many users would like to not be forced to buy 70 channels in order to watch NBA games, or would like to just watch Game Of Thrones without the rest of HBO’s lineup.

Justice Department Is Said to Investigate Cable Companies Over Internet Video - Brian Stelter and Edward Wyatt via NYTimes.com

The department is also said to be studying the ways in which distributors bundle disparate television channels together in all-you-can-watch packages. Distributors and programmers have resisted calls to unbundle channels, but Internet distribution may give consumers more choices in that area — assuming that data caps or other network management practices do not stand in the way.

It is unclear whether the government inquiry is looking solely at cable and broadband Internet providers, or whether it is also examining other types, like satellite television providers. The two largest satellite providers, DirecTV and Dish Network, declined to comment.

The inquiry is important because precedents for the digital distribution of content are being set now, said Art Brodsky, a spokesman for Public Knowledge, a public interest group based in Washington, which welcomed news of the investigation. “This is the critical moment,” he said. “If the government doesn’t step in to protect public interest now, you’re going to lose your chance.”

The review was also welcome news to those who have argued that concerns about control over digital distribution should be addressed through antitrust law enforcement, rather than through pre-emptive regulation.

[…]

There are several factors that could be motivating the government to investigate cable company practices now. For one, it is reviewing a $3.8 billion proposal by Comcast, Time Warner Cable and other companies to transfer some spectrum to Verizon Wireless. The Justice Department’s scrutiny of that arrangement is certain to include an examination of video content delivered over wired and wireless networks.

Separately, the government is also monitoring Comcast’s takeover of NBCUniversal, which took place last year after a lengthy review by regulators.

In a consent decree with the Justice Department when the acquisition took place, Comcast committed to not “unreasonably discriminate” in relation to the Web traffic of its users. As part of a follow-up, the government is studying whether Comcast is living up to its commitments, according to one of the people with knowledge of the investigation.
For years, Comcast has enforced a cap of 250 gigabytes a month for its customers as part of what it calls reasonable network management. But Comcast has exempted the use of Xfinity, Comcast’s own online video Web site, saying that use would not count against that cap. Comcast says Xfinity videos are delivered over the company’s own network, not over the public Internet, but Netflix has cried foul.

Last month, Comcast raised the data cap and said it would no longer enforce the limit as it explores new pricing plans based on usage.

The situation is clear, in some ways.

First, it is certainly in the public interest for cable companies to not throttle data going through their pipes. Since the companies are providing the now-essential Internet connection to the great majority of the connected population, they should not be able to step in and decide what sort of content gets what proportion of the bandwidth.

Second, it is difficult to see what public interest is served by a coercive bundling of channels, forcing the public to buy more than they want in order to get access to TV programming they want. And there is no recourse, in most cases, to much of this programming, other than piracy, which the media world holds up as a boogieman.

For these reasons, the Justice Department should require  MVPD’s to drop any throttling of bandwidth based on content (also called Net Neutrality), which is the current policy of the FCC. And they should break the monopolistic practice of coercively bundling channels, so that any channel can be accessed through a fair price, and that individual shows — like a specific basketball game, or a specific movie on HBO — can be purchased in a pay-per-view style.

Whether the Justice Department will go that far — which would make the public happy, but not the TV magnates — remains to be seen.

14 June 2012 13 worktalkresearch Permalink

Breaking Up The TV Cartel Is In The Public Interest

The Justice Department is making moves toward unwinding the stranglehold that today cable cartel has on the US TV marketplace, especially with regard to anti-competitive practices against non-cable players, like Netflix, Amazon, and Apple.

Justice Department Is Said to Investigate Cable Companies Over Internet Video - Brian Stelter and Edward Wyatt via NYTimes.com

The Justice Department is quietly investigating the cable industry’s behavior toward nascent online video competitors as part of an inquiry into possible anticompetitive practices by cable companies.

The investigation raises the prospect that the government’s antitrust lawyers will intervene in the complex and rapidly changing business of entertainment distribution. In the meantime, it raises new questions about an industry that has no shortage of them already.

Answers are probably not immediately forthcoming. As is typical in cases like this, the Justice Department declined to comment on the investigation or to confirm that it is taking place. But people with direct knowledge of the investigation who were not authorized to speak publicly confirmed, as first reported Tuesday night by The Wall Street Journal, that the department was examining broad changes in the marketplace for online video, including the use of Internet data caps by cable companies.

One of the issues involves whether those limits to the amount of video, audio and other data that users can download are discriminatory against Netflix, YouTube and other new digital video competitors. Comcast, in particular, has come under scrutiny for its past use of data caps and other network management practices.

The US model for today’s Old TV distribution is based on a/ free broadcast TV (which a declining number of people take advantage of) and b/ for fee cable (and satellite) TV (that a dominant and growing proportion of the population rely on). 

Local governments grant cable companies the right to a cable monopoly (usually a duopoly) in a geographic area, allowing them to charge a fee for TV service. Likewise, the US government allows similar models for satellite companies. The Multichannel Video Programming Distributors (MVPD’s) like Comcast and DirecTV also provide internet access to their customers, which at first they saw as simply an additional source of revenue. But now that we can stream video over the web, it’s become a huge competitive threat to their entrenched interests.

One result is the intransigence of cable companies regarding unbundling channels. Many users would like to not be forced to buy 70 channels in order to watch NBA games, or would like to just watch Game Of Thrones without the rest of HBO’s lineup.

Justice Department Is Said to Investigate Cable Companies Over Internet Video - Brian Stelter and Edward Wyatt via NYTimes.com

The department is also said to be studying the ways in which distributors bundle disparate television channels together in all-you-can-watch packages. Distributors and programmers have resisted calls to unbundle channels, but Internet distribution may give consumers more choices in that area — assuming that data caps or other network management practices do not stand in the way.

It is unclear whether the government inquiry is looking solely at cable and broadband Internet providers, or whether it is also examining other types, like satellite television providers. The two largest satellite providers, DirecTV and Dish Network, declined to comment.

The inquiry is important because precedents for the digital distribution of content are being set now, said Art Brodsky, a spokesman for Public Knowledge, a public interest group based in Washington, which welcomed news of the investigation. “This is the critical moment,” he said. “If the government doesn’t step in to protect public interest now, you’re going to lose your chance.”

The review was also welcome news to those who have argued that concerns about control over digital distribution should be addressed through antitrust law enforcement, rather than through pre-emptive regulation.

[…]

There are several factors that could be motivating the government to investigate cable company practices now. For one, it is reviewing a $3.8 billion proposal by Comcast, Time Warner Cable and other companies to transfer some spectrum to Verizon Wireless. The Justice Department’s scrutiny of that arrangement is certain to include an examination of video content delivered over wired and wireless networks.

Separately, the government is also monitoring Comcast’s takeover of NBCUniversal, which took place last year after a lengthy review by regulators.

In a consent decree with the Justice Department when the acquisition took place, Comcast committed to not “unreasonably discriminate” in relation to the Web traffic of its users. As part of a follow-up, the government is studying whether Comcast is living up to its commitments, according to one of the people with knowledge of the investigation.
For years, Comcast has enforced a cap of 250 gigabytes a month for its customers as part of what it calls reasonable network management. But Comcast has exempted the use of Xfinity, Comcast’s own online video Web site, saying that use would not count against that cap. Comcast says Xfinity videos are delivered over the company’s own network, not over the public Internet, but Netflix has cried foul.

Last month, Comcast raised the data cap and said it would no longer enforce the limit as it explores new pricing plans based on usage.

The situation is clear, in some ways.

First, it is certainly in the public interest for cable companies to not throttle data going through their pipes. Since the companies are providing the now-essential Internet connection to the great majority of the connected population, they should not be able to step in and decide what sort of content gets what proportion of the bandwidth.

Second, it is difficult to see what public interest is served by a coercive bundling of channels, forcing the public to buy more than they want in order to get access to TV programming they want. And there is no recourse, in most cases, to much of this programming, other than piracy, which the media world holds up as a boogieman.

For these reasons, the Justice Department should require  MVPD’s to drop any throttling of bandwidth based on content (also called Net Neutrality), which is the current policy of the FCC. And they should break the monopolistic practice of coercively bundling channels, so that any channel can be accessed through a fair price, and that individual shows — like a specific basketball game, or a specific movie on HBO — can be purchased in a pay-per-view style.

Whether the Justice Department will go that far — which would make the public happy, but not the TV magnates — remains to be seen.

14 June 2012 13 worktalkresearch Permalink

Jeremy Allaire on Why The Cable Companies Will Play Along With Apple

Anthony Kosner interviewed Jeremy Alliare about Apple’s hopes for a displacement of conventional cable TV, as he laid out in a recent WSJ piece. Allaire had written some things that line up very closely with the predictions I made in the recent special report, Social TV and The Second Screen. In particular, Alliare wrote:

In my view, TV is the last screen to fall as a computing platform. What do I mean by this? That we should think of TV screens and monitors as the final frontier in Internet-based software applications, not as devices to watch and consume video content.

Properly conceived, a TV is a large high-definition audio/video rendering device that plays a role in displaying content and related data. While certainly the ideal device for consuming and using video-based content, it is also simply put the largest computer monitor in our lives, and one that very often presents in a social context — the living room, the conference room, the dorm room, the classroom, the retail store floor and shop window. In short, these TV monitors are at the core of all of our major social and economic activities.

And in recognizing the broader role that these monitors play in our lives we can begin to re-conceptualize TVs as not just screens for video, but as a rich computing surface for viewing information, playing games, communicating, learning, shopping and so forth. In the past, when trying to use these screens for non-video applications, we would connect them to a PC or laptop (to present a shared piece of content that a group could discuss or interact on), or connect them to a game console for playing games.

In general, most attempts to evolve the capabilities of the TV monitor into richer computing platforms have failed.

Allaire goes on to suggest that Airplay and realted capabilities on our Apple devices allow a transition to using these devices as the next generation set top box, with a superior user experience compared today’s lame options. And it positions Apple to dominate as the preferred second screen in the New TV world, which is about experience, not audience.

Allaire waves a hand of what Apple might do after that — when it also is selling the TV device, and not just adapters for non-Apple TV devices — but the big question is: how can Apple get the existing players to play along? And that’s what Kosner wondered, too:

Anthony Kosner, Brightcove CEO Allaire on How New Apple TV Experience Will Change Home, Work, Advertising via Forbes

Kosner:What do you think Apple has to do to get the “very top-tier TV operators like Comcast and Time Warner to go for their proposal?” Is it just a matter of selling a ton of “add-on” devices with whatever alliances they can start out with and then the top-tier will have to come around? Or are there specific concessions the cable companies are looking for?

Allaire: I think it’s a complicated question. At the core, Comcast, Time Warner and the like are concerned about losing control of the customer relationship, losing margin, and becoming ”dumb pipes” as it were. Clearly, however, if Apple can establish a footprint of TV connected devices that is in the 10s of millions, which should be possible in 1-2 years, their deeper concern will be Apple having enough scale and leverage that they will go direct to the broadcast programmers and disrupt the existing packaging and distribution model for TV content. While expensive for Apple, it is conceivable. That threat may drive one or more of the top-tier MPVD’s [multichannel video programming distributors] into an alliance with Apple that marries their programming relationships and existing broadcast product with an Apple-controlled user experience, much like Apple established with voice products on top of the wireless carrier networks. But I don’t see Apple doing this without also retaining the right and ability to innovate in video content pricing/packaging models as well.

[…]

Kosner:Will marketers be more likely to sponsor content experiences on this new platform-to wrap their messages and offers around the content-as opposed to using more traditional advertising devices (i.e., the 30-second spot)?

Allaire: This has been the question for almost a decade across multiple new mediums.  When we launched Brightcove Video Cloud almost 7 years ago, we had envisioned interactive marketing experience that launched from and wrapped around online video, but the advertising industry didn’t bite and stayed focused on extending the TV commercial model to the Web. There are a host of reasons for this, and I ultimately thought it was a short-sighted approach from the marketer community. When apps came to phones and tablets, again, people thought that richer forms of interactive marketing would become the powerful advertising model, but as you can see today, we are largely still stuck in the display advertising world in mobile and tablets. I do think we will break through and marketers will embrace deeper forms of interactive marketing on these platforms, especially as we extend into the traditional “turf” of TV advertising in the living room.

Too many people are narrowly focused on what it means to have second-screen apps for existing TV video content. I do think that is an important space and one that we’ll see a huge amount of innovation around, especially as Apple TV Apps take hold. For example, we’re working with some broadcasters on TV Apps that provide a great HD viewing experience that is controlled on the iPad and where, while the program runs, compelling companion content, including social streams, are available. That is certainly more “social” than existing broadcast TV.

Kosner:Following up on the last question, do you see the “connected TV” and “second screen” paradigms that you describe as being potentially more successful advertising mediums than desktop and mobile, and if so, why?

Allaire: In theory, this should be the ultimate medium for advertisers, the combination of deep, high-quality viewing environment and an engaged, interactive medium. TV advertisers have been dying for methods of bringing the emotional impact of high-production value video-based commercials into the online environment, and this new model offers that, irrespective of whether users are using a “video app” or some other content app on their Apple TV. Crucially, the larger surface of the TV combined with the companion surface of the tablet creates a highly compelling environment for rich media interactive advertising.

I find a great deal of what Allaire says to be prescient, especially the power of the Swarm Of Devices to create a rich user experience. Perhaps I differ in my aversion to the traditional media thinking creeping in, but this is a distinction of degree not disagreement.

Most critically, Allaire has laid out the strategy that Apple might be using to get cable operators to play along. If they can envision a near future in which Apple has become the premier provider of a transitional New TV experience with tens of millions of add-on devices or iTVs sold, they could face extinction because Apple could start creating their own programming or licensing it directly. Therefore, it might be more adaptive for cable operators to make deals with Apple upfront, and get baked into the new recipe.

I’m sure Apple must be spinning some version of that story, as Allaire suggests.

10 June 2012 2 worktalkresearch Permalink

Doc Searls on Apple’s TV Plans

Doc Searls zooms in on ESPN as the biggest impediment to New TV:

Doc Searls - How Apple will turn the Net’s top into TV’s bottom

The main thing that keeps cable in charge of TV content is not the carriers, but ESPN, which represents up to 40% of your cable bill, whether you like sports or not. ESPN isn’t going to bypass cable — they’ve got that distribution system locked in, and vice versa. The whole pro sports system, right down to those overpaid athletes in baseball and the NBA, depend on TV revenues, which in turn rest on advertising to eyeballs over a system made to hold those eyeballs still in real time. “There are a lot of entrenched interests,” says Peter Kafka in this On the Media segment. The only thing that will de-entrench them is serious leverage from somebody who can make go-to-market, UI, quality, and money-flow work. Can Apple do that without Steve? Maybe not. But it’s still the way to bet.

Doc doesn’t make the analogy to the old music system, where the labels owned the talent, the distribution systems, and were in tight with Tower Records and all the rest of it, but it’s very similar.

Sports programming is one of the few areas where TV is growing. So making a deal with ESPN and others (like the World Cup and other soccer leagues, as was rumored earlier in the year) could be turn out to the Gordian Knot. And who more likely than Apple?

8 June 2012 11 underpaidgenius Permalink