AT&T’s announcement that it selected DirecTV as its sole partner for satellite video is really bad news for DISH Network, but it doesn’t ensure long-term success for DirecTV either.
During the first six months of 2008, AT&T accounted for 15% of DISH ’s gross subscriber adds, or 222,000 of its 1.48 million gross new subscribers. During this same period, almost as many DISH subscribers churned off the service as were added, leaving DISH with only 10,000 net new subscribers. Without AT&T’s contribution as a distribution channel, DISH would have suffered a net loss of over 200,000 subscribers during the first half of the year. DISH ’s churn rate during this period, which averaged 1.78% per month, is attributed to competition, the economy, signal theft, and operating inefficiencies. Given that these are long-term factors, it will not be easy for DISH to reduce churn significantly. However, unless and until this happens, DISH faces ongoing net subscriber losses. In recent years, cable operators also have reported losses of basic video subscribers so DISH will be in good company. However, cable MSOs can point to counterbalancing growth in multiplay RGUs (revenue generating units). For cable operators, it’s arguable whether small to moderate losses in their basic video subscribers really “matter.” For DISH , these losses will hurt.
DirecTV gained 404,000 net new subscribers during the first six months of 2008, reaching 17.16 million in total, and is clearly pulling away from its smaller DBS rival with its 13.97 million subscribers. Given the new AT&T deal, DirecTV will have distribution agreements with all the former Bells -- Verizon, AT&T and Qwest – and in the current competitive environment, telco distribution makes a difference. In its 2Q08 report to the SEC , DirecTV states that its gross subscriber adds during the quarter declined relative to a year earlier “primarily” due to the April 2008 termination by AT&T of its prior distribution agreement in the former BellSouth territory.
There is no pleasure in piling on DISH Network, an innovative and entrepreneurial company. For what it’s worth, DirecTV is also far from a long-term sure thing. For several years, I have opined that both DBS operators face a strategic competitive disadvantage vis-à-vis the multiplay cable and telco operators. Now apparently even Rupert Murdoch recently has uttered the same opinion in explaining why he disposed of his interest in DirecTV. Although perhaps Murdoch was just saying this to tease John Malone, his fellow media mogul who took DirecTV off his hands as ransom for Malone’s large shareholding in News Corporation.
Verizon and AT&T will undoubtedly give top priority to their own multiplay services and will cut back on marketing DirecTV as they expand FiOS and U-verse, respectively. In areas un-reached by FiOS and U-verse, where DirecTV will remain the only video option for telco households, its companion telco DSL broadband product will represent an ever-weaker competitor to cable modems, and the telco/DirecTV team will still have nothing directly comparable to cable VOD . The bidding war between DISH Network and DirecTV to win the AT&T deal must have been intense and whatever DirecTV promised is likely to be reflected in raising DirecTV’s already high subscriber acquisition cost.
Thus while DISH Network faces tough times, for DirecTV the words of poet John Donne also apply, “…send not to know for whom the bell tolls, it tolls for thee.”
Monday, October 27, 2008
Tuesday, August 12, 2008
Eye-to-Eye with Unions: Verizon Blinks To Avert Strike
In the tentative agreement with the CWA and IBEW announced August 10th, Verizon conceded on points that were headlined as key to both sides.
First, Verizon will continue to pay 100% of health care premiums for current employees and retirees. Second, some jobs that have been in the non-union Business (ex-MCI) group, and some formerly non-union temp workers, have been re-classified as permanent union jobs. Third, Verizon agreed to wage and pension band increases (10.87% compounded over three years), plus an additional cost of living bump in wages.
The agreement is complex and the specific starting positions of each side have not been disclosed, so it is unclear how far Verizon and the unions each fell short of their original objectives. For example, while the unions celebrate that formerly non-union SMB tech jobs will obtain union recognition, VZ management indicates that this is achieved by transferring positions to the unionized Telecom group rather than by admitting the unions into the Business group. Also, there is a long-standing theatrical convention, involving parts played by both management and union negotiators, that agreements must be presented by union leaders as representing hard-fought gains won on behalf of dues-paying union members. However, one of the agreement terms reveals that Verizon management believes that it did not achieve the cost savings that it sought. Unlike the earlier five-year contracts, this new agreement will run only three years which Verizon explains will provide “additional flexibility to closely align future agreements to marketplace changes.”
Each side had reasons to fight and reasons to settle. In the end, it looks like Verizon’s big reason to settle – no interruption to marketing and installation of FiOS in New York City and elsewhere – outweighed the unions’ concerns about what they refer to as “a very tough economic and political environment.”
For cable operators, this outcome of Verizon’s latest confrontation with its unions means no time off from FiOS competition, continuation of Verizon’s current labor costs, and a new benchmark for the MSOs’ own labor relations.
Verizon’s top executives may now be hunting for other ways to off-set ongoing high labor costs. It’s unlikely that their first choice will be to sacrifice their own bonuses. Perhaps, as occurred after the last Verizon labor agreement in 2003, they will find cost savings by laying off lower level managers. And then, three years from now, they’ll have an opportunity to arm-wrestle again with the CWA and IBEW.
First, Verizon will continue to pay 100% of health care premiums for current employees and retirees. Second, some jobs that have been in the non-union Business (ex-MCI) group, and some formerly non-union temp workers, have been re-classified as permanent union jobs. Third, Verizon agreed to wage and pension band increases (10.87% compounded over three years), plus an additional cost of living bump in wages.
The agreement is complex and the specific starting positions of each side have not been disclosed, so it is unclear how far Verizon and the unions each fell short of their original objectives. For example, while the unions celebrate that formerly non-union SMB tech jobs will obtain union recognition, VZ management indicates that this is achieved by transferring positions to the unionized Telecom group rather than by admitting the unions into the Business group. Also, there is a long-standing theatrical convention, involving parts played by both management and union negotiators, that agreements must be presented by union leaders as representing hard-fought gains won on behalf of dues-paying union members. However, one of the agreement terms reveals that Verizon management believes that it did not achieve the cost savings that it sought. Unlike the earlier five-year contracts, this new agreement will run only three years which Verizon explains will provide “additional flexibility to closely align future agreements to marketplace changes.”
Each side had reasons to fight and reasons to settle. In the end, it looks like Verizon’s big reason to settle – no interruption to marketing and installation of FiOS in New York City and elsewhere – outweighed the unions’ concerns about what they refer to as “a very tough economic and political environment.”
For cable operators, this outcome of Verizon’s latest confrontation with its unions means no time off from FiOS competition, continuation of Verizon’s current labor costs, and a new benchmark for the MSOs’ own labor relations.
Verizon’s top executives may now be hunting for other ways to off-set ongoing high labor costs. It’s unlikely that their first choice will be to sacrifice their own bonuses. Perhaps, as occurred after the last Verizon labor agreement in 2003, they will find cost savings by laying off lower level managers. And then, three years from now, they’ll have an opportunity to arm-wrestle again with the CWA and IBEW.
Friday, August 1, 2008
DISH Network Nail-Biter As ATT Decides Next DBS Deal
In April, AT&T said it would no longer offer DirecTV in its former BellSouth territory, leaving DISH Network “for the near term” as its sole satellite TV provider across the 22-state AT&T footprint. Then, in June, AT&T notified DISH Network that its distribution contract will terminate at the end of 2008.
This does not mean AT&T will stop offering satellite TV. AT&T now forecasts that U-verse will be built-out by end-of-year 2010 to reach 30 million households, up from 11 million today. Even if this is achieved, it would still leave 40%-50% of the households in AT&T’s footprint with no “advanced TV” option unless AT&T has a satellite TV partner.
Although still needed, satellite TV seems to have lost its magic for AT&T as a draw for new subscribers, which may help to explain why AT&T would want to change its DBS distribution deal. AT&T’s growth in satellite TV connections, net of churn, declined precipitously during the last four quarters, from 140,000 (3Q07), to 130,000 (4Q07), to 116,000 (1Q08), down to just 3,000 (DISH-only 2Q08). AT&T attributes this in part to the greater appeal of U-verse, which gained 318,000 subscribers during 1H08, almost three times AT&T’s net new satellite TV subscribers during this period.
DISH Network has the most to lose if AT&T doesn’t renew. In the DISH Network quarterly SEC report for 1Q08, AT&T is credited with producing a “significant percentage” of DISH’s gross new subscribers. Of 730,000 gross ads during 1Q08, DISH gained only 35,000 net new subs. Lacking AT&T distribution, DISH may start to suffer net losses of subscribers.
In DISH’s favor, AT&T’s innovative Homezone product integrates DISH satellite TV and DSL Internet access, in order to provide VOD-like online movie downloads and remote DVR management, among other features. However, Homezone may not swing a big enough tail to wag the DISH dog. Its subscriber count is unreported by AT&T, but is probably nothing to brag about given that it is a subset of newly-added DISH Network subscribers. An AT&T deal with DirecTV would not necessarily mean the end of Homezone, although the Homezone DVR receiver would need to be adapted to work with DirecTV.
DirecTV is probably less desperate than DISH, but nevertheless would benefit from a distribution agreement that covers AT&T’s entire footprint. DirecTV’s earlier arrangement with BellSouth produced 818,000 subscribers by 4Q06, when AT&T’s purchase of BellSouth was consummated and DirecTV subscribers were last reported by AT&T separately from DISH subscribers.
DISH Network or DirecTV? “In terms of AT&T Homezone, it is premature to speculate. AT&T continues to discuss options with DISH, in addition to evaluating other short- and long-term options,” an AT&T spokesperson says.
This does not mean AT&T will stop offering satellite TV. AT&T now forecasts that U-verse will be built-out by end-of-year 2010 to reach 30 million households, up from 11 million today. Even if this is achieved, it would still leave 40%-50% of the households in AT&T’s footprint with no “advanced TV” option unless AT&T has a satellite TV partner.
Although still needed, satellite TV seems to have lost its magic for AT&T as a draw for new subscribers, which may help to explain why AT&T would want to change its DBS distribution deal. AT&T’s growth in satellite TV connections, net of churn, declined precipitously during the last four quarters, from 140,000 (3Q07), to 130,000 (4Q07), to 116,000 (1Q08), down to just 3,000 (DISH-only 2Q08). AT&T attributes this in part to the greater appeal of U-verse, which gained 318,000 subscribers during 1H08, almost three times AT&T’s net new satellite TV subscribers during this period.
DISH Network has the most to lose if AT&T doesn’t renew. In the DISH Network quarterly SEC report for 1Q08, AT&T is credited with producing a “significant percentage” of DISH’s gross new subscribers. Of 730,000 gross ads during 1Q08, DISH gained only 35,000 net new subs. Lacking AT&T distribution, DISH may start to suffer net losses of subscribers.
In DISH’s favor, AT&T’s innovative Homezone product integrates DISH satellite TV and DSL Internet access, in order to provide VOD-like online movie downloads and remote DVR management, among other features. However, Homezone may not swing a big enough tail to wag the DISH dog. Its subscriber count is unreported by AT&T, but is probably nothing to brag about given that it is a subset of newly-added DISH Network subscribers. An AT&T deal with DirecTV would not necessarily mean the end of Homezone, although the Homezone DVR receiver would need to be adapted to work with DirecTV.
DirecTV is probably less desperate than DISH, but nevertheless would benefit from a distribution agreement that covers AT&T’s entire footprint. DirecTV’s earlier arrangement with BellSouth produced 818,000 subscribers by 4Q06, when AT&T’s purchase of BellSouth was consummated and DirecTV subscribers were last reported by AT&T separately from DISH subscribers.
DISH Network or DirecTV? “In terms of AT&T Homezone, it is premature to speculate. AT&T continues to discuss options with DISH, in addition to evaluating other short- and long-term options,” an AT&T spokesperson says.
Verizon Strike Talks Down To The Wire
Union contracts at Verizon East (former NYNEX and Bell Atlantic) will expire at midnight, tomorrow, August 2nd. There has been no public indication of progress on key sticking points between Verizon and the CWA and IBEW. Union members have authorized a strike which could start on August 3rd if a new contract is not agreed.
The Unions are providing a running update on the negotiations, from their perspective, at http://www.cwa-union.org/verizon/. Excerpts follow:
Verizon Northeast (former NYNEX), 25 July.
CWA/IBEW 2213 and IBEW New England resumed negotiations with Verizon this morning in Rye, New York. …The focus of today’s meeting was on the marketing department side of Verizon. The Unions has raised the issue of the jobs of the future during numerous bargaining sessions since the beginning of these talks. No progress has been made on this important matter.
Our contracts expire on Saturday (sic), August 3rd. Strike preparation continues on both the National and Local Union levels. Members should be contacting their Locals about picketing and strike duty assignments if they have not already done so.
Verizon Mid-Atlantic (former Bell Atlantic), 28 July
The Unions and the Company met today and the Company provided counter-proposals to the Unions' health care proposal made in earlier meetings. The meeting adjourned and the Union will assess the counter-proposals and prepare a response.
Only a few more days remain until the contract expiration and we are still far apart on all critical issues and without any agreement on any issue. While it is still possible an agreement can be reached, it is most important that we are ready in the event this contract has to be negotiated in the street.
This contract is about the future. It will do us no good to win wages and benefits and then lose our jobs. Our members have made it clear that they understand and support our bargaining agenda. Special notice: Alpha Units and Moonlight Units are to stay on stand-by. Absolutely no jumping the gun. These units must act at the same time when the signal is given.
Meanwhile, Verizon is starting this week to install FiOS in New York City in the midst of an intensive marketing campaign. A strike that disrupts growth of FiOS in this market, and elsewhere, will be inconvenient for Verizon’s wireline business which increasingly relies on FiOS to compensate for decreases in local phone lines and DSL connections.
The Unions are providing a running update on the negotiations, from their perspective, at http://www.cwa-union.org/verizon/. Excerpts follow:
Verizon Northeast (former NYNEX), 25 July.
CWA/IBEW 2213 and IBEW New England resumed negotiations with Verizon this morning in Rye, New York. …The focus of today’s meeting was on the marketing department side of Verizon. The Unions has raised the issue of the jobs of the future during numerous bargaining sessions since the beginning of these talks. No progress has been made on this important matter.
Our contracts expire on Saturday (sic), August 3rd. Strike preparation continues on both the National and Local Union levels. Members should be contacting their Locals about picketing and strike duty assignments if they have not already done so.
Verizon Mid-Atlantic (former Bell Atlantic), 28 July
The Unions and the Company met today and the Company provided counter-proposals to the Unions' health care proposal made in earlier meetings. The meeting adjourned and the Union will assess the counter-proposals and prepare a response.
Only a few more days remain until the contract expiration and we are still far apart on all critical issues and without any agreement on any issue. While it is still possible an agreement can be reached, it is most important that we are ready in the event this contract has to be negotiated in the street.
This contract is about the future. It will do us no good to win wages and benefits and then lose our jobs. Our members have made it clear that they understand and support our bargaining agenda. Special notice: Alpha Units and Moonlight Units are to stay on stand-by. Absolutely no jumping the gun. These units must act at the same time when the signal is given.
Meanwhile, Verizon is starting this week to install FiOS in New York City in the midst of an intensive marketing campaign. A strike that disrupts growth of FiOS in this market, and elsewhere, will be inconvenient for Verizon’s wireline business which increasingly relies on FiOS to compensate for decreases in local phone lines and DSL connections.
Friday, June 13, 2008
Strike Clouds at Verizon Bring Spring to Cable MSOs' Steps
Battle lines are forming for a strike at Verizon beginning in early August that could end up as an industry-changing confrontation.
On 2 August 2008 , existing contracts expire between Verizon East, the combined wireline operations of the former NYNEX and Bell Atlantic, and the CWA (Communications Workers of America) and IBEW (International Brotherhood of Electrical Workers). The parties are now negotiating such difficult issues as how to allocate cost of health care and prescription drugs and which jobs are covered, or not, by labor contracts.
Much has changed since August 2003 when Verizon and CWA/IBEW last approached a strike, which in that instance was averted at the last moment. Some of these changes are exerting new pressures on each side to reach agreement before the picket lines go up:
On 2 August 2008 , existing contracts expire between Verizon East, the combined wireline operations of the former NYNEX and Bell Atlantic, and the CWA (Communications Workers of America) and IBEW (International Brotherhood of Electrical Workers). The parties are now negotiating such difficult issues as how to allocate cost of health care and prescription drugs and which jobs are covered, or not, by labor contracts.
Much has changed since August 2003 when Verizon and CWA/IBEW last approached a strike, which in that instance was averted at the last moment. Some of these changes are exerting new pressures on each side to reach agreement before the picket lines go up:
On Verizon
- In 1Q08, Verizon reported a net loss of 576,000 residential phone lines primarily to cable and to wireless substitution. Service disruptions caused by a strike will accelerate this erosion.
- Verizon has cleared almost all regulatory hurdles to offer FiOS TV in New York City and expects to start doing so by late 2008. A strike would put on hold this much-awaited expansion of FiOS TV as well as stopping new installations of FiOS (and other Verizon services) elsewhere.
On CWA/IBEW
- If a strike causes Verizon’s wireline business to shrink, or puts FiOS at risk, Verizon’s need for union workers will be reduced. Other major telecoms employers in Verizon’s territory, including cable MSOs and Verizon Wireless, have minimal union representation. A strike that undermines VZ’s business would shrink the pie that feeds the major telecom unions and their members.
Despite pressures to settle, Verizon may decide to take a strike. A potentially key factor in this decision is that Verizon’s senior management has been taken over by C-level imports from Verizon Wireless starting with Denny Strigle, president and COO , formerly president and CEO at VZW. Unlike its parent, Verizon Wireless is non-union. Might this be Strigle’s moment to take a stand against the CWA/IBEW, as in Ronald Reagan Smites the Professional Air Traffic Controllers Organization? According to a CWA online newsletter in April 2007, a Verizon executive who was urging workers to rethink their support for a union was quoted by witnesses as saying “we are under wireless now,” which the CWA observed was “a reference to Strigle’s harsh anti-union stance when he headed Verizon Wireless.” ?
Although the cable MSOs are on the sidelines, they have a stake in the outcome. They will benefit if the unions “win” and Verizon is forced to carry higher labor costs and has less flexibility in managing its operations. Even if Verizon “wins,” the MSOs may still see their glass as half-full if this weakens the CWA and IBEW which are also knocking on the MSOs’ doors. Either way, the MSOs’ interest in these proceedings has at least a tinge of schadenfreude.
Monday, April 21, 2008
Verizon FiOS Magic Words to Subscribers for Digital Transition: ‘Free’ and ‘Easy’
Verizon is now telling its FiOS TV subscribers that beginning in May their analog TV channels will be transitioned to a digital format. This will affect all subscribers who have directly connected any of their TV sets to receive FiOS’ analog TV package of local broadcast and access channels. The magic words that Verizon is using to break this news—improved, more, free and easy — may be of interest to cable operators who are fretting about how to deliver the same message to their own subscribers.
Cable operators are worried that their analog subscribers will resent having digital set-tops foisted on them versus no set-tops or low-cost analog STBs. The broader context of broadcast TV’s digital transition should alleviate some of this potential resentment. A positive spin on the digital changeover, as is now being modeled by Verizon, could further help to make the medicine go down more smoothly although admittedly Verizon has less to fear since there are relatively few analog-only subscribers to its low-profile local TV package, as compared to the still numerous legacy analog cable subscribers.
In a letter to FiOS TV subscribers, Verizon headlines “an exciting change” that will “…continue to improve the Verizon FiOS TV experience….extending quality of digital to all TVs in your home…to bring you even more of the great HD and special interest content.”
Then, the catch: “Each TV in your home will need one of the following devices to receive the new digital signal: a Verizon-issued digital adapter, or a Verizon-issued set-top box or CableCARD.”
But then, the good news: Verizon offers to provide this equipment for free, as in FREE, all caps, repeated twice. “To avoid disruptions to your service,” subscribers are told to contact Verizon “to order your FREE equipment.”
The letter concludes: “…an all-digital signal will give us the chance to provide improved picture and sound quality, including more HD channels and programming…We will make going 100% digital 100% easy!”
Verizon is fulfilling its commitment to the FCC to complete FiOS TV’s transition to all-digital by February 2009. The FCC requires cable operators to continue to deliver local broadcast TV stations in analog form until 2012 or until a cable system has transitioned to 100% digital, whichever happens sooner. Whenever cable’s digital transition occurs, perhaps cable’s legacy analog subscribers will be mollified if they are persuaded that it will be easy, will improve their service, provide more content, and require only that they accept FREE equipment.
While FREE may work for subscribers, it does have financial implications for MSOs facing substantial capex for the digital set-tops. The financial equation is made more complex by the fact that subscribers who currently have digital STBs now pay a monthly fee for this equipment. Offering digital-transition STBs for free could put this existing revenue stream at risk. FiOS subscribers also currently pay for digital STBs, generating revenues that presumably Verizon also wishes to retain. Here, again, Verizon’s approach may be suggestive for MSOs. Verizon will limit the free devices to reception of linear TV channels with no VOD access, thereby reducing their value for subscribers relative to revenue-generating STBs.
Cable operators are worried that their analog subscribers will resent having digital set-tops foisted on them versus no set-tops or low-cost analog STBs. The broader context of broadcast TV’s digital transition should alleviate some of this potential resentment. A positive spin on the digital changeover, as is now being modeled by Verizon, could further help to make the medicine go down more smoothly although admittedly Verizon has less to fear since there are relatively few analog-only subscribers to its low-profile local TV package, as compared to the still numerous legacy analog cable subscribers.
In a letter to FiOS TV subscribers, Verizon headlines “an exciting change” that will “…continue to improve the Verizon FiOS TV experience….extending quality of digital to all TVs in your home…to bring you even more of the great HD and special interest content.”
Then, the catch: “Each TV in your home will need one of the following devices to receive the new digital signal: a Verizon-issued digital adapter, or a Verizon-issued set-top box or CableCARD.”
But then, the good news: Verizon offers to provide this equipment for free, as in FREE, all caps, repeated twice. “To avoid disruptions to your service,” subscribers are told to contact Verizon “to order your FREE equipment.”
The letter concludes: “…an all-digital signal will give us the chance to provide improved picture and sound quality, including more HD channels and programming…We will make going 100% digital 100% easy!”
Verizon is fulfilling its commitment to the FCC to complete FiOS TV’s transition to all-digital by February 2009. The FCC requires cable operators to continue to deliver local broadcast TV stations in analog form until 2012 or until a cable system has transitioned to 100% digital, whichever happens sooner. Whenever cable’s digital transition occurs, perhaps cable’s legacy analog subscribers will be mollified if they are persuaded that it will be easy, will improve their service, provide more content, and require only that they accept FREE equipment.
While FREE may work for subscribers, it does have financial implications for MSOs facing substantial capex for the digital set-tops. The financial equation is made more complex by the fact that subscribers who currently have digital STBs now pay a monthly fee for this equipment. Offering digital-transition STBs for free could put this existing revenue stream at risk. FiOS subscribers also currently pay for digital STBs, generating revenues that presumably Verizon also wishes to retain. Here, again, Verizon’s approach may be suggestive for MSOs. Verizon will limit the free devices to reception of linear TV channels with no VOD access, thereby reducing their value for subscribers relative to revenue-generating STBs.
Thursday, March 27, 2008
Playing Nicely With P2P
Verizon’s recently-reported willingness to play nicely with P2P (peer-to-peer file-sharing) providers has implications for cable operators. Verizon participated in a trial of a “P4P” system designed to deliver faster P2P file-sharing downloads for users. Although Verizon’s primary motivation is economic – P4P would reduce the P2P burden on Verizon’s Internet backbone by preferentially selecting nearby versus more distant file-sharing peers – this initiative also has regulatory/political and marketing implications.
In the hubbub over “net neutrality,” it will be remarked that Verizon is prepared to assist file-sharers while cable operators are on the griddle for throttling some users’ P2P traffic. Cable’s valid technical reason -- to ensure quality of service for most network users by managing excessive P2P uploads of a small minority of broadband abusers – may be shadowed by the perception that Verizon is collaborative while cable is adversarial.
In the marketing arena, I expect that Verizon will exploit its P2P-friendly activities as a basis of differentiation for FiOS versus cable. Verizon’s marketing message almost writes itself: “For Internet users who love online video, who live for multiplayer games, or who rely on large file transfers, Verizon and P2P providers are working together to ensure a level of performance over FiOS that cable can’t deliver.”
This message will be amplified if it is taken up and repeated by P2P providers and multimedia content publishers who look to P2P to save on networking costs.
Cable operators have a legitimate issue with P2P traffic that jams scarce capacity in the shared upstream channel. Verizon also has some concerns about file-sharing traffic on the local network and P4P will not deal with this issue. This remains an unresolved challenge for all local broadband network providers.
Even so, it will be to MSOs’ advantage to find a way to work with P2P providers. Apart from opportunities that might emerge for cable through more collaborative involvement with P2P, Verizon’s reported progress on this front raises the stakes for cable to find common ground with an increasingly important segment of Internet multimedia distribution. The fact that MSOs including Comcast, TWC, Cox, and Cablevision have joined as Observers in the P4P Working Group is a step in the right direction.
Similarly, an agreement announced today between Comcast and BitTorrent provides a framework to collaborate on traffic management issues and to work on these issues with the broader ISP and Internet community. Apart from this very worthwhile and timely substantive objective, the most significant outcome from the agreement is political, as stated in the press release: "Both BitTorrent and Comcast expressed the view that these technical issues can be worked out through private business discussions without the need for government intervention." BitTorrent, at least, has now recused itself as a potential cable adversary in the net neutrality proceedings.
Note: P4P, which stands for Proactive network Provider Participation for P2P, is being developed by a working group of the Distributed Computing Industry Association.
In the hubbub over “net neutrality,” it will be remarked that Verizon is prepared to assist file-sharers while cable operators are on the griddle for throttling some users’ P2P traffic. Cable’s valid technical reason -- to ensure quality of service for most network users by managing excessive P2P uploads of a small minority of broadband abusers – may be shadowed by the perception that Verizon is collaborative while cable is adversarial.
In the marketing arena, I expect that Verizon will exploit its P2P-friendly activities as a basis of differentiation for FiOS versus cable. Verizon’s marketing message almost writes itself: “For Internet users who love online video, who live for multiplayer games, or who rely on large file transfers, Verizon and P2P providers are working together to ensure a level of performance over FiOS that cable can’t deliver.”
This message will be amplified if it is taken up and repeated by P2P providers and multimedia content publishers who look to P2P to save on networking costs.
Cable operators have a legitimate issue with P2P traffic that jams scarce capacity in the shared upstream channel. Verizon also has some concerns about file-sharing traffic on the local network and P4P will not deal with this issue. This remains an unresolved challenge for all local broadband network providers.
Even so, it will be to MSOs’ advantage to find a way to work with P2P providers. Apart from opportunities that might emerge for cable through more collaborative involvement with P2P, Verizon’s reported progress on this front raises the stakes for cable to find common ground with an increasingly important segment of Internet multimedia distribution. The fact that MSOs including Comcast, TWC, Cox, and Cablevision have joined as Observers in the P4P Working Group is a step in the right direction.
Similarly, an agreement announced today between Comcast and BitTorrent provides a framework to collaborate on traffic management issues and to work on these issues with the broader ISP and Internet community. Apart from this very worthwhile and timely substantive objective, the most significant outcome from the agreement is political, as stated in the press release: "Both BitTorrent and Comcast expressed the view that these technical issues can be worked out through private business discussions without the need for government intervention." BitTorrent, at least, has now recused itself as a potential cable adversary in the net neutrality proceedings.
Note: P4P, which stands for Proactive network Provider Participation for P2P, is being developed by a working group of the Distributed Computing Industry Association.
Friday, January 11, 2008
Playing the HD Numbers Game: Cable versus DBS & FiOS
Who’s got the biggest and best high definition (HD) TV line-up? The answer is, it depends how you count HD TV choices.
DirecTV’s website lists over 90 HDTV channels, well more than on any cable system. These are carried via DirecTV 10, a recently-launched satellite that transmits over Ka-band spectrum and thereby adds substantial capacity to that of DirecTV’s legacy Ku-band satellites. DirecTV 11, a second Ka-band satellite, is scheduled for launch shortly and will provide even more capacity for HDTV channels. There is a catch: To receive the HD channels, subscribers need new terminals that can receive Ka-band as well as Ku-band.
Verizon has raised the HD bar even higher, claiming that by the end of 2008 FiOS TV will deliver 150 HD linear channels plus 1000 HD choices over VOD. Getting from FiOS’ current ~26 HD linear channels to 150 will be a big jump but the FiOS network is likely to be able to deliver the required capacity. Like many up-to-date cable systems, FiOS employs 860MHz for its TV service. However, unlike cable, FiOS will be able to allocate its entire 860MHz bandwidth for downstream SD and HD TV channels. Compared to cable systems, FiOS already allocates a much smaller portion of its video bandwidth for analog channels and by February 2009, FiOS will re-allocate even this segment of its bandwidth entirely for digital TV. Also, unlike cable, all of FiOS’ 860MHz is available for downstream linear TV since upstream and downstream traffic for VOD and Internet access is carried on different wavelengths over the fiber plant.
For cable operators to beat DirecTV and FiOS in the HD numbers game will be a challenge if MSOs play by the same rules. Each of the multiple techniques to expand effective capacity of cable’s HFC (hybrid fiber coax) networks, including switched digital video (SDV), migrating some channels from analog to digital, and so on, will take time to deploy broadly across cable’s footprint. Although cable engineers are past masters at expanding effective capacity of the cable networks, even they will not be able to tweak the cable networks enough to match DBS or FiOS in delivering 100-150 linear HD channels by the end of 2008.
Hence, HD over VOD! Comcast announced in January that it will offer far more HD than anyone else, “more than 1000 HD movies and TV shows every month” on Comcast’s VOD platform.
Cable HD-over-VOD tosses marketing fairy dust on consumers who ask, “where can I get the most HD programming for my new flat panel HD TV set?” Notably, DBS cannot provide real VOD and Verizon lacks the MSOs’ scale and history as video distributors and is therefore likely to lag several steps behind in lining up HD VOD content.
Eventually consumers will clarify whether they prefer an MSO’s 1000+ HD VOD choices along with 50-60 linear HD channels, versus DBS’ or FiOS’ 100-150 linear HD channels (plus FiOS' HD over VOD), or can even tell the difference. Meanwhile cable engineers will have breathing room to derive more usable capacity on cable networks for linear HD channels, in case HD-over-VOD turns out not to be enough.
DirecTV’s website lists over 90 HDTV channels, well more than on any cable system. These are carried via DirecTV 10, a recently-launched satellite that transmits over Ka-band spectrum and thereby adds substantial capacity to that of DirecTV’s legacy Ku-band satellites. DirecTV 11, a second Ka-band satellite, is scheduled for launch shortly and will provide even more capacity for HDTV channels. There is a catch: To receive the HD channels, subscribers need new terminals that can receive Ka-band as well as Ku-band.
Verizon has raised the HD bar even higher, claiming that by the end of 2008 FiOS TV will deliver 150 HD linear channels plus 1000 HD choices over VOD. Getting from FiOS’ current ~26 HD linear channels to 150 will be a big jump but the FiOS network is likely to be able to deliver the required capacity. Like many up-to-date cable systems, FiOS employs 860MHz for its TV service. However, unlike cable, FiOS will be able to allocate its entire 860MHz bandwidth for downstream SD and HD TV channels. Compared to cable systems, FiOS already allocates a much smaller portion of its video bandwidth for analog channels and by February 2009, FiOS will re-allocate even this segment of its bandwidth entirely for digital TV. Also, unlike cable, all of FiOS’ 860MHz is available for downstream linear TV since upstream and downstream traffic for VOD and Internet access is carried on different wavelengths over the fiber plant.
For cable operators to beat DirecTV and FiOS in the HD numbers game will be a challenge if MSOs play by the same rules. Each of the multiple techniques to expand effective capacity of cable’s HFC (hybrid fiber coax) networks, including switched digital video (SDV), migrating some channels from analog to digital, and so on, will take time to deploy broadly across cable’s footprint. Although cable engineers are past masters at expanding effective capacity of the cable networks, even they will not be able to tweak the cable networks enough to match DBS or FiOS in delivering 100-150 linear HD channels by the end of 2008.
Hence, HD over VOD! Comcast announced in January that it will offer far more HD than anyone else, “more than 1000 HD movies and TV shows every month” on Comcast’s VOD platform.
Cable HD-over-VOD tosses marketing fairy dust on consumers who ask, “where can I get the most HD programming for my new flat panel HD TV set?” Notably, DBS cannot provide real VOD and Verizon lacks the MSOs’ scale and history as video distributors and is therefore likely to lag several steps behind in lining up HD VOD content.
Eventually consumers will clarify whether they prefer an MSO’s 1000+ HD VOD choices along with 50-60 linear HD channels, versus DBS’ or FiOS’ 100-150 linear HD channels (plus FiOS' HD over VOD), or can even tell the difference. Meanwhile cable engineers will have breathing room to derive more usable capacity on cable networks for linear HD channels, in case HD-over-VOD turns out not to be enough.
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