Content and content providers

At the Broadband Properties Summit, there was a case study on IP TV (TV delivered via broadband). DirecTV and an apartment owner in Alexandria, Virginia teamed up to provide competitive TV services in a large, 350 unit apartment building. Some of the highlights of the experiment:

Prior to the introduction of the new service, the biggest tenant complaint was about the incumbent TV provider service. The number one tenant demand was for more choice in selecting a TV provider.

After introducing the competitive DirecTV service, complaints are down and compliments are up.

The case study confirmed my longstanding bandwidth calculations about future network planning. A single channel of HD TV on the system requires 10+ megabits of bandwidth on the system, and live HD events (e.g. sports, racing, etc.) requires 15+ megabits of capacity per channel. This demonstrates the inadequacy of DSL, wireless, cable, and even FiOS to deliver next generation services.

Cat5e or Cat6 cable is needed from a distribution closet to each apartment, where a set top box converts the signal and sends it to the TV. The system performed so well that most residents did not realize it was IP TV. There have been claims that "IP TV doesn't work well compared to satellite and cable." We can put those to rest.

The take away for the talk was really about making sure that new homes and apartments are broadband ready. Most communities still do nothing to encourage builders and developers to build "broadband ready" homes and commercial buildings, which is a missed economic development opportunity, especially given the ease and low cost of doing this.

The use of BitTorrent, a peer to peer file sharing service, is up 24% in the past four months. Like the big jump in YouTube traffic in December, some it may be related to the writer's strike. The lack of anything new on that old-fashioned TV thingy in the rec room apparently had people headed in droves to the Internet for some mindless entertainment. And of course, the Internet has plenty of mindless entertainment. Sadly, almost any random 2 minute video clip on YouTube is funnier than most half hour TV comedies.

What's coming? I think it is now safe to say that TV is over. It will be a long slow decline, but the writer's strike created the tipping point that economists always look for. The Internet access providers can monkey around with traffic management to try to discourage the use of services like BitTorrent, but that's just silly over the long term. Imagine any other business saying, in effect, "We're glad you love our product. Please stop using it." That's what the Internet providers and the entertainment industry are doing with their lawsuits, "Internet toll booths," and traffic manipulation.

The solution is to start building networks that are focused on delivering services--any services, including things like BitTorrent--rather than just blindly delivering bandwidth by the bucket. That model doesn't work. If it did, we'd all have a fiber connection by now.

Recently, when we have had people over to house for dinner or when at someone else's home, I notice that a common topic of discussion is what is showing on YouTube. Everyone has a story about some usually goofy thing they saw recently on the video site. Anecdotally, several people have shared that they often just spend a little time in the evening goofing off on YouTube. This is usually followed by the admission they don't turn on the TV much anymore.

Communities who think that DSL and wireless services are adequate with respect to bandwidth are going to be very disappointed, as neither technology is capable of delivering large amounts of video to thousands or ten of thousands of residential customers, no matter what you read about the amazing abilities of WiMax to bring world peace, solve human aging, and deliver massive bandwidth to everyone at the same time. WiMax is a terrific technology that is much better than WiFi, but the amount of actual bandwidth that WiMax will actually be able to deliver to residential and business users is not going to support heavy IP-TV use (i.e. YouTube, movies on demand, TV show downloads, etc.). WiMax has the capability of reaching more premises by virtue of being able to get a signal over longer distances than WiFi. But as you extend the reach of a wireless signal, you also spread the amount of usable bandwidth over a larger number of subscribers, in most cases. This means the amount of per subscriber bandwidth may not increase significantly.

Wireless is part of a complete solution, but fiber is needed alongside it to meet the fast-growing video demands of residences and businesses.

Google has announced a new "search within a search" option that has online retailers worried that the search behemoth will steal customers. The new option lets you use Google to search only pages that are part of a single site. So if you want to buy a digital camera and go to Google to start the search, you get the usual search results page. If you click on a Best Buy site, as an example, Google will now do an extended search only on the Best Buy site.

Sounds handy, right? Except that the search results are likely to include ads from Best Buy competitors. So the pages that Google returns from the customized search may be larded with ads from Circuit City.

For Google, this is a good thing, as it will likely increase ad revenue from click-throughs. And you could argue it is good for the person trying to buy something, as Google gives you more information about prices and competition.

But there is a certain "goose and the golden egg" situation here. While in my example it appears that Circuit City may be the winner, it could just as easily go the other way on the next search, where Circuit City came up first, and subsequent search results are plastered with Best Buy ads. Circuit City and Best Buy both end up paying Google while Google tries to push potential customers somewhere else. This is also known as "wanting your cake and trying to eat it too."

At some point, some big Google advertisers are going to say, "Enough is enough," and take their ad dollars elsewhere.

According to this report, the merger of XM and Sirius has stalled, a year after the deal was first announced. It is a perfect storm because you have a combination of FCC confusion, Congressional confusion, silly prices paid for on-air talent, and a bad business model.

It is a lesson for terrestrial broadband and communities as well, because most of the same problems and lessons apply in community telecom, where we also have the wrong business models, lack of clarity at the Federal level about what to do, and prices for services that are out of whack.

In the satellite market, it is hard to understand how Sirius would ink a $500 million dollar five year deal for foul-mouthed Howard Stern when the company is only getting about $35 million a year in ad revenue, along with anemic subscription sales.

What would make sense, as part of the merger, would be for XM and Sirius to go to an open content model, in which they become just the carrier, and let anyone with the money buy channel space on their satellites. Right now, the two companies are flogging the same old, tired business model used by the cable companies, which is to bundle hundreds of channels together, most of which no one listens to.

It would make more sense to charge $1 a month per channel and let subscribers pick which channels they want to listen to, with something like a ten or fifteen channel minimum.

The FCC and Congress could help out by promoting this as an option, just as they could help out communities by promoting open, multi-service networks like nDanville, which is the country's first municipal open, multi-service network. Service providers from all over the country are starting to call the City to find out how to put their services on the network.

Satellite radio has a bright future, but only if the old business models are tossed and a new, "open" model is adopted.

There are reports that Toshiba has decided to cut its losses and discontinue manufacturing HD-DVD equipment. Microsoft is the other loser in this battle, as the company had been a backer of the HD-DVD format. Christmas 2008 will be a good time to invest in the high def players and recorders, as by that time there will be plenty of competition and lower prices.

Video continues to drive bandwidth needs, and the habits of the American public are changing rapidly. According to this report, December 2007 broke a lot of records, as people sat down in front of their computers 10 billion times to watch "TV."

Now rumors are circulating that Yahoo! may partner with Google to avoid the likely ignominious end of the company via a Microsoft acquisition.

Google has already started preparing for an anti-trust challenge if Microsoft is successful, so it is hard to see how Google could argue that hitching Yahoo! to behemoth Microsoft is bad but hitching Yahoo! to gargantuan Google is good.

Whatever the outcome may be, it sounds like users of free services are in for less choice and more ads. The alternative is to simply stop using "free" services and pay for things like personal email accounts, which cost a pittance these days. It is easy to find email accounts for under $100 per year, and those accounts come with a wide range of features and services that are not always available with the free services, and are ad-free--well worth the money to some.

I had been hearing favorable reviews of the new "Terminator" TV series, but am usually busy with other things in the evening, so I have not been able to catch it at its broadcast time. So I downloaded the pilot from iTunes--the first episode is free.

It took about thirty minutes to download the forty minute episode. We watched it on a widescreen 15" laptop set about four feet away, which gave us a larger apparent screen size than the 27" television on the other side of the room. Did I mention there were no commercials? Nothing like watching a one hour program in forty minutes. It was a good show, and I'm ready to pay two bucks to watch the next episode. In fact, for what I am now paying for cable TV, I could download and watch 25 hours of paid TV, at two dollars per hour--commercial free.

There were some shouts of horror from certain parts of the household when I mentioned discontinuing cable service, but it is getting harder and harder to find a reason to turn the TV on.

However, watching video over the Internet comes at a steep price for the DSL and cable providers, who lack the capacity to handle this if everyone starts doing it. This article is very technical, but the bottom line is that the current copper infrastructure lacks the capacity handle the switch to getting what we call "TV" over the Internet.

You read the headline correctly: "Music sales plunge amid rising sales." Only the music industry, clinging desperately to Mr. Edison's gramaphone technology, could make a 14% growth spurt sound like doom and gloom.

The lead on a widely circulated story about music sales in 2007 is full of hand-wringing about the precipitous 9% decline for the "fast fading" music business.

The article disingenously mixes up declining sales on albums, illegal music sharing, and sales of single tracks, and news writers and editors should be ashamed for reprinting this stuff without actually reading it, because it is completely nonsensical.

If you read the entire article critically, what is very clear is that consumers are buying many more single songs and somewhat fewer albums. But overall, music sales are still increasing year to year--14% in 2007. Most businesses would kill to have a 14% per year annual growth rate. But the music industry stubbornly continues to blame their customers for simply buying only the good songs and ignoring the bad ones, which the real dynamic.

In the old days, the physical format needed to distribute music (vinyl records, CDs) made it efficient to sell a bunch of songs at one time. But most of us know that you often bought an entire album of nine or ten songs just to get the one or two good ones. Today, we don't have to buy the dreck just to get the good song. That's good for music lovers, and in fact, that option of buying only good music is producing double digit growth in the music business.

But the music industry is "fading fast."