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Retrans-Consent: Be Careful What You Ask For!

in Expert Opinion by
WABC-TV
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With the recent battle between Cablevision and Disney over Retransmission Consent in New York regarding WABC-TV carriage on Cablevisions 3.1 million subscribers, and thereby producing a coalition of Cable Providers to petition the FCC to intervene in negotiations, is akin to the saying: (be careful what you ask for).

It seems to me, this is a business market negotiation best handled through competitive market forces rather than asking the FCC to get involved in a dispute between two companies. The (ax can cut both ways) when it comes to oversight of the pipeline distribution and broadcasting industries. Yes, consumers are caught in the middle, wanting pertinent and relevant programming for a reasonable price, while public negotiations and threats of signal cuts dominate the headlines; see (Cable firms seek FCC help in fee disputes).

The issue remains, how much is WABC-TV worth to Cablevision for carriage and distribution of their signal. Retransmission Consent was formulated years ago when broadcast stations wanted assurance that cable companies would carry their local signals, and be compensated for their original programming.  In the beginning most broadcasters just asked for Must-Carry, or assurance their signals would be distributed by pipeline providers for 3 years, see (Moody’s expects to see more retrans battles).

Fast-Forward to today and times have changed. Providers are paying substantial sums per month to distribute most of their programming to consumers. Cable Programmers have reaped the benefits of these carriage agreements in producing top-quality programs through carriage fees along with ad supported revenues; a dual revenue model. Broadcasters are struggling to stay afloat with the single, Ad Revenue Model. Therefore, Retransmission Consent has become a battleground for demanding monthly carriage fees, just as most Cable Programmers ask for, and receive. Broadcasters have seen a significant drop in Ad Revenues in recent years along with a lose network subsidies. Without additional revenue streams, broadcasters are looking to lucrative distribution agreements to make up the short-fall.

This is a market demand negotiation, not a regulation matter for the FCC to consider. If Cable Providers want to lessen the impact of these carriage fees, they should consider (Tiering) Broadcast signals to accommodate and moderate fee increases. Yes, if negotiations demand an unreasonable price for most customers, negotiate for the signal to be on a Tier where consumers can pay an extra cost if they value the programming. Some consumers will lose in this scenario, but overall consumer rates would be adjusted for those who can afford the additional cost.

This is not a regulatory issue, but one of market demand and supply. In my opinion the coalition of cable providers should think twice before asking the FCC to intervene in their business negotiations, or risk having regulations that regulate them into non-existence. This is a Free Market System, let it work as intended.

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Make No Mistake: Internet Content Subscription Models will come!

in Broadband's Impact/Expert Opinion by
Image representing hulu as depicted in CrunchBase
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Why do Internet users continually resist paid content on a systematic basis? Keep in mind that many current Internet business models were built on the premise, (create the content and they will come). We have all seen the sterling examples of this model with Google, Facebook, MySpace, Hulu, YouTube, along with a host of others, including news organizations betting on ad supported revenues to make a profit. While this model worked for some businesses, it has not for others. Relying solely on ad supported revenues is a weak model, as the Broadcast TV Industry found out the hard way.

Historically, news organizations relied heavily on paper subscription models supplemented with ad revenues to make their profits. Linear TV models like CNN and Fox News relied heavily on the Cable Industry’s monthly subscription models while being supplemented with ad revenues. These amounted to dual and re-occurring revenue stream models, realizing the best of revenue worlds, subscription and advertising.

I’m sure the current ad revenue based models were launched based on garnering a gigantic number of users which could be attracted to these sites based on whatever product/service was being offered. Not to mention that these models worked and trained users that Internet Content was free. But what new start-ups today are going to get the numbers needed to break-even, much less make a profit? They are few and far between and Internet junk-yards are full of great ideas based on an ad supported revenue model. One only has to remember the Dot.com era where company valuations were based, not on real revenues, but (pie-in-the-sky) business models.

The time has come with the continued proliferation of broadband Internet users, clamoring for content to distance them from a Linear TV Model, for companies to understand that Internet based subscription models will work, if the business model gives the right combination of a paid and free content model.  The Cable Industry is using this model to perfection with its TV Everywhere initiative, giving away free Internet content, if you keep their subscription based models, see (Nielsen study shows there’s a long road ahead to get people to pay for online content). In the interim, these companies will surely test online dual revenue Internet models of ad and subscription, if not in somewhat of gradual scenario, since Linear TV continues to produce great profits.

The bottom line to subscription based content over the Internet is that consumers want a quality experience at a reasonable price, based on competitive market forces, and one where that do not feel trapped in a spiral of upward rate adjustments. This is where the Linear TV model got into trouble, see (Cable Is Saved?). While it produced great content and hundreds of programming choices, it became too expensive and forced consumers to subscribe to channels they didn’t want or need. But here lies a new frontier where innovation and competition can solve consumer demand at a relative price model. So what do existing and new companies wait for; a realistic business model where investors are willing to put up capital but receive acceptable returns, where consumers will both accept and follow an Internet based subscription model? It’s time is coming, so turn up the bytes and let the good times roll!

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Will Comcast’s XFINITY produce an Affinity with Customers?

in Expert Opinion by
WASHINGTON, DC - FEBRUARY 4:  Comcast Chairman...
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With some 1900 company name changes last year, one would think these re-branding efforts would pay dividends in market share, customer perception, and employee focus in forging a new direction, both in the short and long term.  Does XFINIITY, See (Comcast launches XFINITY), make relevant and pertinent business sense for all stakeholders involved, or can it be viewed as confusing and irrelevant?

These are the questions Comcast (Nasdaq: CMCSA, CMCSK) must answer when making the investment in retraining customers to think in terms of their existing and new products under new brand name.  But there are inherent issues with re-branding which must be addressed to ensure the new name fits with an existing and future targeted customer culture.

Does the company have these items?

  • Multiple Delivery Platforms
  • Multiple Types of Users
  • Products & Services with Multiple Features
  • Future Content Offerings
  • Existing Umbrella or Corporate Names

Can the New Name Pass this Test?

  • Will it have an emotional Bond with customer?
  • Will the brand name be easily remembered?
  • Does the name association reverberate positive or negative?
  • Does the new name position the product as intended?
  • Can the new name be easily pronounced by customers?
  • Will the sound of the new name bond with the customer?

These are the issues Comcast probably considered when changing its product brand name to XFINITY.  If you take the meaning of the word (affinity), pronounced and spelled similar to XFINITY, the meaning produces associations like:

How does an Affinity connection relate?

  • (A feeling of connection) – “a natural liking for or identification with somebody or something”
  • (Connection)-“a similarity or connection between people or things
  • (Somebody attractive)-“somebody to whom somebody else is attracted to”

The question remains, will customers have a connection with the XFINITY name?  Is Comcast seeking to merge its products, both existing and new, into a new brand that best describes its future? What else will the company do to enhance the name, such as tying it to new and improved customer service and quality engineering?  Or maybe it wants to distance its products from an old brand name like Comcast, which has been through the ups and downs of customer perceptions.

Although the company parent name will remain Comcast, even with the newly acquired NBC-Universal, all of its products will be marketed under the name XFINITY, including, Digital Video, Broadband, and Telephone. This goes on to include employee uniforms, customer bills, and product related advertising.

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Cable Trends: Predicting Stock Value as a Percentage of Division

in Expert Opinion by
Image representing Comcast as depicted in Crun...
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Cable industry stocks, like all tech stocks, have seen their ups and downs when it comes to performance. The industry has been through periods of high infrastructure spending, acquisitions and divestitures, increased programming costs, higher retransmission costs, and competitive pressures, each playing its own role in keeping values lower.

How do industry revenue streams effect stock prices today with increasing changes within the marketplace becoming more common, and how will these market shifts impact those revenues and subsequently stock prices? If revenue trending is any indicator of stock performance, then look at division breakdowns as a contribution to stock prices. Where will revenue shifts take place and how these help will or hurt company performance going forward.

From analyzing trends in revenue generation, seeing the move from linear programming dominance can clearly be seen as a migration to High Speed Broadband, and Digital Phone. Digital Cable continues to be a strong performer as companies reclaim bandwidth to offer High Definition products. However Cable continues to shed subscribers on a quarterly basis as evidenced by Time Warner Cable’s predicted 30,000 customer lose for the 4th quarter 2009. Comcast, on the other hand, is expected to lose 150,000 customers during the period.

These are not huge numbers in the scheme of things referring to current Cable Company balance sheets, but do signify that portions of market segments are susceptible to continued churn for various reasons, whether those might be shifting demographics, economic pressures, disillusionment in price, etc…  Without good trending information and significant data mining, corrective actions may continue to elusive.

The Triple Play bundle is by far the most dependable asset the industry has at its deposal to both retain and gain new customers. Consumers no longer want just Digital Cable without Broadband, and why not throw in Digital Phone to entice even more. After all the phone companies have stated they want out of the landline business. So, create a great price package that wins loyalty and reduces churn.

And while we are at the one-stop-shop counter; do not overlook the Quad Play. Both Verizon and AT&T have their sights set on offering Mobile Phone to complete a Quad Play bundle as well, throwing a true Superfecta into the mix.

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Comcast’s impending Regulatory Hurdle: Simple Motives behind a Dream – NBC-Universal

in Broadband's Impact/Expert Opinion/Transparency by
Current logo was used since 1986
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Since announcement of the Comcast/NBC-Universal merger consummated the deal creating subsequent analysis and conjecture about how the new venture will be structured, with its impact on programming distribution and fears of dominance, and anti-trust issues within the marketplace; Comcast is set to go before regulators to convince a skeptical crowd how this union will benefit competition and the continued adoption of broadband access.

News of the deal set-off a firestorm of controversy from public interest groups, competitors, and Internet Access Providers alike, all concerned over the potential abuses such a merger could unleash on Broadband stakeholders and their ability to access, and compete in what is perceived as a Free Internet World.

Ultimately though, a deal such as this has long been the dream of Comcast leadership including lessons learned from previous merger attempts to bond programming and pipeline, thereby creating market dominance along with a competitive edge for the long haul; and it all may be as simple as this scenario which drive the motives behind the acquisition of NBC-Universal. But upcoming regulatory scrutiny will decide how the merger will stand-up under the glare of legislators.

The Pipeline:

Comcast has always, since its inception, believed in the pipeline and the business benefits of building an infrastructure with which to carry interesting, informative, and socially beneficial programming on a broad scale within a national market. The pipeline is the core business, or the building blocks if you will, of which all other Comcast businesses are constructed. The strategy has not changed, and it fits well with the advent of high cost content that has driven smaller operators to the merger or take-over table.

The Programming:

To fill the concept of a pipeline with relevant content, generating concurrent and steady revenues on a monthly basis, Comcast realizes the need to be more than just a pipeline filled with expensive to carry programs. It needs a strong formula to deliver vertically integrated demand driven content that will outstrip the competition in securing bundled revenue streams in an increasingly broadband proliferated genre. Hence, the NBC-Universal merger that gives the right recipe of owned versus purchased programming rights.

Regulatory Finesse

The cable giant has not under-thought the implications of the regulatory hurdles it would face with its merger. The company has for many years relied upon strategic thinking within a 5 to 10 year framework in predicting where the pipeline industry is headed, and then acting upon that strategic intelligence to formulate a plan of action. So, it is not a mere coincidence that NBC-Universal came into its sights at this time, but was more of researching all the implications, including regulatory, and waiting for the right opportunity at the right price. NBC-Universal filled this need as an underperforming part of GE-Vivendi SA considered not a good operational fit from the get-go. It has continually and concertedly moved to reassure regulators of its intentions to run NBC-Universal as a separate company, making it more transparent and independent, to include Hulu with its free Internet content concept.

In conclusion, Comcast motives are simple. Acquire more vertically integrated programming to fill the pipelines serving 24 million customers with unique and relevant content used both in a linear and broadband format that preserves the status-quo and addresses the future. It’s a win-win situation for Comcast; its customers, and the Cable Industry.

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The Cable Pipeline Opinion: Net Neutrality’s Conundrum

in Expert Opinion/Net Neutrality by
View of Wall Street, Manhattan.
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Through continued research of the Net Neutrality debate, distinct realizations come to mind for Regulators’, Consumers, and Network Providers alike in pondering the heated discussions around whether either regulation, or a (hands-off) approach, are sufficient to allow unfettered and equal access, including clear competition, and that all are present on the Broadband pipelines. 

First there has continued to be somewhat of a hysteria and possibly pre-ordained fear, albeit without serious incidents of record, that network providers both have and will continue to throttle speeds and limit access of their customers to the copious amounts of content becoming available through the Internet. Perhaps the hysteria has unfolded as a result of one BitTorrent case, or associated with a fear of other industry debacles as seen with banks, Insurance companies, Investor Management companies, and Wall Street, driving the public to government as their interventionist in reigning in these industries; but how realistic are these fears based on the current Internet model?

Regulation can hamper Broadband Access and Adoption

Increased regulation of a burgeoning Internet on the verge of offering just the recipe the FCC is mandating could backfire in helping startup companies materialize and grow while slowing the proliferation of increased infrastructure, and network upgrades. Without the freedom to invest and seek sufficient ROI’s network providers will cut costs rather than invest for the future. This could stunt job creation, a by-product of innovation and free-flowing investment, in an industry with a broad potential to produce applications and services for the Internet.

Network Management Polices will continue to improve and evolve to handle varying Traffic Needs

It is in the best interest of private network providers to provide the best network management policies for all users in continuing to build their consumer and business base. This correlates to (Business Management – Best Practices-101). If a company cannot offer the best experience for its customers all businesses, whether an Internet Provider or a Wal-Mart, cannot survive the long term.

Use of Anti-Trust Statutes to curtail (Bad-Actors)

Absent a serious history of abuses within the Internet pipelines the FCC should concentrate on harnessing (bad-Actors) with Anti-Competitive Statues, not regulation, allowing that these companies will receive stiff penalties, and will certainly be brought to the forefront via customers and competitors having been abused, disenfranchised, and denied access to fair treatment.

Incentives rather than Regulation

Broadband Stimulus Plan funds should be used to incent companies to build new infrastructure and upgrade their networks to realize an adoption and access vision which the FCC has been mandated to accomplish.  First, detailed maps must be created to determined where the infrastructure is located, and where it is not. Then current providers of Telephone, Cable, or Wireless are incented to build and upgrade their networks in rural areas to provide needed Internet services. Monies will be better spent with incentives associated to quantifiable results rather than regulation and mandates of an existing industry.

The Cable Pipeline has written about both sides of the Net Neutrality issue. It is without question a passionate and personal debate with results having far reaching implications in the lives of individuals, businesses, and public sectors alike. The FCC has been prudent in seeking comment from all stakeholders which will hopefully produce the right results for all concerned. When the dust settles, my preference would lean more toward less regulation and more incentives therefore spurring economic growth and job creation.

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Net Neutrality’s Increasingly Complex Debate

in Expert Opinion/Net Neutrality by
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At issue, the language the FCC crafted in its proposed rule making, specifically FCC NPRM Paragraph 106 as implicated by Digital Society. (see FCC NPRM prohibits good network management)

“We understand the term (nondiscriminatory) to mean that a broadband Internet access service provider may not charge a content, application, or service provider for enhanced or prioritized access to the subscribers of the broadband Internet access service provider, as illustrated in the diagram below.  We propose that this rule would not prevent a broadband Internet access service provider from charging subscribers different prices for different services.  We seek comment on each of these proposals.  We also seek comment on whether the specific language of this draft rule best serves the public interest.”

The crux of the debate for those seeing paid-peering-agreements as essential to increased participation by innovative content, application, or service providers, whether they be start-ups or seasoned, seem to be an open ended interpretation which would ban prioritization. See (What is true neutrality in the network?)

With the wide range of content flowing through the pipelines, and increasing at a rapid pace, the network cannot become a (dumb pipeline). Network management seems to be an essential characteristic needed to handle the flexibility of constantly differing requirements from Internet users. This is not a linear format with constant speeds and demands.

The network must constantly adjust to those varying needs which may require one user to demand more capacity than others at unique times. This management will not degrade the network for other users. It is a matter of choosing one higher demand over a lower demand without degrading the demand for both. It manages the requirements of each user.

As private networks, ISP‘s should know their responsibilities regarding consumer and commercial traffic, and the management issues of prioritizing. Obviously, paid peering is needed for those whose products depend on increased speed and bandwidth for business survival. The consumer wants the same whether they are streaming movies, or downloading PDF’s or just sending e-mail attachments.

It comes down to understanding how the Internet works regarding network access management capabilities across a wide variety of circumstances and geographical locations. In essence, what will it take for both large and small ISP’s to handle the varying traffic over their networks and upgrading to a standard that reasonably doesn’t degrade the user experience?

Hence, the NCTA’s recent reference to First Amendment issues in discriminating against ISP providers in Paid-Peering Agreements. The FCC should revisit NPRM Paragraph 106 and make sure proposed Net Neutrality rules do not discriminate against one party in favor of another.

Cable industry: at a Cross-Roads

in Expert Opinion by
Diagram of Streaming Multicast
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Cable providers are looking at a cross-roads with the current climate brought on by a new political landscape, a Democratic Congress, with an FCC mandated to change the future of broadband, and a public viewed skepticism of the Cable Industry.

This adds up to significant changes which might threaten the status-quo of annual rate increases, tiered program blocks, and set-top-box rentals that have plagued the industry with criticism in the past. So, how does the industry change those perceptions and move forward in a new competitive landscape?

With innovations and growth spurred by deregulation of the 1980’s Reagan era, the Cable Industry began a journey starting with wire-line build-outs spurred by terrestrial satellite programming. A phenomenal market emerged for content delivered over the pipelines, which leaped forward with the advent of fiber for better quality, bandwidth, and extended reach to new customers.

This model became so successful it began to come under scrutiny from a public, and then regulators, which perceived an industry with little competition, blocks of programming tied to rate increases, poor service from a lack of forethought, and high profits.

Fast-forward to today with broadband streaming video, alternatives to traditional linear TV, increased competition from DBS and a few wire-line providers; the industry is at a cross-roads. Where do we go from here to ensure the profit model which made us successful in the past?

But the industry has its up-side, with a commercial business market largely untapped and held by incumbent phone companies for decades; a new venue of Internet Broadband viewing by an increasingly impatient consumer for change in the status-quo, therefore TV Everywhere; a Set-Top-Box market that begs for universal service across many mediums; and a mandate by regulators to increase broadband penetrations.

The industry can, if strategically focused, take advantage of these changes in the market by embracing change, letting go of the past, and moving forward to the future. Its message should be one of new innovations, a willingness to compete under a new market structure, and a helping hand in achieving broadband proliferation. These are the cross-roads the industry must face. Their message should be communicated positively, succinctly, and often.

NCTA’s McSlarrow Speech: Mirrors Self-Serving Control of Pipelines

in Expert Opinion/Net Neutrality by
the CNN-Youtube Republican Debate
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Kyle McSlarrow’s recent speech to The Media Institute mirrors a self-serving approach to control the pipelines, guised as a First Amendment right for ISP’s. The point Mr. McSlarrow is trying to make shakes the Freedom of Speech right for every citizen to the core. How can such rhetoric hide behind this basic citizen right in making an argument to control speeds, and content of global information sharing, the principle design of the Internet, and contention of the Net Neutrality debate? The Internet has become larger than any private company’s right to control it.

Instead of creating more controversy, the NCTA, (the right arm of the Cable TV industry), should be highlighting how these private sector companies can benefit consumers and businesses in a competitive landscape. The important issue should be how those networks will continue to upgrade infrastructure to act as a conduit for information, education, and global business competition.

The industry is not well served by its spokesperson in (drawing-a-line-in-the-sand), or trying to hijack the premise of free speech to avoid shackling of its pipelines that will clearly profit from a (lack of free speech). Unfortunately, the comments argument only drives home the need for government intervention.

Finally, to say that an industry which helped create CNN, FOX NEWS, HEADLINE NEWS, CNBC, BLOOMBERG, and other news organizations is under threat of losing its freedom of speech, is ridiculous. It has so many avenues of getting its point to the masses by creating pay content, the speech becomes an oxymoron. This is an ill-conceived speech cloaked with big business and power wanting control of the pipelines, and from an industry on the (tipping-point) of increased regulation.

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