Thinking Inside The Box

Remember the Great Set-Top Box War of 2016? That was the brouhaha touched off by then-Federal Communications Commission chairman Tom Wheeler’s effort to force cable TV operators to “unlock the box” and make their video service available as a standalone feed so that third-party device makers could incorporate the service into their own platforms and within their own user-interface functions.

The proposal met fierce opposition from the TV networks and cable operators, who feared losing control over the uses and presentation of their programming, as well as from the Republican members of the FCC itself.

After a bruising, months-long fight, Wheeler was forced to pull the proposal on the eve of a planned vote. It was later dropped altogether after Wheeler left and a new, Republican-appointed chairman took over.

Yet for all the sturm und drang, a pair of recent announcements suggests that cable operators and box makers are finding ways to move beyond the controversy to achieve at least some of Wheeler’s hopes regarding innovation in the pay-TV market, if not his ultimate goal of breaking up the traditional pay-TV bundle.

At Apple’s Worldwide Developers Conference this week, the world’s biggest (by market cap) device maker announced a wide-ranging partnership with number 2 cable operator Charter Communications to incorporate Charter’s Spectrum TV app into Apple devices.

As part of the deal, the Spectrum TV app will be available on Apple’s next-generation set-top box, the Apple TV 4K, due later this year. Spectrum subscribers will be able to access “hundreds” of live channels, according to the announcement, and “tens of thousands” of video-on-demand titles through the Apple box.

While Charter has made the Spectrum app available on Roku devices since 2015, the Apple integration goes deeper. For one thing, the Apple 4K will incorporate Siri, allowing at least some functions of the box and its apps to be controlled with voice commands.

More notably, Apple’s latest operating system for the 4K box, tvOS 12, will enable the device to access a broader range of Spectrum subscribers’ program permissions and authorizations, including TV Everywhere authentication — one of the principal goals of Wheeler’s proposal. As described in the announcement, “Apple TV simply detects the user’s broadband network and automatically signs them in to all the supported apps they receive through their subscription—no typing required. Zero sign-on begins with Charter later this year and will expand to other providers over time.”

The feature would still require subscribers to get both broadband and video service from Charter, but it moves Apple TV a step closer to being a viable replacement for the traditional cable box.

Also this week, Amazon unveiled the Amazon Fire TV Cube, which combines features of Amazon’s current 4K-capable Fire TV box with those of its Echo smart speaker, including the Alexa voice assistant.

While Amazon has not announced any pay-TV service integrations with the Cube, the box does support HDMI-CEC (Consumer Electronics Control). Though still a bit dodgy, HDMI-CEC is designed to allow devices connected to a TVs HDMI ports to communicate back and forth with the TV, which means Alexa will be able to control at least some functions of compatible TVs though voice commands.

The Cube also contains IR (infra-red) blasters and comes with an IR dongle that attaches to the back of the device, giving Alexa a measure of control over a variety of cable boxes, soundbars and other TV-connected devices.

According to Amazon, the Cube is compatible with “more than 90 percent” of cable and satellite services, including boxes from Comcast, Dish, DirecTV, Charter, and Verizon.

To be sure, both the Apple and Amazon solutions leave the incumbent pay-TV operators in control of subscribers’ program permissions, as well as how that programming is packaged and presented — a grip Wheeler had hoped to loosen. And they do nothing to break up the Big Bundle.

Yet, by introducing innovations such as effective voice control they could begin to render that packaging and visual presentation moot, achieving through attrition what Wheeler tried to achieve by fiat.

 

The Great Re-bundling: The Wireless Future of Music and Video

Bundled media services are becoming table stakes in the wireless business. With plain old wireless service (POWS?) at or close to the saturation point in the U.S., wireless operators are increasingly fighting over slices of a fixed pie, and feel a growing need to differentiate from their competitors in pursuit of market share.

With the costly build-out of 5G networks looming, operators also need to increase ARPU by adding services.

Thus, it was no big surprise this week when Softbank-owned Sprint snapped up a 33 percent stake in Jay-Z’s Tidal music streaming service. Sprint already had a partnership with Tidal, but as MIDiA Research analyst Mark Mulligan noted in a blog post,  the bundling game has changed for wireless operators, and meaningful differentiation increasingly means having your own skin in it.

“The original thinking behind telco bundles was differentiation, but when every telco has got a music bundle there’s no differentiation anymore,” he wrote. “Additionally, if you are a top tier telco and you haven’t got Apple or Spotify, then partnering with one of the rest risks brand damage by appearing to be stuck with an also-ran. By making a high profile investment in Tidal, Sprint has thus transformed its forthcoming bundle from this scenario into something it can build real differentiation around.” Read More »

The FCC Plays For Time in Charter-TWC Merger

The Federal Communications Commission and the U.S. Justice Department this week each signaled their intent to approve Charter Communication’s $65 billion acquisitions of Time Warner Cable and Brighthouse Networks, subject to several conditions.

The mergers will create the second largest cable-TV provider in the country, with 17.4 million subscribers, behind Comcast’s 22 million. Strikingly, though, none of the conditions attached by the FCC and DOJ have to do with the provision of cable-TV service. Instead, they deal almost entirely with promoting over-the-top video as a viable competitor to cable.

FCC_headquartersUnder the deal with the FCC, the merged company will be prohibited from imposing usage-based pricing or data caps on its 19.4 million broadband subscribers, a tactic many cable internet providers have turned to lately to discourage video cord-cutting by indirectly raising the cost of using OTT services like Netflix.

Charter will also be prohibited from charging Netflix and other OTT providers with interconnection fees for delivering traffic to Charter broadband subscribers.

Under the agreement with the Justice Department, Charter will be barred from inserting or enforcing most-favored nation (MFN) clauses in its carriage agreements with programmers — a tactic many pay-TV providers, particularly TWC, have used to discourage programmers from making their content available on OTT platforms. Read More »

Cable’s Q4 Bundle of Joy

Comcast, Time Warner Cable and Charter all reported strong video subscriber growth in the fourth quarter of 2015, adding 172,000 between them. That was a far cry from a year earlier, when they collectively lost 35,000 video subs.

The results led some to speculate that the worst days of cord-cutting are now behind the industry and that cord-nevers may be starting to change their minds about paying for TV.

Maybe, although the pay-TV industry as a whole continues to lose subscribers, at a rate of about 1 percent a year, according to an estimate by comcast_vanMoffettNathanson analyst Craig Moffett. Most of that shrinkage in the fourth quarter came from telco and satellite providers, as those two businesses undergo restructurings.

Between them, Verizon’s FiOS TV service and the combined AT&T/DirecTV lost 6,000 video subscribers in the quarter, as Verizon shifted its video focus to its new mobile streaming service Go90 while AT&T shed U-Verse subscribers as it prepared to swallow DirecTV.

In Comcast’s Q4 earnings call, CEO Brian Roberts acknowledged that some of cable’s gain last year probably reflected a market share shift, reversing several years in which cable was losing share to satellite and telco. Read More »

Netflix Flexes Its Muscles

Having played a pivotal role in persuading the Federal Communications Commission and the Department of Justice to reject Comcast’s attempted merger with Time Warner Cable, Netflix has seemingly done an about face and given its blessing to Charter Communications’ bid to acquire TWC. In a letter to the FCC dated July 15, VP of global public policy Christopher D. Libertelli said, “Netflix  supports the proposed Charter – Time Warner Cable transaction if it incorporates the merger condition proposed by Charter.”

reed_hastingsKey to the apparent change of heart was precisely that “merger condition proposed by Charter,” specifically a commitment by Charter to offer settlement-free peering with edge providers like Netflix across its entire expanded footprint.

“Charter’s new peering policy is a welcome and significant departure from the efforts of some ISPs to collect access tolls on the Internet,” Libertelli wrote. “Charter’s policy will promote efficient interconnection with on line content providers and with the transit and content delivery services that smaller online content providers rely on to reach their consumers. Charter’s endorsement of the policy as an enforceable merger condition will ensure that consumers will receive the fast connection speeds they expect.”

Charter outlined the new policy in a separate filing with the FCC, also dated July 15.

Comcast’s successful effort to impose interconnection fees on Netflix was the main reason Netflix aggressively opposed Comcast’s bid for TWC. Peering agreements were also the main focus of Netflix’s lobbying in support of net neutrality, urging the FCC to require open interconnection policies as part of its Open Internet order (in the end the FCC did not include specific rules for interconnection arrangements in its order, but set up a process for reviewing complaints against ISPs brought by consumers or edge providers). Read More »