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Wall Street Investors Suckered By Broadband, Wireless Myths on Usage Pricing, Network Investment

verizon-protestBig Telecom companies like Verizon and AT&T use phony numbers and perpetuate myths about broadband traffic and network investments that have conned investors out of at least $1 trillion in unnecessary investments and consolidation.

Alexander Goldman, former chief analyst for CTI’s American Recovery and Reinvestment Act grants, is warning Wall Street and investors they are at risk of losing millions more because some of the largest telecom companies in the country are engaged in disseminating bad math and conventional wisdom that relies more on repetition of their talking points than actual facts.

Goldman’s editorial, published by Broadband Breakfast, believes the campaign of misinformation is perpetuated by a media that accepts industry claims without examining the underlying facts and a pervasive echo chamber that delivers credibility only by the number of voices saying then same thing.

Goldman takes Verizon Communications CEO Lowell McAdam to task for an editorial published in 2013 in Verizon’s effort to beat back calls on regulators to oversee the broadband industry and correct some of its anti-competitive behavior.

McAdam claimed the U.S. built a global lead in broadband on investments of $1.2 trillion over 17 years to deploy “next generation broadband networks” because networks were deregulated.

Setting aside the fact the United States is not a broadband leader and continues to be outpaced by Europe and Asia, Goldman called McAdam’s impressive-sounding dollar figures meaningless, considering over the span of that 17 years, the United States progressed from dial-up to fiber broadband. Wired networks have been through a generational change that required infrastructure to be replaced and wireless networks have been through at least two significant generations of change over that time — mandatory investments that would have occurred with or without deregulation.

Over the past 17 years, the industry has gotten more of its numbers wrong than right. An explosion of fiber construction in the late 1990s based on predictions of data tsunamis turned out to be catastrophically wrong. University of Minnesota professor Andrew Odlyzko, the worst enemy of the telecom industry talking point, has been debunking claims of broadband traffic jams and the need to implement usage-based pricing and speed throttling for years. In 1998, when Wall Street was listening intently to forecasts produced by self-interested telecom companies like Worldcom that declared broadband traffic was going to double every 100 days, Odlyzko was telling his then-employer AT&T is was all a lot of nonsense. The broadband traffic emperor had no clothes, and statistics from rival telecom companies suggested Worldcom was telling tall tales. But AT&T executives didn’t listen.

fat cat att“We just have to try harder to match those growth rates and catch up with WorldCom,” AT&T executives told Odlyzko and his colleagues, believing the problem was simply ineffective sales, not real broadband demand. When sales couldn’t generate those traffic numbers and Wall Street analysts began asking why, companies like Global Crossing and Qwest resorted to “hollow swaps” and other dubious tricks to fool analysts, prop up the stock price and executive bonuses, and invent sales.

Nobody bothered to ask for an independent analysis of the traffic boom that wasn’t. Wall Street and investors saw dollars waiting to be made, if only providers had the networks to handle the traffic. This began the fiber boom of the late 1990s, “an orgy of construction” as The Economist called it, all to prepare for a tidal wave of Internet traffic that never arrived.

After companies like Global Crossing and Worldcom failed in the biggest bankruptcies the country had ever seen at the time, Odlyzko believes important lessons were never learned. He blames Worldcom executives for inflating the Internet bubble more than anyone.

A bubble of another kind is forming today in America’s wireless industry, fueled by pernicious predictions of a growing spectrum crisis to anyone in DC willing to listen and hurry up spectrum auctions. Both AT&T and Verizon try to stun investors and politicians with enormous dollar numbers they claim are being spent to hurry upgraded wireless networks ready to handle an onslaught of high bandwidth wireless video. Both Verizon’s McAdam and AT&T’s Randall Stephenson intimidate Washington politicians with subtle threats that any enactment of industry reforms by the FCC or Congress will threaten the next $1.2 trillion in network investments, jobs, and America’s vital telecom infrastructure.

Odlyzko has seen this parade before, and he is not impressed. Streaming video on wireless networks is effectively constrained by miserly usage caps, not network capacity, and to Odlyzko, the more interesting story is Americans are abandoning voice calling for instant messages and texting.

8-4WorldcomCartoonThat isn’t a problem for wireless carriers because texting is where the real money is made. Odlyzko notes that wireless carriers profit an average of $1,000 per megabyte for text messages, usually charged per-message or through subscription plan add ons or as part of a bundle. Cellular voice calling is much less profitable, earning about $1 per megabyte of digitized traffic.

Wireless carriers in the United States, particularly Verizon and AT&T, are immensely profitable and the industry as a whole haven’t invested more than 27% of their yearly revenue on network upgrades in over a decade. In fact, in 2011 carriers invested just 14.9% of their revenue, rising slightly to 16.3 percent in 2012 when companies collectively invested $30 billion on network improvements, but earned $185 billion along the way.

While Verizon preached “spectrum crisis” to the FCC and Congress and claimed it was urgently prioritizing network upgrades, company executives won approval of a plan to pay Vodafone, then a part owner of Verizon Wireless, $130 billion to buy them out. That represents the collective investment of every wireless provider in the country in network upgrades from 2005-2012. Verizon Wireless cannot find the money to upgrade their wireless networks to deliver customers a more generous data allowance (or an unlimited plan), but it had no trouble approving $130 billion to buy out its partner so it could keep future profits to itself.

Odlyzko concludes the obvious: “modern telecom is less about high capital investments and far more a game of territorial control, strategic alliances, services, and marketing, than of building a fixed infrastructure.”

That is why there is no money for Verizon FiOS expansion but there was plenty to pay Vodafone, and its executives who walked away with executive bonuses totaling $89.6 million.

As long as American wireless service remains largely in the hands of AT&T and Verizon Wireless, competition isn’t likely to seriously dent prices or profits. At least investors who are buying Verizon’s debt hope so.

Goldman again called attention to Odlyzko’s latest warning that the industry has its numbers (and priorities) wrong, and the last time Odlyzko had the numbers right and the telecommunications industry got its numbers wrong, telecommunications investors lost $1 trillion in the telecommunications dot.com bust.

As the drumbeat continues for further wireless consolidation and spectrum acquisition, investors have been told high network costs necessitate combining operations to improve efficiency and control expenses. Except the biggest costs faced by wireless carriers like Verizon are to implement strategic consolidation opportunities like the Vodafone deal, not maintain and grow their wireless network. AT&T is putting much of its spending in a proposed acquisition of DirecTV this year as well — at a cost of $48.5 billion. That could buy a lot of new cell towers and a much more consumer-friendly data plan.

Voice to text substitution (US)

year voice minutes billions texts billions
2005 1,495 81
2006 1,798 159
2007 2,119 363
2008 2,203 1,005
2009 2,275 1,563
2010 2,241 2,052
2011 2,296 2,304
2012 2,300 2,190

Cell phone network companies (if you can believe their SEC filings) are incredibly profitable, and are spending relatively little on infrastructure:

year revenues in $ billions capex in $ billions capex/revenues
2004 102.1 27.9 27.3%
2005 113.5 25.2 22.2
2006 125.5 24.4 19.4
2007 138.9 21.1 15.2
2008 148.1 20.2 13.6
2009 152.6 20.4 13.3
2010 159.9 24.9 15.6
2011 169.8 25.3 14.9
2012 185.0 30.1 16.3

FCC Chairman Tom Wheeler Ignores Millions of Americans, Plans Fake Net Neutrality Frankenplan

frankenplanThe majority of 3.7 million comments received by the FCC advocate strong and unambiguous Net Neutrality protections for the Internet, but that seems to have had little impact on FCC chairman Thomas Wheeler, who is laying the groundwork for a hybrid Net Neutrality Frankenplan that would marginally protect deep pocketed content producers while leaving few, if any, protections for consumers.

The Wall Street Journal reported late last week that Wheeler is considering a “hybrid” approach, separating broadband into two distinct services:

  • Retail Broadband, sold to consumers, would continue as a broadly deregulated service, allowing ISPs to set prices and policies with little, if any, oversight. Wheeler’s plan would allow providers to freely implement usage-based pricing, establish paid fast lanes at the request of customers, and permit ISPs to continue exempting preferred content from usage pricing while charging customers extra to access content from “non-preferred partners;”
  • Wholesale Broadband, the connection between your ISP and content producers, would be reclassified under Title II and subject to common carrier regulations, which would allow the FCC to police deals between your provider and services like Netflix.

Wheeler’s proposal would offer significant protection to wealthy content producers like Netflix, Amazon.com, broadcasters and Hollywood studios, but would leave consumers completely exposed to providers’ pricing tricks, usage caps/consumption billing, and paid fast lanes that could leave unpaid content vulnerable to network deterioration, especially during peak usage times.

Comcast_pumpkinLarge telecommunications companies argue that deregulation promotes broadband investment and expansion to create world-class service. But years of statistics and comparisons with other countries suggest deregulation has not inspired sufficient competition to keep prices in check and force regular network upgrades. In fact, competition is much more robust at the wholesale level, while the majority of retail consumers have a choice of just one or two providers that receive almost no oversight. Those providers are now exercising their market power to further monetize broadband usage to boost profits and raise prices.

Wheeler’s proposal would ignore the wishes of more than three million Americans that want comprehensive Net Neutrality protections, as well as those of President Barack Obama, who has called for a ban on paid fast lanes. A senior White House official signaled Thursday the administration has concerns about Wheeler’s proposal, noting “the president has made it abundantly clear that any outcome must protect net neutrality and ban paid prioritization—and has called for all necessary steps to safeguard an open Internet.”

“This Frankenstein proposal is no treat for Internet users, and they shouldn’t be tricked,” consumer group Free Press CEO Craig Aaron said in a statement. “No matter how you dress it up, any rules that don’t clearly restore the agency’s authority and prevent specialized fast lanes and paid prioritization aren’t real Net Neutrality.”

Broadband providers don’t like Wheeler’s plan either. Verizon last week sent comments to the FCC warning any attempt to reclassify broadband under Title II “could not withstand judicial review.” Others, including the industry-backed U.S. Telecom Association, promised swift legal action against Wheeler’s proposal.

Aaron believes the last thing broadband needs is another “hybrid” plan.

“The FCC has already tried twice before to invent new classifications on the fly instead of clear rules grounded in the law,” Aaron said. “And twice their efforts have been rejected. This flimsy fabrication will be no different. And this approach will only serve to squander the political support of millions and millions of Americans who have weighed in at the agency asking for strong rules that will stand up in court.”

YouTube Piles on the Video Ads, Now Ponders Charging Viewers to Get Rid of Them

Phillip Dampier October 28, 2014 Consumer News, Online Video 4 Comments

YouTubeYouTube will earn as much as $6 billion this year from the increasing number of ads that accompany videos on the world’s busiest website. It could earn even more charging consumers a subscription fee to get rid of them.

As online video advertising loads increase, online viewers are growing increasingly intolerant watching 30 second ads just to view a two-minute video. YouTube has at least allowed most of the its ads to be manually skipped by the user after a five second waiting period, but as more and more videos are subjected to the “pre-roll” ad treatment, a growing number of YouTube fans seem prepared to pay a nominal fee never to be bothered with ads again.

YouTube CEO Susan Wojcicki believes there is room for both free, ad-supported videos and a paid subscription, ad-free model and it is contemplating letting YouTube viewers choose between the two.

“We’re early in that process, but if you look at media over time, most of them have both ads and subscription services,” Wojcicki said at the Code/Mobile conference. “YouTube right now is ad-supported, which is great because it has enabled us to scale to a billion users, but there’s going to be a point where people don’t want to see the ads.”

hulu-plusYouTube rival Hulu may have already reached that point. It charges $7.99 a month for Hulu+, its enhanced service, but its online programming still carries a very heavy ad load, now approaching what viewers would see watching their favorite shows over broadcast TV. That advertising has cost Hulu+ a significant number of subscribers unwilling to pay a premium price for online videos littered with commercials.

Hulu showed users an average of 82.3 ads a month, compared with YouTube and other Google-owned sites, which showed an average of 32.3 ads per viewer, according to comScore data from December 2013.

A number of advertising agencies are welcoming a reduction in online advertising. With saturation advertising, viewers have a tendency to tune out the ads or go back to pirating video content. A small number of ads tend to hold viewers’ attention better and most won’t bother trying to skip or ignore a single 15 or 30 second ad.

“After Facebook went public, they had in-stream video and it suffocated the users and they pulled back,” Steve Minichini, chief digital officer at ad agency Assembly, told The Post. “If what we’re hearing is correct — that Hulu is pulling back — I would welcome that.”

The Capitol Forum’s Insightful Review of the Comcast-Time Warner Merger Deal: A Tough Sell

be mineWall Street is increasingly pessimistic about Comcast and Time Warner Cable pulling off their merger deal as regulators stop the clock to take a closer look at the transaction.

The Capitol Forum, an in-depth news and analysis service dedicated to informing policymakers, investors, and industry stakeholders on how policy affects market competition, specializes in examining marketplace mergers and their potential impact on American consumers and the general economy. The group has shared a copy of their assessment — “Comcast/Time Warner Cable: A Closer Look at FCC, DOJ Decision Processes; Merits and Politics May Drive Merger Challenge, Especially as Wheeler Unlikely to Embrace Title II Regulation for Net Neutrality” — with Stop the Cap! and we’re sharing a summary of the report with our readers.

The two most important government agencies reviewing the merger proposal are the Federal Communications Commission and the Department of Justice. The FCC is responsible for overseeing telecommunications in the United States and is also tasked with reviewing telecom industry mergers to verify if they are in the public interest. The Department of Justice becomes involved in big mergers as well, concerned with compliance with antitrust and other laws.

In many instances, the two agencies work separately and independently to review merger proposals, but not so with Comcast and Time Warner Cable.

Sources tell Capitol Forum there is a high level of coordination and information sharing between DOJ and the FCC, potentially positioning the two agencies in a stronger legal position if they jointly challenge the merger. Readers may recall AT&T’s attempt to buy T-Mobile was thwarted in 2011 when the FCC followed the DOJ’s lead in jointly challenging the merger on competition and antitrust grounds. With a united front against the deal in Washington, AT&T quickly capitulated.

comcast cartoonDespite a blizzard of Comcast talking points claiming the cable industry is fiercely competitive, Capitol Forum’s report indicates the DOJ staff level believes the cable industry suffers dearly from a lack of competition already, and allowing further marketplace concentration would exacerbate an already difficult problem.

Capitol Forum reports the DOJ’s staff is inclined to “take an aggressive posture with regards to [antitrust] enforcement.”

The DOJ would certainly not be walking the beltway plank to its political doom if it ultimately decides to oppose the merger.

Few on Capitol Hill are likely to fiercely advocate for a cable company generally despised by their constituents. The Capitol Forum report notes that Comcast faces powerful opposition and its political support is overstated. Comcast’s lobbying efforts and ties to President Obama and several high level Democrats have also been widely exposed in the media, which makes it more difficult for D.C.’s powerful to be seen carrying Comcast’s water.

In fact, the report indicates a regulatory challenge against Comcast and Time Warner Cable would face considerably less political opposition than what the FCC faces if it reclassifies broadband as a “telecommunications service,” protecting Net Neutrality and exposing the industry to stronger regulatory oversight.

The report suggests FCC Chairman Thomas Wheeler, who seems intent on opposing reclassification of broadband under Title II, may appease his critics by taking a stronger stance on the Comcast/Time Warner deal instead.

Wheeler has already expressed concern about the state of competitiveness of American broadband. He considers providers capable of delivering at least 25Mbps part of broadband’s key market, which in many communities means a monopoly for the local cable operator.

Understanding “The Public Interest” and the Implications of a Combined Comcast/Time Warner Cable on Competition

comcastbuy_400_241The FCC will review the transaction pursuant to Sections 214 and 310(d) of the Communications Act of 1934, in order to ensure that “public interest, convenience, and necessity will be served thereby.”

The merger proposal must also demonstrate it does not violate antitrust laws.

It is here that merger opponents have a wealth of arguments to use against Comcast and Time Warner Cable.

Despite Comcast’s insistence the deal would have no competitive implications, the Capitol Forum reports the merger’s potential anticompetitive effects are “widely recognized and evidence from the investigation could provide DOJ and FCC with a solid foundation to challenge the merger.”

Although the two cable companies don’t directly compete with each other (itself a warning sign of an already noncompetitive marketplace), the report finds “a wide array of anti-competitive effects and several antitrust theories” that would implicate the cable company in a Clayton Act violation.

Comcast is betting heavily on its surface argument that by the very fact customers will not see any change in the number of competitors delivering service to their area, the merger should easily clear any antitrust hurdles. That argument makes it more difficult for the DOJ to fall back on the usual market concentration precedents that would prevent such a colossal merger deal. To argue excessive horizontal integration — the enlarging of Comcast’s territory — the DOJ would first have to prove Comcast’s size in comparison with other cable companies is a reason for the courts to shoot down the deal. Or it could bypass Comcast’s favorite argument and move to the issue of vertical integration — one company’s ability to control not just the pipes that deliver content, but also the content itself.

octopusHere the examples of potential abuse are plentiful:

  • Comcast would enjoy increased power to force cable programmers to favor Comcast in cable programming pricing and policies while allowing it to demand restrictions on competitive online video competitors or restrict access to popular cable programming;
  • Comcast could impose data caps and usage-based pricing to deter online viewing while exempting its own content by delivering it over a Wi-Fi enabled gateway, game console or set top box, claiming all are unrelated to Comcast’s broadband Internet service or network;
  • Force consumers to use Comcast set top boxes that would not support competing providers’ online video;
  • Use interconnection agreements as a clever way to bypass the paid prioritization Net Neutrality debate. Netflix and other content producers would be forced to compensate Comcast for reliable access to its broadband customers;
  • Noting AT&T has declared U-verse can not effectively succeed in the cable television business without combining its customer base with DirecTV to qualify for better volume discounts, there is clear evidence that a super-sized Comcast could command discounts new entrants like Google Fiber could never hope to get, putting them at a distinct price disadvantage.

The FCC’s scrutiny of Comcast’s merger deal has already uncovered evidence previously unavailable because of non-disclosure agreements which show Comcast’s heavy hand already at work.

The report notes Michael Mooney, a senior vice president and group general counsel at Level 3, told the Capitol Forum the dispute earlier this year between Netflix and Comcast could have been resolved in about five minutes had Comcast added a port to relieve congestion at an interconnection point. The cost? Just $5,000. Had Comcast been willing to spend the money, millions of Comcast customers would have never experienced problems using Netflix.

Whether Comcast is ultimately deemed too large to permit another consolidating merger or whether it is given conditional approval to absorb Time Warner Cable remains a close call, according to the Capitol Forum, despite the fact consumers have urged regulators for something slightly more concrete – a single sentence, total denial of its application.

http://www.phillipdampier.com/video/Capitol Forum The Consumer Welfare Test.mp4

The Capitol Forum broadly explores how the “consumer welfare standard” has become a part of the antitrust review process over the last 30 years. Sometimes, a strict antitrust test is not sufficient to protect “the public interest” of consumers, and allows the dominant player(s) to harm competition. In the digital economy, corporate mergers that empower companies to restrict innovation can prove far more damaging than classic monopoly abuse. (15:52)

Redbox Instant by Verizon Shutting Down Oct. 7; Customers Worry About Purchased Digital Media

Phillip Dampier October 6, 2014 Competition, Consumer News, Online Video, Verizon 1 Comment
The death certificate will be signed on Oct. 7.

The death certificate will be signed on Oct. 7.

As expected, Redbox Instant by Verizon will stop operations on Tuesday (Oct. 7) after failing to attract enough interest from customers in the Netflix-dominated online video marketplace.

IMPORTANT SERVICE SHUTDOWN NOTICE

Thank you for being a part of Redbox Instant by Verizon. Please be aware that the service will be shut down on Tuesday, October 7, 2014, at 11:59 p.m. Pacific Time.

Information on applicable refunds will be emailed to current customers and posted here on October 10. In the meantime, you may continue to stream movies and use your Redbox kiosk credits until Tuesday, October 7 at 11:59 p.m. Pacific Time.

We apologize for any inconvenience and we thank you for the opportunity to entertain you.

Sincerely,
The Redbox Instant by Verizon Team

Customers that purchased digital copies of movies Redbox Instant offered for sale may not be able to retrieve them from Verizon’s digital storage locker after the service shuts down, but the company says it is “exploring options” for those affected.

“The service is shutting down because it was not as successful as we hoped it would be. We apologize for any inconvenience and we thank you for giving us the opportunity to entertain you,” the company said as part of its shutdown notice.

Paying customers will receive a refund for one month of service and have just 24 hours to redeem any Redbox kiosk rental vouchers included with their subscription.

Comcast’s Streampix and Verizon’s Redbox Instant Gasping for Air; Netflix Killers They Are Not

Rumors abound of the imminent death of Redbox Instant.

Rumors abound of the imminent death of Redbox Instant.

Comcast’s Streampix and Verizon’s Redbox Instant have not lived up to the expectations of their respective owners and the two Netflix-like services have quietly been partly decommissioned or have stopped accepting new customers altogether.

Loathe to admit the services are roadkill on the TV Everywhere highway, Comcast claims it is simply downsizing its Streampix service and Verizon issued a terse “no comment” to GigaOm’s Janko Roettgers in response to rumors Redbox Instant would begin shutting down for existing customers on Oct. 1.

But truth be told, neither service made a competitive dent in Netflix, either because they were poorly marketed or found no audience. Comcast denies it is even trying to compete against Netflix. But it did admit in a regulatory filing Streampix found very few takers at its $4.99/month asking price.

“Though Comcast sought to create excitement around Streampix by offering the online version through a unique online site and app, and offered Streampix to a small number of XFINITY broadband-only customers in one region, these attracted minimal interest,” Comcast wrote.

Streampix will be a shadow of its former self, continuing on mostly in name-only.

“Going forward, Streampix will simply be part of the XFINITY TV app and website like other video-on-demand offerings,” said Comcast in the filing. The Google Play and Apple App stores seem to confirm as much when customers looking for the Streampix app instead find: “Streampix has moved to XFINITY TV Go. Comcast customers with Streampix should download XFINITY TV Go to view Streampix content.”

Comcast launched Streampix in February 2012 as a streaming-only offering, but added download capability in late 2013.

When customers balked at paying Comcast another $5 a month for the streaming add-on, Comcast began giving it away to customers who subscribed to multiple premium channels or high value triple play packages as part of ongoing promotions.

Comcast's XFINITY Streampix admittedly didn't draw much interest from customers.

Comcast’s XFINITY Streampix admittedly didn’t draw much interest from customers.

Critics of Comcast’s merger with Time Warner Cable suspect Comcast’s real intention was to launch the service to markets outside of its service area to compete for premium over-the-top video customers without cannibalizing its cable television revenue. With the merger under scrutiny at the state and federal levels, some suspect Streampix’s public demotion is a maneuver to protect the deal from a potential political liability over Comcast’s growing dominance in the cable and broadband business.

The troubles with Verizon’s Redbox Instant service go well beyond the realm of public policy debates. Since launching in mid-2013, the service has attracted only minor interest from the public. Critics contend a marketing deal with Redbox was wrong from the start. Redbox’s success comes from renting DVDs from kiosks, not competing with Netflix. Verizon hoped a promotional tie-in offering online viewers up to four free DVD rentals a month from Redbox kiosks would bring the two services closer together. Redbox Instant also rented current movie titles on a pay-per-view basis, and hoped it could convince kiosk users disappointed with out of stock DVDs or otherwise poor pickings to go online and stream a pay-per-view video instead.

But customers would have to be psychic looking for something to stream – Redbox does not publish online movie availability on its kiosk-service website. Unsurprisingly, kiosk users have stayed loyal to renting movies through the kiosk and online viewers usually won’t bother renting a DVD from a kiosk, even with a voucher.

Free trials of Redbox Instant service brought an underwhelming number of customers converting to paid subscriptions. That might be attributed to the heavy overlap of titles available from Redbox Instant and competitors Netflix and Amazon.com, making three services redundant for many. Although Redbox’s parent has invested $70 million in the service, it is dwarfed by the massive content acquisition budgets available to its larger competitors.

It would take a larger subscriber base to change that for the better, but Redbox Instant seems intent on sabotaging its success, still refusing to enroll new customers three months after a security breach. It seems Redbox Instant’s website was an excellent resource for credit card thieves to verify if stolen card numbers were still valid. Current customers are still able to use the service, but reportedly cannot update or change their credit card information, meaning they will lose service if their credit card expires or the credit card number changes.

no new users

A notice on Redbox Instant’s website prevents new users from enrolling.

Company executives have told investors they are not happy with Redbox Instant’s subscriber numbers. Not allowing new customers to sign up while gradually losing old ones because of an expired credit card could go a long way to explain this. Redbox’s parent company previously warned it has the right to pull out of the venture if the numbers don’t improve, and they won’t if the website remains locked down.

When Roettgers asked Redbox and Verizon to comment on a reddit rumor that the service was to close down on Oct. 1, the only reply was “no comment.” Roettgers believes that is telling, because no company would want such a false rumor to spread unchallenged. With Oct. 1 less than 24-hours away, we won’t have long to wait to see what happens next.

Roettgers would not be surprised to see Redbox Instant downsize itself with an end to its subscription video plan and move forward exclusively as a paid, video-on-demand service. It already powers Verizon’s On Demand video store. Having a traditional television partner like Verizon FiOS TV could help Redbox survive in an already crowded marketplace of online, on-demand video stores like iTunes, Google Play, Vudu, Amazon, and others.

In a larger context, the industry’s belief in “if we build it, they will come,” appears to be untrue, especially cable and telephone company efforts developing their TV Everywhere platforms. Content and viewing limitations that confine online viewing largely to the home, a barrage of online video advertising, subscription fees, and the lack of quality content have all hurt efforts to deliver a good user experience that can promote customer loyalty. Nothing now or on the horizon appears to be anything like a Netflix-killer app.

http://www.phillipdampier.com/video/Bloomberg Bibb Says Comcast Has Little Confidence in Streampix 2-21-12.mp4

Two years ago, Porter Bibb, managing partner at Mediatech Capital Partners, panned the then-new XFINITY Streampix service for streaming the same television shows and movies customers can already see on Netflix and other services. From Bloomberg Television’s “Bloomberg West,” originally aired Feb. 21, 2012. (4:30)

Irish TV Venture in Talks With Comcast/Time Warner Cable for Nationwide Carriage Deal

Mhaoilchiaráin and O'Reilly launch Irish TV (Image: Picture: Frank Dolan )

Mhaoilchiaráin and O’Reilly launch Irish TV (Image: Picture: Frank Dolan )

Irish TV, focused on the Irish diaspora, is in talks with Comcast and Time Warner Cable to add its online channel to the national cable television lineups of both companies.

The network, not affiliated with Raidió Teilifís Éireann (RTÉ) — Ireland’s public broadcaster, is a Mayo-based commercial venture that launched in May 2014, and can be viewed only in part on some PBS stations and via Sky and Freesat in Europe.

John Griffin, chairman of Irish TV, has committed to spend up to $18.9 million on the network. He has the money, having earned millions while growing London minicab company Addison Lee. He sold his interest in the venture to the Carlyle Group for $486.3 million dollars last year.

The vision behind the Irish channel, which features homegrown cooking, music, and sports entertainment, originated with its founders Pierce O’Reilly and Máiréad Ní Mhaoilchiaráin. They agreed to let Griffin run the network after concluding negotiations carried out in a London pub.

Each Irish county (North and South) will have its own half an hour slot on the channel called County Matters.

In August, the Broadcasting Authority of Ireland, the country’s telecom regulator, began talks with Irish TV’s parent Teilifís Mhaigh Eo Teoranta for a broadcast license. Currently, the venture only operates in Europe because of a license issued by Ofcom, the British telecommunications regulator.

An Irish television license will allow the venture to operate directly within Ireland and facilitate programming agreements with RTÉ that could bring more mainstream Irish television programming to American television.

Winning a carriage agreement with Comcast and Time Warner Cable would bring the network more potential viewers than there are citizens of Ireland itself.

 

Netflix Aggravates Canada’s Identity Crisis: Protection of Canadian Culture or Big Telecom Company Profits?

netflix caThe arrival of Netflix north of the American border has sparked a potential video revolution in Canada that some fear could renew “an erosion” of Canadian culture and self-identity as the streaming video service floods the country with American-made television and movies. But anxiety also prevails on the upper floors of some of Canada’s biggest telecom companies, worried their business models are about to be challenged like never before.

Two weeks ago, the country saw a remarkable Canadian Radio-television and Telecommunications Commission (CRTC) hearing featuring a Netflix executive obviously not used to being grilled by the often-curt regulators. When it was all over, Netflix refused to comply with a CRTC order for information about Netflix’s Canadian customers.

Earlier today, the CRTC’s secretary general, John Traversy, declared that because of the lack of cooperation from Netflix, all of their testimony “will be removed from the public record of this proceeding on October 2, 2014.” That includes their oral arguments.

“As a result, the hearing panel will reach its conclusions based on the remaining evidence on the record. There are a variety of perspectives on the impact of Internet broadcasting in Canada, and the panel will rely on those that are on the public record to make its findings,” Mr. Traversy wrote in a nod to Canada’s own telecom companies.

Not since late 1990’s Heritage Minister Sheila Copps, who defended Canadian content with her support of a law that restricted foreign magazines from infiltrating across the border, had a government official seemed willing to take matters beyond the government’s own policy.

CRTC chairman Jean-Pierre Blais threw down the gauntlet when Netflix hesitated about releasing its Canadian subscriber and Canadian content statistics to the regulator. Mr. Blais wanted to know exactly how many Canadians are Netflix subscribers and how much of what they are watching on the service originates in Canada.

With hearings underway in Ottawa, bigger questions are being raised about the CRTC’s authority in the digital age. Doug Dirks from CBC Radio’s The Homestretch talks with Michael Geist at the University of Ottawa. Sept. 19, 2014 (8:40) You must remain on this page to hear the clip, or you can download the clip and listen later.

Netflix has operated below regulatory radar since it first launched service in Canada four years ago. The CRTC left the American company with an impression it had the right to regulate Netflix, but chose not to at this time. The CRTC of 2010 was knee-deep in media consolidation issues and did not want to spend a lot of time on an American service that most Canadians watched by using proxy servers and virtual private networks to bypass geographic content restrictions. But now that an estimated 30% of English-speaking Canada subscribes to Netflix, it is threatening to turn the country’s cozy and well-consolidated media industry on its head.

Ask most of the corporate players involved and they will declare this is a fight about Canada’s identity. After all, broadcasters have been compelled for years to live under content laws that require a certain percentage of television and radio content to originate inside Canada. Without such regulations, enforced by the CRTC among others, Canada would be overwhelmed by all-things-Americans. Some believe that without protection, Canadian viewers will only watch and listen to American television and music at the cost of Canadian productions and artists.

http://www.phillipdampier.com/video/BNN Netflix vs the CRTC 9-22-14.flv

Kevin O’Leary, Chairman, O’Leary Financial Group is furious with regulators for butting into Netflix’s online video business and threatening its presence in Canada is an effort to protect incumbent business models. From BNN-Canada. (8:45)

A viewer watches Netflix global public policy director Corie Wright testify before the Canadian Radio-television and Telecommunications Commission (CRTC) in Ottawa (Image: Sean Kilpatrick, The Canadian Press)

A viewer watches Netflix’s Corie Wright testify before the CRTC. (Image: Sean Kilpatrick, The Canadian Press)

But behind the culture war is a question of money – billions of dollars in fact. Giant media companies like Rogers, Shaw, and Bell feel threatened by the presence of Netflix, which can take away viewers and change a media landscape that has not faced the kind of wholesale deregulation that has taken place in the United States since the Reagan Administration.

Before Netflix, the big Canadian networks didn’t object too strongly to the content regulations. After all, CRTC rules helped establish the Canadian Media Fund which partly pays for domestic TV and movie productions. Canada’s telephone and satellite companies also have to contribute, and they collectively added $266 million to the pot in 2013, mostly collected from their customers in the form of higher bills. Netflix doesn’t receive money from the fund and has indicated it doesn’t need or want the government’s help to create Canadian content.

“It is not in the interest of consumers to have new media subsidize old media or to have new entrants subsidize incumbents,” added Netflix’s Corie Wright. “Netflix believes that regulatory intervention online is unnecessary and could have consequences that are inconsistent with the interests of consumers,” Wright said, adding viewers should have the ability “to vote with their dollars and eyeballs to shape the media marketplace.”

That is not exactly what the CRTC wanted to hear, and Wright was off the Christmas card list for good when she directly rebuffed Mr. Blais’ requests for Netflix’s data on its Canadian customers. Wright implied the data would somehow make its way out of the CRTC’s offices and end up in the hands of the Canadian-owned broadcast and cable competitors that know many at the CRTC on a first name basis.

Does Netflix pose a threat to Canadian culture? Matt Galloway spoke with John Doyle, the Globe & Mail’s television critic, on the Sept. 22nd edition of CBC Radio’s Metro Morning show. Sept. 22, 2014 (8:31) You must remain on this page to hear the clip, or you can download the clip and listen later.

Mr. Blais, obviously not used to requests being questioned, repeated demands for Netflix’s subscriber data to be turned over by the following Monday and if Netflix did not comply, he would revoke Netflix’s current exemption from Canadian content rules and bring down the hammer of regulation on the streaming service.

Blais

Blais

The deadline came and went and last week Netflix defiantly refused to comply with the CRTC’s order. A Netflix official said that while the company has responded to a number of CRTC requests, it was not “in a position to produce the confidential and competitively sensitive information, but added it was always prepared to work constructively with the commission.”

Now things are very much up in the air. Many Canadians question why the CRTC believes it has the right to regulate Internet content when it operates largely as a broadcast regulator. Public opinion seems to be swayed against the CRTC and towards Netflix. Canadian producers and writers are concerned their jobs are at risk, Canadian media conglomerates fear their comfortable and predictable future is threatened if consumers decide to spend more time with Netflix and less time with them. All of this debate occurring within the context of a discussion about forcing pay television companies to offer slimmed down basic cable packages and implement a-la-carte — pay only for the channels you want — is enough to give media executives heartburn.

To underscore the point much of this debate involves money, American TV network executives also turned up at the CRTC arguing for regulations that would compensate American TV stations for providing “free” programming on Canadian airwaves, cable, and satellite — retransmission consent across the border.

Netflix does not seem too worried it is in trouble in either Ottawa or in the halls of CRTC headquarters at Les Terrasses de la Chaudière in Gatineau, Québec, just across the Ottawa River. Prime Minister Stephen Harper and Heritage Minister Shelly Glover have made it clear they have zero interest in taxing or regulating Netflix. Even if they were, the Canada-U.S. free trade agreement may make regulating Netflix a practical impossibility, especially if the U.S. decides to retaliate.

http://www.phillipdampier.com/video/Canadian Press CRTC vs Netflix 9-19-14.mp4

Dwayne Winseck, Carleton School of Journalism and Communication, defended the role the CRTC is mandated to play by Canada’s telecommunications laws. (1:41)

Average Netflix User Now Uses 45GB a Month, Will Exponentially Increase When 4K Video Arrives

Phillip Dampier September 29, 2014 Consumer News, Internet Overcharging, Online Video 1 Comment

The average Netflix subscriber now watches 93 minutes of online video a day just from Netflix, and that adds up to 45GB of usage on average a month.

The Diffusion Group released that estimate in a new 35-page report (priced at $2,495) based on streaming data released by Netflix, and it shows a 350 percent increase in viewing over the last ten quarters, adding up to more than seven billion streaming hours in the last quarter alone.

Consumers with usage-limited broadband accounts will find online video viewing increasingly eating away at viewing allowances, but when 4K HD video arrives in the not too distant future, usage caps of 300-500GB a month will seem paltry. That new video format consumes up to 7GB per hour, and if current trends stay true, the average Netflix viewer streaming at the highest video quality could find their monthly Netflix traffic consumption rising to more than 300GB a month.

netflix-report

 

Singapore’s Cutthroat Gigabit Broadband Price War Shows Real Competition Saves Consumers $

bnr_reg_1gbpsThree competing telephone companies in Singapore have launched an all-out price war on gigabit fiber to the home Internet access that shows what real competition can do for broadband pricing.

Last week, M1 took a butcher knife to its monthly rate for 1Gbps service that used to cost $101.75 a month. Today, anyone can order service price-locked for 24 months at a promotional price of $38.65 a month — less than what most cable companies in the United States charge for 10Mbps service. It is the cheapest gigabit plan in Singapore and when the promotion ends, the price may or may not increase to $78 a month. Competitive pressure in Singapore may make M1’s post-promotional price untenable.

Competition is the reason M1 may not be able to raise prices. MyRepublic slashed the price for gigabit service to just under $40 a month in January.

SingaporeSingapore’s largest phone company, SingTel, has its own unlimited gigabit offering for $55.13 a month, a price the company is now re-evaluating.

“We’re happy to see Singapore move towards the 1Gbps standard,” a MyRepublic spokesman said, noting it has no immediate plans to further lower its rates. But it has sweetened its offer by throwing in a free smartphone for every customer signing up for 1Gbps service.

With broadband prices so low, providers are now switching to beefing up extras to entice customers. SingTel promises customers they will never encounter traffic shaping that might cut their broadband speeds when networks get congested. It also offers a 25 percent discount on a virtual private network (VPN) add-on, a common feature used in Singapore to get past geographical restrictions on video streaming. VPN users in Singapore rely on the service to reach Hulu, Netflix and other North American video services that only allow domestic audiences to watch.

A fourth competitor – StarHub – is late to the gigabit battle and is presently working on a revamped offer to be introduced by October. StarHub’s original gigabit broadband offer was expensive at more than $400 a month. That plan has been discontinued.

Wall Street and other trading centers are not happy that falling prices have sliced into telecom profits. Average revenue per user (ARPU) collected by Singapore’s ISPs have dropped 15-20 percent since MyRepublic launched the price war. Investors are being warned that profits will be affected by the robust competition. In Singapore, broadband prices are falling, but so are the costs to provide the service. In North America, it is a much different picture, where a lack of competition has allowed providers to increase prices, constrict usage, and avoid dramatic speed upgrades, even though wholesale broadband costs in North America are among the cheapest in the world.

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