Britt

On this morning’s conference call for investors, Wall Street continued to pound Time Warner Cable CEO Glenn Britt about when the company would introduce an Internet Overcharging scheme for broadband customers in the form of so-called “usage based billing.”

This quarter, the pressure came from Deutsche Bank’s Doug Mitchelson, who used the occasion to remind Britt he called usage pricing “inevitable” and wanted to know when the company was going to get the ball rolling on the pricing scheme.

Britt was unprepared to answer, other than to make comparisons about his “inevitable” remark with wireless carriers, who have said the same thing about the end of unlimited use plans in wireless, a different technology.

After following Britt’s public statements for more than two years about this subject, we detected a moderating view.  Britt told investors he believes “there should remain an unlimited plan for those who want to buy that,” and suggested Time Warner Cable might not be interested in applying usage pricing on every level of its broadband service.  That could be good news, so long as Britt doesn’t believe the price of “unlimited” should be the $150 a month the company proposed in 2009.

“We’re more focused on affordability and lower income people who might be light users and might seek to pay less because they use less,” Britt said. “That’s a much better context than the usual ‘oh those people using all the bandwidth’ and caps and all that stuff.”

Britt added he doesn’t anticipate having caps across the board.

Mitchelson explained in a follow-up question why Wall Street is interested in the adoption of usage pricing – an increase in “ARPU growth” — the average revenue earned from each broadband customer in the form of more expensive usage plans.

Britt acknowledges what Stop the Cap! has predicted all along — ARPU growth can be realized instead from subscribers upgrading to faster speed tiers, which carry higher costs.  Britt told Mitchelson he, and other investors, can get the ARPU growth they crave by looking at those numbers instead of earnings from usage based pricing.

How long before Wall Street demands both speed-related ARPU growth and extra earnings from usage pricing is an open question, but Britt’s latest remarks represent a significant shift in attitude about pricing broadband, potentially because the company has a new found appreciation for the limited capability of customers to keep opening their wallets to pay higher and higher cable bills.  That was clearly in evidence as the company tried to explain another quarter of declining cable TV customers, many forced out of the service because of its high cost.

Time Warner Cable CEO Glenn Britt answers a question about usage-based pricing from Deutsche Bank’s Doug Mitchelson, just one of a parade of Wall Street banks pushing broadband providers to adopt Internet Overcharging to increase profits. July 28, 2011. (2 minutes)
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This digital transport adapter from Motorola is commonly installed on secondary television sets, such as those found in bedrooms, offices, or the kitchen to ensure reception of digital cable television channels without the size and expense of a traditional cable set top box.

Time Warner Cable has announced it will cease analog cable television service within five years, as the cable company embarks on a wholesale transition to all-digital cable.

The announcement came from CEO Glenn Britt during this morning’s investor conference call, and represents a major transition for the cable operator and its customers.

While Time Warner Cable already runs older digital cable systems in New York City and parts of Los Angeles, today’s announcement represents the company’s de-emphasis on Switched Digital Video (SDV), the technology the cable operator initially supported to free up channel space on its systems.  SDV allowed Time Warner Cable to maintain analog cable lineups for consumers who detest cable set top boxes.  Instead of converting the entire lineup to digital, Time Warner changed the way it delivered certain digital cable channels, only sending their signals to viewers in neighborhoods actually watching them at the time.

“We always said we would supplement switched digital video with going all-digital,” Britt said. “Our plan is to migrate all systems to all-digital over the next five years.”

The decision means Time Warner Cable has opted to follow Comcast’s lead towards all-digital systems, instead of trying to support both analog and digital video.

Britt said the company’s first target city for the all-digital switch is Augusta, Maine.  Customers there will be given the choice of taking the cable company’s traditional set top box or new Digital Transport Adapters (DTAs), devices which convert digital signals into standard definition analog video, suitable for televisions where customers may not need or want a full-powered cable box.  DTAs have traditionally been given away in small numbers or rented for a nominal fee (usually under $2 a month) by other cable operators like Comcast.  But Time Warner has not made any specific announcements about pricing for impacted subscribers just yet.

When complete, every Time Warner cable subscriber will need to have either a cable box, a DTA, or CableCARD for every cable-connected television in the home.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WPXI Pittsburgh Verizon Unveils New Home Control Service 7-25-11.flv[/flv]

Verizon’s home control and automation system is set to debut in Pittsburgh where Verizon FiOS is available.  WPXI-TV was invited to a training session for Verizon employees, where they were taught about the new service with the help of Verizon-hired actors.  Suffice to say, the new technology was more impressive than the actors hired to promote it.  (2 minutes)

While Netflix has grown like wildfire across Canada, providing unlimited streamed video entertainment for $8 a month, a few cable operators at risk of premium channel cord-cutting have responded with their own movie streaming services, at least one that temporarily found itself the subject of controversy when it was introduced a few weeks ago.

Shaw Communications’ Movie Club is that cable company’s answer to Netflix — offering a flat rate streaming service available over broadband or through your Shaw set top cable box for $17 a month ($12 if you forgo HD movies).  For that, Shaw promises unlimited viewing, without any usage caps so long as you stream movies from your cable box and not from your home computer.

But is it worth it?

With the assistance of one of our readers in Calgary, we were able to give Shaw’s Movie Club a trial run.

Availability

Evidently, Shaw Movie Club works best if you live in Calgary or Edmonton, where Shaw has been testing their new “Gateway” system, which is a combination home video terminal/DVR designed to compete with phone company DVR boxes which can record 4-6 shows simultaneously and deliver recordings to multiple sets in the home.  A number of Shaw customers on less-advanced, older cable systems may find the service a lot less convenient to use.  Outside of urban Alberta and in British Columbia, we found instances where customers could request to view Shaw Movie Club titles, but they had to be watched on your cable set top box.  For now, the most aggressive marketing for the service seems to be in Calgary and Edmonton, perhaps for this reason.

The Selection

When we sampled the service, we found about 150 titles available for viewing — hardly a wide selection.  Although many popular, semi-recent movies were available for viewing, the selection was comparable to what one would find from one or two premium movie channels.  Existing premium subscribers may find more than enough to watch from Super Channel or Movie Central On Demand, which are included with your subscription to one or both networks.  In the States, HBO, Cinemax, and Showtime all offer their own virtual “on-demand” channels that let viewers select most of the titles shown on each respective network for instant, on-demand viewing.  Shaw Movie Club felt very much like one of these channels, based on the limited selection.

In comparison, Netflix does not make it easy to count the actual number of streamed movies they have on offer at any one time, but the selection was clearly more substantial on Netflix, with a much deeper catalog.  But Canadians are also punished by Netflix because the service does not yet have agreements in place with studios to stream the same titles to both American and Canadian audiences.  Americans have a much larger selection of titles to stream.  Shaw’s agreements with studios clearly emphasize more current titles, and there are titles available on Shaw’s service that are not available from Netflix.

Winner: Netflix – You have a better chance of finding something to watch on Netflix.

Loser: Shaw Movie Club – But the service may have access to movies you wish Netflix provided.

Shaw's biggest competitor

The Value

At up to $17 a month, Shaw Movie Club is expensive.  In fact, it’s a lot more expensive if you do not subscribe to Shaw’s cable television.  It’s required to sign up for the streaming service.  That seems counter-intuitive to provide video streaming but deny broadband-only customers the opportunity to buy, but not when you consider such services are designed to prevent cable-TV cord cutting, not enable it.  Shaw charges nearly $40 in Alberta for basic cable service, so that’s a steep entry fee to pay before handing over another $12-17 just to stream movies.

For those uncomfortable video streaming on home computers, Shaw’s set top box solution lets you watch shows on-demand directly on your television.

Shaw initially found itself mired in controversy when it appeared they would exempt their video streaming service from their own usage caps — a clear anti-competitive move against Netflix, which does count against your cap.  But Shaw quickly clarified their position to state only set top box viewing was exempt from their caps.  We’re not certain exactly what distinction Shaw is trying to make beyond the political, because data is data — it all arrives on the same cable.  Shaw would argue their video may travel over their “television” bandwidth when delivered to set top boxes and their broadband network when delivered over the Internet.  But Time Warner Cable has shown it can deliver video over its Apple iPad app to cable subscribers over Time Warner’s internal network, which means it costs next to nothing to provide.  We suspect there is nothing technically precluding Shaw from exempting all of its Movie Club viewing from usage caps, beyond the political implications of doing so.

Winner: Netflix – $7.99 a month is an afterthought when you consider how much you can watch.

Loser: Shaw Movie Club – Up to $17 a month is a very steep price to pay for fewer than 200 movie titles to watch.

Video Quality

Both services delivered high quality video, even over a remote connection we used to sample Shaw Movie Club.  Shaw’s HD streaming performed with absolutely no technical flaws, evidence they are paying careful attention to deliver video from networks as close to their customers as possible.  Shaw’s HD streaming was often better than Netflix’s online streaming, but Netflix’s network consumes a lot less bandwidth, an important distinction if you have a large family piling on your broadband connection at the same time.  Shaw’s video is a bandwidth piggy, and will eat into your usage allowance fast if you use it over the Internet.

We recommend watching Shaw’s service over your existing set top box whenever possible.  It’s convenient and won’t count against your usage allowance.

A Tie: Netflix and Shaw Movie Club both deliver excellent quality video with no technical flaws experienced.  Shaw Movie Club has a larger selection of HD movies, but that is tempered by the fact watching them will rapidly erode your usage allowance if watching online.

Over the air television in Detroit if the NAB is correct.

The National Association of Broadcasters is warning a Congressional plan proposed on behalf of the wireless industry could force every broadcast station in Detroit off the air, and drive at least one network affiliate in many northern U.S. cities along the Canadian border to “go dark” if the plan is adopted.

The FCC’s National Broadband Plan contains provisions now on Capitol Hill to recapture spectrum currently used by free over-the-air television stations and provide it to wireless providers to bolster mobile broadband and cell phone networks.  Lawmakers expect the wireless industry will pay up to $33 billion for the lucrative spectrum, to be shared with vacating broadcasters and the U.S. Treasury.

But the NAB says the FCC plan goes too far, forcing stations to vacate UHF channels 31-51 to crowd into the remaining channel space of 11 VHF channels (2-13) and 17 UHF channels (14-31).  According to a study conducted by the broadcasting lobby, there is simply not enough remaining channel space to accommodate 1,735 U.S. stations, forcing at least 210 to sign off, permanently.

Because of agreements with the Canadian government to protect American and Canadian stations from mutual interference, the results could be devastating for northern cities along the U.S.-Canadian border.  The worst impact would be in Detroit, Michigan where the NAB predicts every local station would have to leave the airwaves.

The cities of Buffalo, Seattle, Syracuse, Cleveland, Spokane, Rochester and Watertown, NY and Flint, Mich. would likely lose at least one major network affiliated-full power station each.  At least 73 stations in the top-10 largest television markets would be forced off the air, unable to find appropriate channel space in the remaining available spectrum.  Hundreds of stations would be forced to change channels and potentially reduce power and coverage areas to protect stations sharing the same channel number in adjacent cities.

“If the FCC’s National Broadband Plan to recapture 20 more TV channels is implemented, service disruption, confusion and inconvenience for local television viewers will make the 2009 DTV transition seem like child’s play,” said NAB President Gordon Smith. “NAB endorses truly voluntary spectrum auctions. Our concern is that the FCC plan will morph into involuntary, because it is impossible for the FCC to meet spectrum reclamation goals without this becoming a government mandate.”

Broadcasters are feeling a bit peeved at the federal government for repeatedly returning to sell off a dwindling number of channels for other uses.  The original UHF dial included channels 14-83, but over the years the highest channel number has dropped to 51, mostly for the benefit of the cell phone industry.  Now they’re back for more, seeking channels 31-51 for wireless broadband and mobile telephony.

The cell phone industry wants broadcasters to “voluntarily” give up their channel space and reduce transmitter power so more stations can share the same dial position in nearby cities.  But that could leave fringe reception areas in rural communities between cities without over-the-air television reception, and make free television more difficult to watch without a rooftop antenna.

The NAB called on the FCC to immediately make public its analyses of the broadband plan’s potential negative impact on viewers of free and local television.

“We’ve waited patiently for over a year for FCC data on how the Broadband Plan impacts broadcasters, and more importantly, the tens of millions of viewers who rely every day on local TV for news, entertainment, sports and lifeline emergency weather information,” said the NAB’s Smith. “Even Congress can’t get information from the FCC. All we are seeking is more transparency. We have but one chance to get this right if we are to preserve future innovation for broadcasters and our viewers.”

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/NAB Free TV Spot.f4v[/flv]

The National Association of Broadcasters is distributing this ad to local broadcasters to air on their stations to inform viewers about the spectrum controversy.  (1 minute)

The consumer wireless handset lobby does not deny the plan will leave Americans with fewer channel choices, but they believe that will come from corporate station owners voluntarily shutting down stations for profit.

“The study presumes an unrealistic scenario in which every single existing TV station continues to operate over-the-air. However in the event of incentive spectrum auctions, it is highly likely numerous stations will capitalize on their spectrum assets by exiting the business or sharing resources,” said Consumer Electronics Association senior vice president for government affairs Michael Petricone.

Petricone believes the number of Americans spending time with broadcast television is dwindling, and less important than the wireless industry’s spectrum woes.

“Our nation faces a crisis as demand for wireless spectrum will soon outstrip supply,” said Petricone. “Meanwhile, the number of Americans relying purely on over-the-air TV is less than 10 percent, according to both CEA and Nielsen market research. Incentive auctions would be a financial windfall for broadcasters, free up the spectrum necessary for the next generation of American innovation to move forward and bring in $33 billion to the U.S. Treasury.”

The cellular industry’s top lobbying group CTIA was more plain: it’s survival of the fittest.

“Since spectrum is a finite resource, it is vital that the U.S. government ensures the highest and best use of it,” said CTIA vice president Chris Guttman-McCabe.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/NAB Explains Spectrum.flv[/flv]

The NAB explains the concept of “spectrum” — or ‘the airwaves’ to consumers and what a major reduction in UHF channel space would mean for “free television.”  (3 minutes)