Tales of the Sausage Factory

Fragmentation Games: Playstation Gets “Boxeed,” TV Anywhere Gets More Content.

In the latest twist in the broadband fragmentation games driven the overlap of MVPDs and broadband access providers, users of PlayStation 3 can no longer access Hulu. As some may recall, Hulu tried a similar trick with Boxee.tv, resulting in a good old fashioned tech arms race wherein Boxee camouflaged itself as browser and Hulu responded by encrypting html.

Now Hulu has shut off the spigot to Playstation 3. Why? As I noted when Hulu pulled this on Boxee in the spring, the people who make money off the existing video subscription model (both the cable operators like Comcast and the content holders like NBC Universal) really dislike the thought of streaming media actually competing with them. As long as video stayed on the laptop and occasionally stopped to buffer, it didn’t really threaten the established business models. But make it possible to watch streaming media on your regular TV, with a quality practically equal to what you get on cable, and it becomes a very disruptive technology.

Playstation 3 and other game consoles are obvious candidates to disrupt the existing business model. They already plug into your television set, you are very familiar with the controls, and the manufacturers are always expanding the capabilities of the units to make them more “media centers” and less “game centers.” Like Boxee, they represent a real threat by making it possible for me to stream online content effortlessly on my TV and watch in exactly the same way I watch anything else.

Meanwhile, Time Warner and Comcast have found lots of other content networks eager to join the “Entitlement Program.” This initiative appears to be gathering critical mass very rapidly, which is not too surprising. While some of the bigger folks like Disney may hold out to see how they can maximize their return, the midsized players anxious about possible changes to the business model are likely to want to get in while the getting is good.

To conclude, what we have here is not anything obvious or dramatic. It is a few more ripples in the pond, indicating where the big fish swim. Any one of the “fragmentation games” incidents I’ve discussed, for example the ESPN360.com business which has been slowly ratcheting up to include more ISPs, is not necessarily significant on its own. Taken together, however, I see a pattern emerging that tells me where the fun and games will happen over the next few years. Heck, at this point, I’m not even sure what policy prescription I would offer. I just know that I’m seeing a bunch of ripples that might be nothing. Or it might be bunch of salmon and a great place to cast a line. Or it might be a school of piranha and I need to be very careful before wading in.

Stay tuned . . . .

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Tales of the Sausage Factory

700 MHz Endgame: Martin Antes. AT&T Raises. Google Calls. Does AT&T Fold or Call?

So yesterday, AT&T was extolling the virtues of the Martin plan. Among its virtues, Jim Ciconni included:

In effect, Chairman Martin’s plan faces Google and others with a “put up or shut up” opportunity. If they are serious, they will be able to bid and test their model in the marketplace against the business models of companies already enjoying widespread consumer acceptance.

Critically, Ciconni was referring to the “reserve price” feature of the Martin plan. To protect himself against the threat that even his device only open access would depress auction revenues, if the 22 MHz “C” block did not fetch at least $4.6 billion in bids, the FCC would cancel that part of the auction, split the 22 MHz int two 11 MHz blocks, and reauction without conditions. (Reserve prices are not uncommon in spectrum auctions, although as far as I know they have never been tied to a specific condition.)

So today, Google’s Eric Schmidt called Ciconni’s raise. In a letter to Chairman Martin, Schmidt committed to bidding a minimum of $4.6 for the “C” Block — but only if the Commission adopts all “four opens” that Google demanded in its letter last week and endorsed by the public interest coalition, Frontline, and a bunch of others. That means not just real device attachment and open application rules, but also real wholesale obligations at non-discriminatory prices. (You can find Google’s blog post explaining their letter here.)

The fear that Google would not bid no matter what, or that only one or two companies would bid on a license with wholesale open access conditions, has been one of the central features of the debate. Even ardent believers in real open access like Commissioner Adelstein have expressed real concerns over this. And, as I have noted previously, AT&T and its various sock puppets and Republican subsidiaries have used the threat of messing with the revenues as a major weapon against wholesale open access.

In a stroke, the Google letter changes the nature of the game. Google has now guaranteed that the feds will make their auction projections — but only if they include real open access. Meanwhile, rumors swirl that it may be AT&T, rather than Google, that sits this auction out. Suddenly, we switch from “will including wholesale open access keep out bidders and lower the revenue” to “will not including wholesale open access keep out needed bidders and drive down revenue.”

Meanwhile, the clocks ticks toward deadline. What does it mean? What happens next? And will I ever get a vacation this summer?

See below . . . .

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Tales of the Sausage Factory

Full text of statment from Jim Ciconni on Martin’s Plan for the 700 MHz Auction

For my analysis, see here. Text reproduced below . . . .

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Tales of the Sausage Factory

700 MHz Auction Update — FCC Republicans Interested In Public Interest Proposals While Senate Democrats Take a Pass.

Welcome once again to the topsy-turvy land of spectrum politics. Although Republican FCC Chair Kevin Martin shattered expectations by seeking comment on the Public Interest Spectrum Coalition (PISC) proposals for the 700 MHz auction, the Senate Democrats have decided to avoid having anyone from the public interest discuss the auction at next Thursday’s (June 14) hearing. In other words, despite my hope to the contrary, the Democratic Senate Commerce Committee is still playing spectrum politics under the old rules (treating this as an industry food fight and a chance to raise revenue), rather than using this as a chance to promote a robust public debate on how to ensure that wireless auctions promote competition and serve the public interest.

As a result, when the Senate Commerce Committee gathers to ask how the 700 MHz wireless auction can introduce new competitors for broadband and facilitate the open networks critical for civic engagement and innovation, they will hear from Mr. Dick Lynch of Verizon Wireless, Mr. Michael Small of Centennial Communications Corporation, and Dr. Amol R. Sarva of the Wireless Founders Coalition For Innovation. While Verizon has supported anonymous bidding, and the Wireless Founders Coalition supports open access, that hardly takes the place of having actual public interest representatives up there to press for real spectrum reform regardless of the impact on business models or bottom lines. As I say all too often (everyone repeat together) citizen movements must be citizen driven, and that includes giving us folks pushing the public interest an opportunity to speak rather than relegating us to the side-lines because corporate interests overlap with ours.

More below . . . .

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