Why is it so hard to get TV on UTOPIA? There’s no money in it

Sourced from Wikipedia

Sourced from Wikipedia

Earlier this week, I sat down with UTOPIA to discuss the Macquarie deal and their general operations. One great part of these sit-downs is that I can get candid answers to some of your common questions. Some of you have asked more than a few times about TV service. Right now, only Beehive Broadband and Brigham.net sell video service to new customers using UTOPIA’s headend and Veracity is using their own. Most providers sell satellite packages to plug the gap. Why? Because video doesn’t make money.

Yes, it’s true. Video is a break-even product at best. Look at the numbers from any cable provider and you’ll see the same story: video and voice make data customers more “sticky”, but it’s the broadband that pays the bills. They’ve quickly become commodity products that help the revenue side but don’t do much on the profit side. The consensus at FTTH conferences is that video isn’t something that most of them want to do.

So what does this mean for you? Right now, you’ll have to fall back on satellite TV or pick one of the providers that does video service. Since Brigham.net is sticking to Brigham City, that means Beehive or Veracity. This doesn’t mean that all hope is lost, though. UTOPIA has been talking to its video partners about an over-the-top live TV service to plug the gap. It would be sold Netflix-style, but it would have all of your favorite TV channels and possibly some good on-demand stuff too. It’s a ways out (I’d guess years), but it’s where we’re all headed anyway.

Misplaced Rage with Netflix

It seems like the entire Internet is raging and fuming about Netflix raising prices on some of their services. Most of it is coming under super-dramatic headlines such as “NETFLIX JACKED UP PRICES 60% OMGWTFBBQ!!!” Naturally, this rage is not only misplaced, it’s totally blown out of proportion.

The skinny is that Netflix has decided to break up the entry-level tiers into “streaming only” and “one DVD at a time”, each priced at $8/mo. The tier that includes both of these will cost $16/mo instead of the previous $10/mo. Some of the other tiers will see pricing changes as well. I’m not saying that I’d be happy with the increase either, but nobody is taking the time out to actually understand why it’s happening.

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Providers: Your Pipe is Dumb, and So Are You

For several years now, service providers have been terrified of the so-called “dumb pipe” and its potential to remove them as the gatekeepers to various services. Many of them use protectionism as a way to lock customers in. CenturyLink denies CLECs access to any node upgraded to FTTN, Comcast requires bundling to get their fastest service, and Verizon even goes so far as to snip out the old copper lines when you jump to FIOS. The reality, though, is that the dumb pipe is already here and they are ill-prepared for it.

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Comcast, Netflix and Why Municipal Networks Matter

Comcast is apparently a bit of a slow learner. After getting publicly smacked about for tinkering with bitTorrent, they’ve really stepped in it now by messing with Netflix. The audience is much bigger than the guys running protocol analyzers on their connections; you’ve gone and upset regular folks too. (How do you see that one working out?) Unfortunately, this is playing out as badly as anyone can hope.

Comcast is unfortunately trying to realize the dream of Ed Whitacre by essentially double-dipping for data at a time when bandwidth is so cheap you can almost afford to give it away. Imagine if the phone company tried to charge you for making a call and the recipient on another phone network for receiving it. Can you imagine the uproar and outrage at attempting to bill someone that’s not even their customer? That’s what Comcast is essentially doing, trying to charge both sides of the transaction instead of providing you the service you already paid for.

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Why Cable Fears The Internet

If you’re a content distributor, odds are that you and the Internet aren’t really on speaking terms these days. The recording, movie, and publishing industries all blame it for sagging sales, declining revenues, and shuttering up operations, even in cases where it just isn’t so. (I’m looking at you, Hollywood.) The problem is that most of them fear what they don’t understand. For cable, though, they understand perfectly what the Internet is. That’s why they’re so terrified of it.

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Broadband Bytes: February 28-March 6, 2009

This week’s top stories include a white spaces fight, a clearing backlog of DTV converter coupons, and the wrapping up the The Pirate Bay’s copyright infringement trial. There’s also cool gadgetry (including some that should give studio execs heartburn) and a little bit of kissing and making up between Boxee and Hulu. All that and more in this week’s Broadband Bytes!

  • Broadcast stations aren’t very happy with the decision to open up the space between stations, “white spaces”, to allow access by unlicensed devices. In fact, they’re unhapy enough to sue the FCC over the decision claiming that such devices will interfere with their signals despite extensive testing to prevent it. It could be a while before white space devices are offering up Internet access, but, like others, I doubt the blockade will last.
  • Weeks after Congress approved more money for DTV converter box coupons, the backlog is finally starting to clear up. Everyone who was on the waiting list should get their coupon within 3 weeks. Good news for the procrastinators, presuming that boxes can still be found.
  • The defense and prosecution in The Pirate Bay’s trial have made their closing statements and wrapped up what could change the face of filesharing (and bandwidth consumption) forever. The short of it is that the prosecution says that TPB got filthy rich from pirating works and the defense says they’re in the same category as Google and didn’t even cover operating expenses. Now we have to wait until April 17 to find out what the judge thinks.
  • News sites jumped all over the announcement of a new streaming STB, then yawned and said, “oh, another ‘me too’ effort“. ZillionTV hopes to sell a dirt-cheap box with no subscription fees to stream online content and do paid VOD. Their angle? Get ISPs to give their traffic priority over competitors. Given how touchy users are over net neutrality issues, I’m betting they don’t go far with that last bit. But hey, more STB choice is a good thing for consumers, right?
  • Roku isn’t standing still either. Their $99 Netflix box now has Amazon VOD support. It’s been long-rumored that Roku is also working on adding options like Hulu to their menu of options. Cord-cutting may be a myth right now, but at $99 + $10/mo, those boxes are looking really attractive to early adopters.
  • If you’re looking for the top-end of third-party STBs, go check out the Tesly BLOBbox. It combines a OTA HD tuner with a 160GB DVR, then tosses in a bitTorrent client, RSS feeds, Last.FM support, an open SDK… basically an entire HTPC in an easy-to-use interface. The Linux-based box carries a relatively steep $490 price tag and is currently only available through an Italian reseller, but it shows how cheap technologies can help viewers watch TV on their own terms without monthly fees or a lack of extensibility.
  • Boxee and Hulu are on the mend. Kind of. Boxee released a new alpha that allows pulling in Hulu video from RSS feeds, but it’s not as slick as the old menu system that allowed you to browse all of the available content. The content providers want to get Hulu out as much as they can, but they’re also terrified of canibalizing more lucrative broadcast revenue. The disconnect between financial incentives and user desires has driven XMBC hackers to piece together new plugins to allow Hulu access without the ads and many users to go back to downloading torrents of their favorite shows.
  • President Obama picked Julius Genachowski as the new head of the FCC weeks ago, but the nominations is just now official. Genachowski is a net neutrality supporter, but that doesn’t stop the praise from both sides of that issue from flowing in. I imagine it’s because anything is an upgrade over Kevin Martin.

Broadband Bytes: February 21-27, 2009

Sorry about the late post, folks. I had family in town over the weekend and, well, you know how that goes.

Cable’s been trying to make some waves with online video announcements as The Pirate Bay continues to dominate the prosecution in their trial. There’s also allegations that the US might be #1 in broadband, but it depends on which metrics you use or give weight to. I’ve also got a bunch of stories on online services and home media extenders. All that and more in this week’s Broadband Bytes!

  • Comcast and Time Warner are still beating the drum to put together their own Internet video offering to get more of the channels they offer onto the web, possible as early as this summer. It could, however, be too little, too late. As content producers and service providers continue arguing over how to make money doing it, consumers aren’t wasting a lot of time turning to iTunes, Hulu or even bitTorrent to get their video fix. Viewers are now watching record amounts of video thanks to new online outlets available on PCs and mobile phones. Maybe it’s time to follow the lead of Europe and Latin America with hybrid STBs that combine online video with a traditional product. That way you can keep cord-cutting as myth instead of a somber reality and maybe make some extra money off of it.
  • The Pirate Bay continues to embarass the prosecution and wipe the floor with them. In fact, the defendants were confident enough that they threw a big party after the first week was over. The prosecution’s investigators admitted that they downloaded torrents from TPB and the only evidence they could show were screenshots. The IFPI was apparently so clueless that they almost sued Google for facilitating piracy and had to alter the charges a second time to try and make conviction more likely. ISPs are getting bold enough to tell the music industry to come back with a court order if they want them to block P2P sites. Given how easy it is to keep on circumventing tracking and blocking systems, P2P whack-a-mole is a losing bet for ISPs.
  • We’re… #1 in broadband? Not exactly. Broadband availability and speeds still suck, but Americans are pretty darn good at squeezing productivity out of IT assets including broadband. The survey also includes data of dubious relevance such as SMS, so take the entire thing with a grain of salt. Besides, does it really matter how we compare or how we’re really doing?
  • Verizon will allow you to stream music, pictures, and (soon) video from your PC to any FIOS STB in your house. FIOS MediaManager is available to all double-play video/Internet customers for free and while the initial interface is a bit on the clunky side, it’s that kind of innovative product that keeps customers. Providers can also extend this to offer media streaming outside of the home. If you don’t have to mess around with a HTPC or setup your own streaming solution, why would you? Verizon is also letting subscribers remotely schedule DVR recordings.
  • What’s 400MB, written by John Carmack, and totally changes online gaming? Quake III in a browser, that’s what. Quake Live launched to queues of over 55,000 players waiting to get their hands on what is likely to be the most popular free-to-play non-casual browser game. This isn’t your typical small casual flash game and it’s likely to draw a big crowd. With a success like this, will you be ready for browser-based games pushing gigabytes of data?
  • The first Blu-Ray quality movies for purchase on an STB come from VUDU, not a big-name MSO or media store like iTunes. At between $14 and $24 per title, that’s a considerable discount over Blu-Ray discs, though you do sacrifice some portability.
  • Netflix plans to launch a streaming-only plan this year or next. The powerhouse in mail-order DVDs has seen most of its subscriber growth centered around the 12,000-title strong Watch It Now feature and its availability on everything from PCs to XBox360s to TV sets. The company has proved itself savvy enough to be ahead of what consumers want, a lesson that others could learn from.
  • T-Mobile is rolling out unlimited voice plans for long-time customers at a mere $50 per month. Customers will also be able to tack on data and SMS/MMS for just $35 per month more. With competitive pricing like this, you have to give customers a reason to keep a landline around.
  • If you’re being hit by black hat hackers, it could be personal, not business. About a quarter of malicious activity in 2008 was aimed at making a statement rather than the traditional ID theft or malware planting. I’m sure that’s not much comfort to Time Warner as they ride out a DDoS attack on their DNS servers.

Broadband Bytes: February 7-13, 2009

Congress passed the broadband portions of the stimulus package and just barely dodged some really nasty provisions while the DTV delay looks less than crystal clear. We’ve also seen Qwest’s abuse of monopoly power to shut down a rival ISP, both good and bad economic news (including Charter’s bankruptcy) and Fairpoint’s big bucket of fail in taking over Verizon assets in rural New England. All this and more in this week’s Broadband Bytes!

Broadband Bytes: January 31-February 6, 2009

It feels like the summer TV season as most of the news this week is reruns from last week. The DTV delay and broadband stimulus continue to dominate the news headlines. We also saw the launch of Lafayette’s fiber project, some new gadget news and more bad news from device manufacturers and SPs. All this and more in this week’s Broadband Bytes!

Broadband Bytes: January 24-30, 2009

This week saw the DTV transition delay get, uh, delayed (though not for long), Cox’s new traffic management plan, and a competing version of the broadband stimulus package that offers 50% more cash for 90% fewer conditions. Qwest also renewed its fight with SkyWi, Charter dropped a 60Mbps gauntlet, and Google launched tools to find out if you’re being throttled by your ISP. All that and more in this week’s Broadband Bytes!

  • The DTV delay got stalled up as the House failed to consider the bill for a fast-track passage despite unanimous support from the Senate. The Senate later passed a second DTV delay bill that the House should vote on next week; it’s widely expected that it will pass and President Obama has already said he will sign the bill as soon as it hits his desk. Now Congress just needs to figure out if/how to fund the 3.2 million (and growing) backlogged requests for DTV converter box coupons. I think the whole thing is kind of silly since Hawaii made the switch and there was no TV armageddon. Besides, interim FCC Chairman Copps says that a seamless transition is impossible.
  • Cox Communications is the latest large ISP to implement some kind of network management, opting for a system that’s a lot like what Comcast did. Unlike Comcast, however, they plan to throttle specific “low-priority” traffic types once the congestion gets too high including FTP file transfers, torrents and newsgroups. Predictably, there are a lot of people calling bunk on the plan, but I don’t think it’s so bad. Comcast is getting ripped by the FCC since their protocol-agnostic version would degrade competitor’s VoIP traffic if you end up being one of the hogs, so it makes sense to try and only smack around the data types that generate a lot of packets and a lot of transfer. Most users are fine with network management schemes so long as they are transparent and generous; the complaining just happens to be very, vey loud.
  • The US Senate has put together a competing version of the House’s broadband stimulus plan. The good? It ups the funds by 50% to $9B. The bad? It strips out all of the open access language and allows anyone to get in on the action. DSLReports rightly calls it a giveaway to Verizon since they can become eligible for money at the flick of a switch without having to really do much of anything differently and, as expected, Qwest doesn’t like how the plan is shaping up either. The House has already passed the $6B version and kept open access provisions intact. It also keeps the money restricted to rural and underserved areas and will only be available via loans and grants, not tax breaks as incumbents had hoped for. GigaOm has a great breakdown of who wins or loses in the various proposals.Telco lobbyists are already launching a multi-pronged attack. They want to scrap special access rates for competitors, up the spending, drop the speed requirements, get more tax breaks… pretty much anything they think might stick. Incumbents, though, seem to have missed the memo that the goals of this plan are to increase availability of braodband AND increase competition, not entrench the incumbents. I suppose they’re too used to abusing the USF and getting their way.
  • Qwest decided to ignore an order from New Mexico’s PRC and disconnect some of SkyWi’s customers without the required 10-day warning. Qwest has likely figured that whatever the penalty is, it’s worth it to kill off a competitor and SkyWi might not be around to finish its lawsuit. The company tried to pass it off as a clerical error. Expect New Mexico’s PRC to give Qwest a serious smackdown (provided it can survive Qwest’s army of robot lawyers) and keep an eye open for possible FCC involvement. Spurned CLECs like SkyWi are prime companies to recuit onto open networks like UTOPIA.
  • Charter, despite its severe financial problems, stole the St. Louis speed crown from AT&T by launching a 60Mbps DOCSIS 3.0 service at a wallet-busting $140/mo. This bests Comcast and Verizon by about 10Mbps, but it far faster than anything AT&T can do with ADSL2+. Verizon took the opportunity to make fun of DOCSIS 3.0 and its limits as compared to fiber. Users on UTOPIA are likely very “ho-hum” about the announcement since 50Mbps service has been available for quite some time.
  • Speaking of Verizon and AT&T, they announced earnings this week that reveal that DSL and landline users are being cannibalized by their FIOS and U-Verse systems, respectively. Both systems are picking up a lot of video users, but the margins on most television packages are very slim. Wireless revenues were the real shining spot, but it didn’t stop AT&T from posting a large drop in revenues and announcing a sharp decrease in spending for system upgrades. Guess the iPhone wasn’t enough to save them as AT&T also froze executive compensation (including bonuses) and brought a lot of jobs back to the US from India. Verizon is also rumored to be contemplating layoffs despite a good quarter.
  • Google fired a shot at ISPs who employ any kind of throttling or traffic management by offering up free tools to test for it. Even if your ISP isn’t engaging in these kinds of practices, the presence of these tools will help keep them honest. In the debate over network management, it’s very important to be clear and upfront about any caps or network management policies you plan to employ. Comcast got a PR black eye by hiding its policies for months as angry users took to the Internet and flooded forums with complaints. They get kind of stabby when you mention it after the fact (and for good reason).
  • I imagine users on Comcast and AT&T will appreciate these new tools. All three ISPs have signed on with the RIAA to disconnect users who are sharing copyrighted files. It’s part of the RIAA’s broad approach to turn ISPs into their copyright cops in exchange for a cut of the action, something they have successfully pulled off in Ireland. Given the lack of an appeals process and frequent ISP mistakes, you can bet that this opens the market for competing providers to snap up those customers.In the UK, they’re debating a different approach: a £20/mo “piracy tax”. Such a tax has already been implemented in Isle of Man which allows residents there to pirate as much as they want for under $1.50/mo. The RIAA would probably do better to offer an “all you can download” music service or some kind of “piracy license” that gives you the right to download whatever you want.
  • Comcast is thinking about offering WiFi to subscribers, but no word yet on if they plan to charge for it or use it as a perk to lure in customers. They’re currenting testing it out in New Jersey in a partnership with Cablevision. Cox Communications really took the lead on this by snapping up a lot of regional 700MHz licenses so that they can start offering wireless services as well, including leasing tower space to cell phone carriers. Thinking beyond the triple play to include these kinds of services is a smart move for any service provider.
  • Smart companies also focus on customer service. Charter has taken up permanent residence on the DSLReports forum and, like Comcast, has a customer service team assigned to Twitter. And while Sprint has announced that they will layoff 8,000, they plan to avoid sacking anyone in a customer service position even as subscribers decline sharply. High customer satisfaction leads to low churn and lots of free word-of-mouth advertising. I recently got support from Sprint’s Twitter team and got my issue resolved in record time.
  • Guess who’s making money hand over fist? If you guessed Netflix, give yourself a red envelope. Or don’t, since most of the company’s revenue has come from users switching from mailed DVDs to streaming on their PC or TV. Even with the switch to streaming, Netflix is going to start shipping DVDs on Saturdays to help speed up processing and delivery times. (No word on how the post office’s plans to drop Tuesday service will affect this.) I wouldn’t be surprised if the secret sauce in Netflix’s bottom line is customer satisfaction. The few times I’ve had an issue, I had a short hold time to talk to a live person who was empowered to make me happy.