How The Cable Companies Can Win Again - InformationWeek

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5/28/2008
02:58 PM
Fritz Nelson
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How The Cable Companies Can Win Again

The cable companies are in trouble, but the trouble is so avoidable. They have home and business premise access, and those lines have been robust enough to carry hundreds of video channels, many now in high definition. The addition of phone and Internet service has been, I'm sure, a fantastic boon to their businesses. But the growth of video on the Internet and the power of the Web as its platform will be this decade's final disrupter. Those with no urgency today will be scrambling for survival

The cable companies are in trouble, but the trouble is so avoidable. They have home and business premise access, and those lines have been robust enough to carry hundreds of video channels, many now in high definition. The addition of phone and Internet service has been, I'm sure, a fantastic boon to their businesses. But the growth of video on the Internet and the power of the Web as its platform will be this decade's final disrupter. Those with no urgency today will be scrambling for survival tomorrow. Time is ticking like a clock in Kitchen Stadium.

James Kelso, Cox VP of video engineering, told me in New Orleans last week at the cable show (NCTA): "The computer isn't an emotional experience [like television], unless you're doing your taxes or something in a chat room." Got that? No crying for Izzy Stevens on the keyboard. No more catching up with episodes of The Hills (admittedly this would just be faux emotion) on lunch break.

Besides hubris, the cable companies face several obstacles. First, their footprint, in comparison with the telcos, is mostly regional. Second, they don't have a mobile strategy worth thinking about (yet), which will very quickly become the next video battleground. Third, they have yet to wrap their heads around a business model that is "all Internet." Granted, this last point is also still a bone of contention for the telcos, but they at least admit it's inevitable. Kelso told me that video on the Internet is on Cox's radar and that conversations have taken place, but it isn't a chief concern. Sound familiar? Sound like a phone company refrain on the dawn of Internet telephony? How about print media's shoulder shrug on new media? Kelso's main concerns are competition from the satellite companies, and the threat of Verizon and AT&T getting into the content business.

To be fair, the cable companies have a decided advantage or two. They say their viewership is up and it's growing, primarily as they now start to add more high definition programming and people purchase high-definition screens (Comcast announced officially that it will have 6,000 movies on demand next year, 3,000 of those in high definition).

Also, as niche programming grows, cable companies are seeing niche audiences, which provides the opportunity for targeted advertising. Technology such as Switched Digital Video and new set-top box-like technology like Tru2Way promise greater consumer flexibility with features like caller ID on the TV, a universal address book, the ability to upload photos and share them with others, all of which Comcast was demonstrating in New Orleans. Sound like anything (the Web) we know? The cable companies believe this will add new life to TV viewing. Watch this feature video on Tru2Way:

One of the challenges, however, is the perception that fiber to the home/premise/curb/body socket is a requirement. Cable companies and most industry experts agree that there is tremendous headroom in existing cable infrastructure: node splitting, switched digital video, reclaimed analog spectrum, MPEG4 Codecs, HFC, and the newly certified DOCSIS 3.0, which provides, today, 4-by channel bonding, with potential for even more channel bonding and a seemingly unlimited headroom for bandwidth rivaling fiber to the home; and yet, cable providers also have fiber options like RF over Glass, and Cable PON (passive optical networks). It may be arcane to most consumers -- and lots of new home builders are demanding fiber, just from a perception standpoint -- but it's real, and the cable companies are all over it. Watch this video on optimizing cable bandwidth.

So they have the customers, they have the bandwidth. But they are not ready for the Internet to replace television. Even if the claims about TV watching growth are true, that will end quickly. Televisions are coming equipped with Internet capabilities and other technologies exist to turn your TV into a massive computing experience. The content companies already are publishing vast libraries of content, in some ways competing with the very cable companies that bring the content to the consumer.

Nobody's saying this will be a pleasant experience for cable companies. It requires a leap of faith, throwing out what you know and perhaps milking a cash cow faster than you might have otherwise. But the future is at stake. What on God's dark fiber do you think Verizon is going to do with those billions it's investing to your home? Allow a few Firefox sessions? Some family photos up to Flickr? A Skype session? 22 IM sessions at once for your children? A YouTube video of your monkey giving your cat a bath? How about all of that and then some. If the Cable Companies don't develop a strategy TODAY for video on the Internet, they are doomed, and won't it be interesting that the phone companies will be pulling the irony over their eyes.

The answer is as simple as the current business model. The content providers want to have their content everywhere. Their model is advertising. More views, more money. That's why they have their own Internet strategies in the first place. Video on demand, time-shifted content, with demographics sliced as thinly as prosciutto around a big fat piece of melon. That's really the end game.

The cable companies already doing that, just on TV. If you have all of the content and you know how to encode it and tune it like nobody's business, just go do it on the Internet.

Comcast is trying. It launched Fancast in January at the Consumer Electronics Show. It's pretty slick because it doesn't just show you native content on the Comcast system, it links you through search and other services (Amazon UnBox and Netflix, for instance) to whatever content you want. It also has plans to help you get recommendations from the social graph, much like Amazon's recommendation feature. It's built a six degrees feature where you can look up just about anyone in television land and find out who they've dated, the movies and shows they've been in, and connections with other stars -- all of this is kept in a database that some day will be accessed just as easily on the television using a Tru2Way device as it can be on the Internet now. The service lacks only two things: more native content and better marketing.

Side notes:

If you've never been outside of the French Quarter in New Orleans, here's a recommendation that's worth the two-day stop on your way to or from Key West or Fort Lauderdale or wherever your journeys take you in that general vicinity. Get in a cab on a Tuesday night (the later the better), and tell the driver to take you to Jacques-Imo's, where you'll find an elegant meal in an inelegant setting (well, as elegant as gumbo or etouffee or blackened lamb or redfish can be). Then, amid the bohemian setting, walk next door to the Maple Leaf and watch Rebirth and get ready for the nastiest brass you've ever heard or seen live. The experience is reminiscent of a juke joint, crowded to its bursting seams. Whatever late-night strength you have to muster just to take the 15-minute cab ride and endure the occasional push or shove from those who simply must get their groove on up front, the pain of the morning and the struggle to make sense of anything anyone is saying thru the din of the ear-thrum, is worth it.

Note to Cisco: These rules may not be written anywhere, but wearing your team shirts (especially the 1982 bowling look) to Maple Leaf and shouting "I LOVE this music" to each other over high fives and white-man overbites: not cool. Blend. Please. Or stay home.

Watch our videos of Cox' Kelso and Comcast's CTO Tom Werner, and our feature piece on Cable vs. Telco . . . and yes, Cisco, you can watch these in your bowling shirts; just keep the noise down.

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