Freeview's Managing Director, Ilse Howling, today warned UK regulators and politicians that the free digital TV service could only continue to grow if it had access to the 600MHz and 700MHz bands. Speaking at this morning's Westminster eForum event, she also reconfirmed her company's opposition to the current proposals for use of the 800MHz band by 4G services, which could, according to Arqiva's Charles Constable, lead to many more than two million homes losing access to some or all Freeview services.

Howling praised the Government's decision to fund the cost of the filters required to minimise disruption to television services, but criticised the fact that there was currently no proposal to fund the cost of installing these devices in homes, which is estimated at between £150 and £160 per home. Howling believes that the 'polluter pays' principle should apply, the 'polluters' in this case being providers of 4G services, in case there was any doubt.

Howling's position was supported, not surprisingly, by the DTG's Richard Lindsay-Davies, who said that management of 4G spectrum and white spaces were the most important challenges facing DTT's future. To that end he announced that the DTG's own test centre had been chosen by the UK government to assess the threat of 4G interference with DTT receivers. Professor Sylvia Harvey made the important point that the term 'interference' is inappropriate in the digital world, since rather than deteriorating gradually or suffering partial degredation, services would immediately disappear altogether.

There was also general agreement with the suggestion made by Barry Fox, renowned technology journlist, that a real world trial of 4G, possibly in the Oxfordshire area (containing the constituencies of Prime Minister David Cameron and Minister for Culture, Communications and Creative Industries, Ed Vaizey) would allow everyone to see exactly how many homes and devices would be affected by the introduction of 4G services, since however rigorous the testing, real world conditions are impossible to predict. One can imagine that the disappearance from the Freeview airwaves of a major live sports event – the Olympics 100m final perhaps – caused by a temporary 4G switch-on might be effective in bringing the issue to national attention.

In spite of their natural allegiance to the television industry, most eForum speakers recognised the importance of 4G services in the UK’s overall information infrastructure, but there are clearly battles ahead when it comes to the fine details of which spectrum gets used for which services and who pays for disruption to established businesses caused by the introduction of new technologies.

The wider context of the debate centres on the relative importance of traditional television in the context of the continued expansion and influence of personal and mobile devices such as a smartphones and tablets as media consumption platforms. These issues were also addressed at the conference but with an inevitable bias towards traditional models, in the sense of both “big screen” and “free to access” as key components of what many (British and European) people still understand as “television”.

The key unknown in much of this discussion is whether the current sharp demographic variation in media device consumption patterns indicates a permanently altered landscape. In other words, will today’s young, small screen video viewers remain that way as they grow older or will they seize the opportunity to migrate to a large screen HDTV as soon as they form their own households in later life? Because the assumption of many “wireless” provider seems to be that “wireless broadband” is the only service many people will need in the future to consume whatever content (video, music, games) on their personal smart devices as well as larger screens. The US is already debating whether LTE broadcasting can provide a long term replacement for traditional over-the-air signals (see Ericsson IEEE paper). If such debates come to Europe then the DTT/4G arguments seem set to become even more complex.

David Mercer

Established IPTV and OTT vendors Viaccess and Orca Interactive have now merged their operations and will now be known as VO. This is presented as a structural change with no impact on employment in either firm. In the near term the branding will remind customers of the companies’ combined origins. Judging from discussions with management in Paris earlier this week, VO’s pronunciation itself remains to be determined: “Vee-Oh” appears to be the preferred option although we will see whether market forces push things in the direction of a more obvious if less melodious “Voh”.

Both Viaccess and Orca have been part of the France Telecom (Orange) group for some years, since Orca was acquired back in 2008. And therein lies one of the main problems the new company is trying to solve: it believes it is widely and less than accurately perceived as focusing on the interests of its parent company. In fact VO counts YouSee, Eutelsat, Canal+, Reliance and Boxer amongst its customers. The key objective of the merger is to help kickstart a further expansion of VO’s customer base, notably in the Americas, although it is also presented as offering existing clients the benefits of closer synergies between the two firms and a more complete solution to the content discovery and management needs of companies deploying IP (OTT or managed) TV services.

There is a perennial debate in the TV technology space about the relative merits of smaller (nimble, agile) versus larger (one-stop shop) vendors. VO readily admits that it now falls into the medium sized bracket, but seems particularly keen to stress the advantages it has against bigger competitors which, if anything, have become larger in recent times with the acquisitions of NDS by Cisco and Widevine by Google.

If a company’s success was determined simply by its relative size forecasting would be a simple business, but presumably also no new companies would ever succeed. VO’s creation will only be justified as successful, by France Telecom as well as the outside world, if the company grows. Demonstrations of VO’s multiscreen and hbbTV solutions suggest it has a package of products and services worth considering. As VO’s deputy CEO, Haggai Barel noted, Orca was demonstrating multiscreen on a Nokia smartphone ten years ago, and this pedigree has evolved into a set of multiscreen options which appear to tap into most of the possible needs of managed or OTT service providers.

What I would most like to see is further evolution in VO’s content discovery and intelligence technologies. As I have pointed out previously this remains one of the unresolved challenges and opportunities in the new TV era and the company that comes up with solutions which truly revolutionise the way viewers discover and enjoy television content will be creating new value.

David Mercer

Big news today as Cisco announces its intention to acquire NDS for $5bn. Both company boards have approved the deal which is expected to close during 2H 2012. NDS is currently owned by News Corp and Permira.

Cisco made headlines last year for most of the wrong reasons, including famously pulling out of most of its consumer-facing businesses such as the Flip camcorder. Acquiring NDS puts it firmly back on the acquisitions radar, and confirms what John Chambers told me during our analyst roundtable at the 2012 CES: “the consumer still remains a key element in Cisco’s strategy”. Cisco supports service providers who support consumers, and NDS fits nicely into that positioning. According to Chambers during the financial analyst call today, NDS’s strength in software is exactly what Cisco’s customers have been looking for.

NDS helped create the pay TV industry. Originally developed out of the News Corp organisation, its smart card technology was a critical element in the development of Sky in the UK, and from that base it expanded into many pay TV operators around the world. Along the way it expanded into interactive (now more fashionably known as smart TV middleware and many other components of the television technology chain. And while the company’s charismatic leader, Abe Peled, used to make great play of the longevity and importance of the smart card/set-top box model, his company nevertheless has been preparing the way for the OTT/connected TV era. The fact that News Corp is willing to sell NDS is another sign (after Sky recently announced its own independent OTT service) that media companies see their subscription businesses as less reliant on the television set-top box, instead moving towards a multi-device, software and network based model.

If anyone doubted Cisco’s seriousness about the consumer video space (rumours about the future of its Scientific Atlanta business regularly resurface), this acquisition confirms it still intends to play a critical role in television’s transformation over the coming years. Assuming that the transaction goes ahead and NDS can be successfully integrated, NDS’s operator relationships, R&D strength and technology visions should help Cisco’s service provider and media customers make better sense of the value chain disruptions which lie ahead.

David Mercer

Former President of the European Parliament Pat Cox closed this morning's keynote at Cable Congress 2012 in Brussels by alluding to Roman Emperor Seneca the Younger's warning: "if man does not know to what port he is sailing, no wind is favourable." He was speaking in reference to the never-ending travails of the European Union as it seeks to resolve its financial problems. But he might as well have been commenting on the state of the European cable industry.

Europe's cable TV subscriber base has been flat for many years, although it has had some success in growing TV ARPUs. According to this morning"s press conference at Cable Congress in Brussels the fastest growth is now in broadband data, at least in the German market, where cable broadband had a very slow start.

Manuel Cubero, COO of Kabel Deutschland, made a telling remark when he said that the German cable industry now thinks of broadband customers using OTT video services as its own video customers, and in that context the cable industry’s video or TV customer base is growing.

Cable has always been the original broadband pipe, with the potential to offer video, television, communications, data and advanced services like smart home, all using the same network access platform. But while this inherent multi-service capability has always been seen as a strength, has it also obscured the industry's direction? If cable operators are now happy to accept customers who only pay for data as though they were video customers, what business is cable in?

As our research has shown, cable TV is caught in a pincer movement between higher value, technology-leading satellite services, and free DTT. It’s understandable that cable operators want to emphasise broadband as their growth opportunity, but at the same time I have heard a lot today about video being central to their future. Messages do seem to be somewhat mixed.

During the next panel discussion Mike Fries of Liberty Global touched on the old question of whether cable operators are in the content business. He indicated that cable certainly intended to expand its presence in content. He made the interesting point that cable's primary competitor, in all markets including the US, is free-to-air. So as cable navigates stormy seas, if it is defined primarily in relation to its main competitor this suggests that cable's port can be described as simply getting people to pay for something, or possibly anything.

That conclusion is clearly unsatisfactory so I am on the lookout for further guidance on cable's strategy and direction over the next couple of days. In the worst case perhaps we will just conclude that the sea fog is so thick that we can't even see where we are going, never mind know where and when we are expected to arrive.

David Mercer

 

Reuters is reporting that cable operators are working on a plan to allow customers to purchase channels on an individual basis, also known as à la carte. This represents a 180 degree change in strategy and position, from an industry that has long held that established advertising models preclude any departure from the 'tiered' channel system. 

Glad to see you're finally coming around, Cable.

Not that you had much choice. And not to be uncharitable, but golly, it feels good.

You see, our camp (those who have been citing the need for à la carte bundling for the past 4+ years) has been rather sparsely populated of late. In countless reports, presentations and one-on-one meetings with Cable executives over the years, we have pointed out that à la carte is not just a consumer preference, it is a Pay TV imperative. Meanwhile, through industry blowhards and paid quote-models, we have been told that it can't work, that it won't work.

Our response has always been that it has to work, if Pay TV is to survive.

And after years of dismissing it out of hand, of categorically rejecting any survey data or consumer insights contradicting their established talking points, Cable is finally listening, the wires and airwaves are filling up with the sounds of pundits finally changing their tunes.

"There is a growing recognition that the current model is broken," one epically overexposed talking head quipped yesterday.

How's that for groundbreaking insight?

US Pay Cable operators posted net subscriber losses for the 15^th consecutive quarter in Q2'11. For fourteen of those fifteen quarters, the industry has regularly pivoted on its explanation.

First, they said net losses were just a 'blip', an anomaly. When losses persisted in sequential quarters, the stagnant economy and high unemployment were to blame. When that no longer held water, the talking point morphed into a we didn't want you anyway argument, that those churning or dropping were low value customers. A report we just published completely discredits that explanation as well.

Fresh out explanations, and having bled 400,000 subscribers in Q2'11, Pay TV really has no choice.

For as long as I've been covering this space, I've cited survey after survey confirming a strong consumer preference for à la carte and indeed, a willingness to pay MORE for à la carte. Consumers feel ripped off, they want to feel that they are in the drivers' seat. They need choice or the illusion of choice.

And contrary to what some suggest, money is not the primary motivator for consumer churn, it's about perceived value. It's about control of content.

Indeed, our latest report, which draws on a recent survey of of 2,000 US households, further confirms this notion. It shows that 21% of American Pay TV subscribers would be willing to pay more than they currently do if it means they have some say in what channels they get.

Glad you've seen the light, Cable. What took you so long?

Kent Displays is not a name which will immediately bring recognition to consumer electronics industry veterans, but it’s one to watch out for. The company, based in Kent, Ohio, makes a unique and patented variant of LCD displays, Reflex™, and after many years of trying different professional applications finally came out with its consumer-oriented Boogie Board towards the end of 2010. According to CEO Albert Green, the company’s initial sales projections of “a few thousand” were vastly exceeded, with several hundred thousand sold in the run up to Christmas. Boogie Boards were available at $39.99 in Brookstone stores if you were lucky enough to find one. Sales will exceed one million this year. What are they? Basically they are small, very light, notepads, and require no power to retain the image since they use reflected light. The image can be erased instantly and this function requires a small 3V watch battery. The writing experience truly is very similar to paper, in fact in many ways it is much better. When the company adds local storage in future iterations, this will become a powerful, simple, low cost and easy-to-use notepad which could synch directly to a PC or smart device for further processing. I can’t wait to get my hands on one before next year’s CES. David Mercer

The only thing in the middle of the road are dead skunks and yellow lines

Or so goes the Texas adage. Today’s 3-2 FCC vote on rules pertaining to so-called “Net Neutrality” may once again prove that compromise guarantees only one thing.  That nobody’s happy. The debate, which has been a five year long rollercoaster ride, came to a head in what is being described as “rules of the road” for the Internet. The inherent fuzziness of the provisions, which include such vague concepts such as “transparency,” “network management,” and “unreasonable discrimination” all but guarantee that the matter will ultimately be decided in the courts. Furthermore, the same rules don’t apply to fixed and mobile networks.

Fair to Middling

FCC Chairman Julius Genachowski made a point of characterizing the rules as “middle of the road” approach—though likely one where no side even feels a little bit ok about it. “On one end of the spectrum, there are those who say government should do nothing at all, on the other end of the spectrum are those who would adopt a set of detailed and rigid regulations.” The Chairman said he rejects “both extremes in favor of a strong and sensible framework - one that protects Internet freedom and openness and promotes robust innovation and investment."

A Little Hyperbole Goes a Long Way

Indeed, critics are vocal on both sides, with opponents comparing it to the “government takeover of the Internet,” and Net Neutrality supporters calling it “worse than nothing.” Outspoken Senator Al Franken calls it the “most important free speech issue of our time,” and surmised that “ If corporations are allowed to prioritize content on the Internet, or they are allowed to block applications you access on your iPhone, there is nothing to prevent those same corporations from censoring political speech.” Republican FCC Commissioner Robert McDowell, in a Wall Street Journal Op/Ed piece said that the new rules will squelch innovation and investment, and reflect more “coercion than consensus or compromise.” He goes on to say: “On this winter solstice, we will witness jaw-dropping interventionist chutzpah as the FCC bypasses branches of our government in the dogged pursuit of needless and harmful regulation. The darkest day of the year may end up marking the beginning of a long winter's night for Internet freedom.”

Netting Out Net Neutrality

It’s still not over

It’s not over—not even by a long shot. April’s ruling by the U.S. Court of Appeals for the District of Columbia challenged the very role of the FCC in regulating broadband. Certainly, this is yet to be scrutinized and debated in Congress, and ultimately in the courts.

Please Have Exact Change

While the rules voted on today preclude service providers from blocking “lawful content,” they apparently do little to discourage the practice of “paid prioritization. ” The rules, set to go into effect in 2011, create a “toll road” of sorts on the metaphorical information superhighway—a road that companies such Google and Netflix may be forced to take.

FUD Factor 2.0

Markets don’t like fear, uncertainty and doubt. We all know that. And while Chairman Genachowski suggest that the rules “increase certainty in the marketplace, and spur investment both at the edge and in the core of our broadband networks”, the result may be just the opposite. Well, that’s what it smells like anyway.  -Ben Piper

Cisco today unveiled its long-awaited consumer Telepresence product. A smaller and scaled-down version of the company’s enterprise-grade TelePresence system, “ūmi” (‘you-me’) comes with an HD camera, a console and a remote. The idea of the videophone is far from new. Children of the 60s and 70s may recall George Jetson getting chewed out by his boss, Mr. Spacely, over videochat. In fact, the technology, is older than that, and was conceptualized as early as the late 1800s. The German Bundespost offered (albeit short-lived) commercially-available service the1930’s. AT&T announced its Picturephone product at the 1964 World’s Fair, though the service never quite took off, reportedly maxing out at 500 subscribers nationwide.

This time it’s different…

What makes this time different? According to Cisco’s VP of Consumer Marketing, Ken Wirt, three things are different this time. The quality and ubiquity of HD displays, the increased average household bandwidth, and exponentially increasing processing power have converged to create a ‘perfect storm’ for telepresence.

With apologies to Elvis Costello

Writing about telepresence is like dancing about architecture

Or was that Frank Zappa? In any case, as with HD or 3D, trying to explain telepresence to someone who hasn’t seen it is akin to trying to explain the color blue to a blindfolded person. You kind of have to see it to understand it. I had a chance to test drive the product last week before the official product announcement, and must say that—even as a professional skeptic--I left the demo thoroughly impressed. The so-called “immersive” effect (allowing you to ‘see what others are feeling’ ) is quite noticeable, and is what distinguishes it from a garden-variety Skype video or web-based video chat program. There is near perfect synchronization between audio/video, and people appear life sized on the screen. Ken Wirt cited a study showing that 55% of all conversation is non-verbal. It’s no surprise that it is our body language, the nods and raised eyebrows, shaking heads, smiles and smirks, that distinguish a phone call from a ‘carbon-based’ face-to-face meeting.

The Uncomfortable Topic of Money

The price tag is steep, at $599 for the unit, plus a monthly fee of $24.99 for unlimited ūmi calls, video messaging and video storage. The system will be sold through Best Buy/Magnolia Home Theater stores, bestbuy.com and on the cisco website. The service requires a minimum of 3.5 Mbps to work in 1080p, though it can be optimized for use at lower speeds, as low as 1.5Mbps for 720p. This means that the service will largely be limited to those with cable broadband or FTTx. Cisco believes that 34% of US households have this type of upstream capability—which is in line with Strategy Analytics’ own estimates.

The Network Effect

Back in the early days, the phone company sold “telephone pairs,” with the understanding that the value of the network lies in the number of nodes. A telephone network with one phone is not terribly valuable. Nor is a telepresence unit if there’s nobody on the other end. Cisco has partially circumvented this problem by providing interoperability with Google video chat, though if you’re spending $600 on a unit, you probably want the “real thing.” The real value of telepresence will be realized when there is a robust network of equipped households. While family video-calling seems the most obvious use-case, its utility seems rather limited. How many times do we really want to videochat with Grandma each month? Unless and until the network reaches critical mass, the appeal and draw of video calling will be very limited. Rather than a consumer mass market play, the real opportunity might very well be in the Business to Consumer (B2C) space. If private industry can help subsidize and drive the technology more mainstream, it could hit the critical mass it needs. Cisco talked about a number of other potential applications, three sound like potential winners in driving telepresence forward. These include

Financial Services: A $600 upfront investment and $25/month is a drop in the bucket for a company trying to prove its value to high net worth clients. For the cost of a few steak dinners, a Financial Services company could equip a client’s living room and increase the frequency of “touch points.”

Health Care: While the chatter around Telemedicine never seems to cease, this is one application where it actually could make sense. An insurance company might find it financially beneficial to subsidize a unit for a patient requiring regular and routine examinations, or for medical compliance monitoring (“Did you take your pills Mrs. Smith?”)

Distance Learning: How about tapping into the multi-billion dollar distance learning market in the US.  Equip every “Phoenix” with a system? That’s what I call scale.

I want one… but not for $599 plus $24.99/month

Many who experience the technology firsthand will want one for their own living room. It’s cool. It works well, and the potential applications are only limited by the imagination. It’s light years ahead of pc-based chat. On the flipside, the price is high. Too high. And when you add on the 24.99/month fee, it starts to feel like another cable bill. Survey research conducted by Strategy Analytics in Q3’10 shows that 30% of Americans showed some interest in a service of this type. Importantly, though, 46% of those interested said they are often concerned about their ability to afford regular household bills, 45% said they worried about signing up to new fixed term contracts when buying new products and services.

Adoption Will be Slow But Steady

Cisco would certainly admit that the $599 price point is untenable for the long run, and as volumes slowly ramp up, we should expect to see price points come down. If Cisco is successful in getting private industry into the game, and a subsidy model takes hold, we could see adoption speed up. The other barrier standing in the way of rapid adoption is broadband. While today only one-third of households have the minimum required bandwidth to support the system, this will certainly increase going forward. We estimate that by 2015, over 60% of all US households will have at least 1.5 Mbps upstream capabilities. Stay tuned…we’ll be putting out a Telepresence report in the upcoming

Returning to temperate climes after my first “summer” visit to Las Vegas, I am more amazed than ever at Nevada residents’ ability to withstand daily temperatures of 40 degrees plus and practically zero humidity. At least I now know what 108 Fahrenheit feels like. The contrast between this and a proper British summer (a few days of 25C followed by cool cloud and rain) could not be more stark. Las Vegas’ Mandalay Bay was the venue for Cisco’s annual customer gathering, which this year also brought together a hundred or so analysts for in-depth discussion of product and commercial strategy. The highlight product announcement was the Cius, as reported by my colleague, Susan Welsh de Grimaldo. While the company has not officially announced pricing, I expect it to be closer to $1000 than $500. Cisco is quite clear that the Cius is positioned as an enterprise solution, and these prices are likely to prevent much leakage towards “unofficial” consumer markets. What was most interesting, perhaps, is the genesis of the Cius within the Cisco organisation. It was obvious from many conversations that few people were aware of its development until very shortly before its unveiling. Even John Chambers himself claims to have been unaware of it until two months ago. If the product proves successful it will be further justification of Cisco’s innovation in organisation and management which allows dynamic cross-fertilisation of ideas across multiple teams. The other news centered on home energy management, where Cisco is launching a “Home Energy Controller” allied to Cisco Energy Management Services, which will be offered by utility companies to help consumers understand and control their energy consumption. The Controller uses Zigbee, WiFi and other home networking technologies to exchange data with and, potentially, control a variety of home devices. Much of our discussion with Cisco execs centered on the challenges and opportunities for service providers offered by OTT video, as well as the potential for telepresence in the home environment. Telepresence has a been a success for Cisco in the corporate market, and it is still on track to bring a consumer solution to the market by the end of 2010. It still strikes many people, both in the industry and consumers, as odd that Cisco should have a serious consumer strategy. While its brand presence is growing, not many would consider it as a competitor to the Sonys, Samsungs and Apples of the world. And there is no doubt that the company’s financial power is built on its core network switching and routing market dominance. Cisco does have key positions in home networking and set-top boxes, as well as the TV and broadband service provider space, but the jury is still out on whether Cisco itself will become an overall leader in consumer markets over the next decade. But consumer players cannot ignore Cisco as an influence on market direction. Its innovation processes, as demonstrated by Cius, will combine with its financial strength to create a wave of consumer innovations over the coming years. Many may fail, but it will only take a few to be successful for rivals to feel the heat. Client Reading: Chasing the Elusive IPTV Business Model: NDS, Cisco and Comcast to the Rescue?