Friday, July 17, 2015

"Over the Top" Will Challenge U.S. Cable TV Operator Collegiality

When and how it happens is not so clear, but moves by Comcast and other U.S. cable TV operators into the streaming media and mobile businesses are going to raise business issues that have not had to be grappled within the past.

Some might argue those issues might occur with business voice services as well. Though there no longer is any reason in law why one cable company, in area A, does not compete with another cable operators in area B, that is basically the unwritten industry rule.

Cable companies historically have not competed against each other, in their franchised territories. That isn’t so unusual in the fixed network telco business, either. Historically, only one telco was authorized in any geographic area.

In the U.S. market, since the latter 1980s, telcos began to compete head to head, in the same regions, first in the long distance industry, and then in the mobile industry.

At some point, hosted services, cloud services and all other over the top apps will raise new issues about “where” a cable company competes, and whether that means competition with another cable operator.

To be sure, operators are likely to try and maintain the old rules to the greatest extent possible. Industry collegiality virtually requires that approach.

But a nationwide mobile service will necessarily cover all or most cable TV areas, no matter who the “local” operator happens to be. In the same manner, a hosted voice service can, in principle, be sold anywhere, on “any broadband connection, not just in those areas where a given cable TV operator has a fixed network.

Right now, Comcast will sell its over the top streaming service only to customers who buy it high speed access service, supplied by Comcast’s own networks. But that’s akin to Google allowing people to use YouTube or search only when they buy Google Fiber.

“Over the top” apps are not inherently bound by geography, though they might well be confined to some countries, or barred from some countries, for other reasons.

In the past, when cable operators have thought about ways to create a “cable version” of mobile service, the approach was to federate along existing cable operator across geographies. That never really worked very well.

Any eventual successful “cable version” of Netflix is likely going to be sold across all U.S. geographies, to gain scale. Whether federating will work is the issue.

The same might  be said for any other national U.S. business services: scale requires working nationwide. Cable likely will try and federate in some way.

But it might ultimately be the case that this is unworkable. And that might mean that a few large cable companies wind up competing, more or less directly, in “new” services consumed using the Internet. That would be hugely disruptive, but might be inevitable.

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