Video Penetration Higher than We Think?

By some estimates U.S. cable video penetration is in the mid-60s, at the upper level at 70 percent. Satellite video is said to be between 25 percent and possibly 28 percent. And yet at the same time some estimates show "no provider" other than over-the-air transmissions for as many as 26 million homes, something on the order of 23 percent of U.S. households.

The numbers don't square, and there are few explanations other than false reporting by cable and satellite operators; incorrect housing statistics or much-higher-than-expected numbers of homes where consumers are buying multiple subscriptions. False reporting of those sorts of numbers is so unlikely as to be implausible. One has the impression that consumers tend not to buy both satellite and cable video service. Try and think of someone you know who does this.

One can make the argument that multichannel video subscriptions are nearly 100 percent, or as low as 75 percent. So things are better or worse than we might think. It is hard to tell which is the case.

HDTV Transition Issues: How Big?

This summer, the Consumer Electronics Association estimated mid-year 2007 that 16 million high-definition televisions would be sold during the year, bringing the total number of HDTVs sold in the U.S. to 52.5 million.

Thirty percent of U.S. households had an HDTV in the early summer of 2007, likely rising to 36 percent by the end of this year. Among these HDTV households, almost a third own more than one high-definition set.

The issue is what happens as the analog TV broadcast shut off occurs in February 2009. Most surveys show a fairly high degree of consumer confusion about the coming change. That, in turn, has some observers calling for more vigorous programs to prepare the market.

The problem might not be as big as most people assume, irrespective of "awareness." For starters, most TV watchers in the U.S. market get their video from a cable or satellite provider.

Estimates of overall cable penetration range from 67 to 70 percent. Satellite providers have 25 percent penetration or more. Telcos aren't much of a factor yet, but the salient point is that these providers have a vested interest in making sure their customers remain customers, and will undertake most of the actual customer notification and equipment upgrade tasks when the time comes.

Some of those customers already get 100-percent digital signals using a decoder already in the home. Others already are outfitted with HDTV decoders as part of the upgrade process cable operators actively are pushing for "digital TV" tiers of service.

True, there are some viewers who get their signals over the air, and who will not own HDTV tuners by the analog shut off date. That's an issue, but affects a sub-set of over-the-air TV viewers.

User Generated Content Catches On

Some 40 percent of 2,200 U.S. consumers between the ages of 13 and 75 surveyed by Deloitte & Touche are making their own entertainment by editing movies, music and photos. You might not be surprised that 56 percentof all Millennials (ages 18 to 24) do so. But you might find it interesting that a quarter of users (65 or older) do so.

More than one in 10 Millennials are actively uploading their own videos on the Internet and 51 percent of all survey respondents are watching or reading content created by others. Some 71 percent of Millennials watch or read content created by others while 56 percent of Gen Xers do.

About 53 percent of Millennials say they would download more videos if connection speeds were faster.

But the survey also shows that traditional media, including television and magazines, remain part of the user mix. About 58 percent of Millennials say magazines help them learn about what’s “in.” Also, about 64 percent of users say they tend to pay greater attention to print ads in magazines or newspapers than advertising on the Internet.About 58 percent say they use magazines to find out about what's "cool and hip," such as clothes, cars and music. Perhaps more important, almost three-quarters (71 percent) enjoy reading print magazines even though they know they could find most of the same information online.

Millennials, though, are most receptive, as you would guess, in just about any area of "converged" or "new media" experience. About 64 percent want to easily connect their television to the Internet for viewing videos and downloading content to their television. About 60 percent want the ability to move their content to any device they own without any problems. Some 57 percent want an entertainment and communication device that lets them "do everything." Nearly half (49 percent) want a computer or similar device that will be the center of their household media experience.

Wal-Mart Closes Video Download Service

Wal-Mart shuttered its video download service Dec. 21. Videos purchased and downloaded as part of the service still are playable, so long as the original PC the movies were downloaded to remains operational. Due to licensing restrictions, those videos cannot be copied or transfered to a different computer.

That's an obvious measure to protect copyrights, but points to one objection some users may have to buying downloads. Some of us go through a PC a year, so "buying" really means viewing until the hard drive or PC dies.

Having learned the hard way this will happen, some of us now store iTunes collections on external hard drives, so we can lose the CPUs without having to reload all the music again.

DVDs, Concerts, CDs: Attention Deficit

Alliance Bernstein Research reports that DVD sales were down 4.1 percent in December, year to date, and that the fourth quarter declined 2.1 percent, based on Nielsen VideoScan tabulations.

That makes 2007 the first negative sales growth year-over-year since DVDs came to market. Which drives one to speculate that multi-tasking and attention sharing now is beginning to show. There are other possible explanations, of course.

The high-definition format battle might be a factor. Consumers might be waiting until the dust settles before beginning a switch to HD format disks.

As retailers blame the weather for slower than anticipated sales, we might this year point to a tougher economic climate and consumer unwillingness or inability to spend on such things, as well.

The total North American concert industry also posted its slowest year since 2004. According to Pollstar, the top 20 tours generated $996 million, down 15.6 percent from 2006 totals.

Amazon to Sell Some Warner Music Without Encryption

Warner Music is making its entire back catalog, free of copying restrictions, available for purchase through the Amazon MP3 store. New releases won't be part of the deal.

Amazon therefore will be able to sell 2.9 million songs in encryption-free MP3 format. Music copyright holders obviously don't like the MP3 format. As a user, I wouldn't buy any music that isn't in MP3 format. Let them flail around some more. No MP3, no sale. That simple.

Many music industry executives probably still are kicking themselves for not "getting" digital distribution, then not "getting" iTunes.

Apple Fox Deal: Blockbuster and Netflix Impact

Apple has a deal with News Corp's Fox for a movie rental downloads. So far, the viddeo download business has been called a "hobby" by Apple CEO Steve Jobs.

Disney has had its catalog available on iTunes to allow for purchases, and other studios have partial movie and partial video content catalogs already available. It isn't clear how much impact the new "rental" capability will have. Apple probably doesn't expect much revenue lift for the moment.

Blockbuster and Netflix, of course, will be watching closely, as both of those firms want to dominate the video download business.

If Apple succeeds, it will illustrate one interesting thing about "disruptive" innovation. Normally, one expects more innovation from smaller companies. But sometimes it takes a big, influential company to really shake things up.

Google and Apple are those sorts of companies.

at&t FTTH, FTTN Marketing Issues

Marketing operations, as much as anything else, will mean at&t customers who actually have fiber-to-the-home will get the same bandwidth and services as customers served by the U-Verse networks, which use very-high-speed Digital Subscriber Line as the drop wire. That means 6 Mbps data access and one high-definition TV stream at a time, even though FTTH networks are capable of more.

About a million at&t customers actually will have fiber drops by the end of 2008.

The marketing issue is analogous to what happens when a citywide broadband network has to be build and marketed. In the early stages, it isn't really possible to use mass media such as radio or television because the service provider simply generates lots of calls for service which it cannot meet. Early on, door hangers and direct mail work better.

To market U-Verse with scale economies, at&t wants to avoid confusing the market by touting offers that one out of 18 customers actually can get. So at&t has to "dumb down" the fiber access pipe. It makes total operational sense, even if some users who know the difference will be disappointed they can't take advantage of the optics.

Android Phones in February?

One would assume that Android phone developers will want to show prototypes of possible devices at the Mobile World Congress in February. This screen sort is supposed to be one of the concepts.

Keep in mind that this is supposed to be a functional prototype on which the developers and engineers can do their work, not a polished industrial design. That sort of thing almost has to be done before February, if Google is to gin up much buzz.

Google Patent Infringement: One Win and Overtime

The U.S. Court of Appealrs has ruled that Google’s AdSense program does not infringe on any Hyperphase Technologies patents related to contextual linking and presentation of information. Google won the initial decision, which was appealed. However the court overturned the part of the initial decision covering the AutoLink browsing tool, ruling that there may be infringement of two patents, and sent the case back for another look.

The AutoLink browser tool parses Web pages for fragments of text in certain formats, and then transforms them into links to relevant Web pages.

One senses that something is wrong with the patent system. Fostering innovation by protecting inventions is a good thing. But some patents seem so generic, covering entire processes, not simply the expression of a process, that the patents are overly broad, and seem examples of prior art.

Google Increases Storage

Gmail will increase the amount of free storage it provides to 5 Gytes. Some users already have seen the increase. Everybody will notice in January. In October the amount of free storage was something on the order of 4 Gbytes.

From January 4 on, users will get an additional 3.3 MBytes every day, an expontential rate of increase. Pretty amazing.

Google Apps mail accounts will have the same quota as standard Gmail accounts, while Google Apps Premier Edition will have 25 GB mail accounts. Previously, Google Apps accounts had 2 GBytes of storage, while the business edition offered 10 GBytes per account.

Gmail's paid storage option will feature around 50 percent more storage for the same price: 10 GB for $20 a year, 40 GB for $75 a year, 150 GB for $250 a year and 400 GB for $500 a year.

DoCoMo to Feature Google Apps

Japanese wireless provider DoCoMo, which is said to be in the running to sell the Apple iPhone in the Japanese market, also is moving to feature Google applications including search, Gmail, calendar and photo apps, according to "The Nikkei."

DoCoMo is also said to be weighing development of a next-generation handset using Google's Android OS for mobile devices.

It isn't unusual for mobile providers to feature applications on their phones, of course. What is new: making it easy for end users to access mobile-optimized and formatted third-party Web-based apps.

Cbeyond Eyes Pittsburgh: Thank FCC

Pittsburgh is on a short list of new markets Cbeyond now is is reviewing. And the recent Federal Communications Commission decision that several Verizon markets were not yet sufficiently competitive to relax wholesale special access rates (broadband access services such as T1s and DS3s)can be credited, in part, for the interest.

The FCC ruling means Cbeyond can buy T1s at discounted rates, and that's quite helpful for Cbeyond's business model, which typically involves provision of voice and data services to small businesses over one or two T1 lines.

Cbeyond apparently has been considering Pittsburgh for some time but the FCC ruling was pivotal, Cbeyond Vice President and Corporate Counsel Bill Weber says.

"Had that FCC decision gone the other direction, in all likelihood we would have never come to Pittsburgh because it would no longer be possible for us to make money," Weber said.

Cbeyond might not begin operations in Pittsburgh, should it decide to expand there, for as much as two years. Typically a fierce competitor in the small business market everywhere it operates, Cbeyond will run into Comcast in Philadelphia as well as Verizon and other providers.

SME Smart Phone App Gap

As you might expect, 65 percent of heavy smart phone-using small and medium-sized organization associates say access to corporate applications and data anywhere and anytime would most benefit them in their work roles, according to a survey undertaken by the Yankee Group. Smart phone-centric employees generally have jobs that require more remote working and therefore find some value in smart phone technology.

Excluding corporate email, the most-used applications by employees who have smart phones are Web browsing, business
productivity suites such as Microsoft Office, customer relationship management, project management and corporate instant messaging.

However, no more than a quarter of SME employees are using these applications on their smart phone in the office. Also, in most cases, no more than a handful of SME employees are using these smart phone-enabled applications outside the office in work-related venues such as airports and hotels.

Considering only those SME associates whose primary mobile device is a smart phone, material requirements planning and supply chain management applications are top applications.

However, none of the SME employees in the Yankee Group survey in this segment use MRP and SCM applications on their smart phones regardless of workplace venue.

Both MRP and SCM applications are valuable tools for operations-based employees to track flows of raw materials, pre-finished goods and finished goods at various stages in the supply chain and manufacturing process. Non-office use of these applications is stymied today by a lack of mobile-enabled solutions, Yankee Group researchers argue.

Things might be improving. The Apple iPhone helps with Web browsing. User experience for productivity apps is hampered by small screens, formatting issues and device processing power. Salesforce.com helps with CRM, but the need to support multiple IM clients is cumbersome.

The point, Yankee Group analysts say, is that there is lots of room for further refinement of user experience that could boost use of mobile apps by small and mid-sized business associates.

Fairpoint Buy Rejected by Vermont Regulators

Fairpoint Communications, a provider of rural telephone service, has had its bid to buy some rural Verizon landlines rejected by the Vermont state government. Verizon and Fairpoint announced the deal, which consists of 1.6 million landlines in Vermont, Maine and New Hampshire, nearly a year ago.

The deal has also faced opposition from regulators in Maine. The Vermont Public Service Board's decision doesn't terminate the deal, but it forces the companies to reach a new agreement, which could mean lowering the sale price.

It's just another reminder of how much regulators shape and condition the telecom market.