Netflix Faces Stiffer VODCompetition

Netflix faces competition in digital video-on-demand and pay-per-view offerings from players like Comcast, Time Warner Cable, DirecTV and Dish Network, according to analysts at Trefis. The reason is a
recent Federal Communications Commission decision allowing new films to be made available on-demand before such films are available on DVDs.

The FCC generally prohibits the use of so-called "selectable output control" technology, which encodes video programming with a signal to remotely disable set-top box output connections. But the FCC granted a waiver from those rules for Motion Picture Association of America members who want to protect copying of content if a new digital release window is created.

Allowing movie studios to temporarily prevent recording from TVs could pave the way for movies to be released to homes sooner than they are today. The FCC said the waiver is therefore in the public interest, because the studios are unlikely to offer new movies so soon after their theatrical release without such controls.

The FCC decision allows movie studios (like Paramount, 20th Century Fox, Disney Studios) to block analog signals on TVs and video recorders when consumers purchase their latest on-demand movies.

This decision was pushed for by Disney, Time Warner and Viacom to reduce the likelihood of content piracy, especially for new films where instances of piracy tend to be high. While this move gives movie studios more control over their content offering, it also gives a boost to cable providers that compete with Netflix to deliver the latest films to consumers, Trefis argues.

Will Common Carrier Regulation Lead to De Fato Price Regulation?

The Federal Communications Commission says it has no interest in applying price controls to broadband access services. But even if formal rules are not imposed, some executives believe de facto price controls are the logical consequence of any move to regulate broadband access as a common carrier service.

At a minimum, any such rules are likely to immediately slow investment in broadband facilities for years.

The last time the Federal Communications Commission altered fundamental rules in the common carrier area,  AT&T cut annual capital spending by more than half, from $12 billion to $5 billion dollars a year. That cut lasted for four years, until the courts threw out the FCC's mandatory wholesale rules, which created pricing rules service providers found highly damaging, says Dennis Kneale, CNBC media and technology editor.

This time around, the rules might affect a wider range of industry suppliers, including cable and wireless providers, with potentially much-greater damages.

The last time the FCC tried such a major incursion, in the mid-1990s, Stephenson, then the company’s chief financial officer, cut annual capital spending by more than half, from $12 billion to $5 billion dollars a year. That cut lasted for four years, until the courts threw out the FCC mandatory wholesale rules.

Some telecom execs say the FCC’s agenda is downright radical and could thwart high hopes for the wireless Internet, arguably key to the future of the entire U.S. communications industry.

The agency assault could restack the pecking order of winners and losers and reshape their stock prices, affecting the portfolios of millions of retirees and investors as well, says Kneale.

The immediate matter at hand is a prohibition on any type of packet prioritization. But at least some telecom execs also fear this would lead to de facto price controls, primarily because inability to prioritze packets would jeopardize the effort to create enhanced and new services that provide quality of service mechanisms of the sort businesses routinely use.

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8 Liberal Groups Skeptical About Common Carrier Regulation of Broadband

Eight liberal advocacy groups signaled skepticism with a Federal Communications Commission plan for regulating broadband access as a common carrier service.

In a letter to Senate Commerce Chairman John Rockefeller (D-W.V.) and House Energy and Commerce Chairman Henry Waxman (D-Calif.), eight groups called for Congress to restore FCC authority over broadband after an April appeals court ruling appeared to undercut the commission's authority.

The Communications Workers of America, the Minority Media and Telecom Council, the International Brotherhood of Electrical Workers, the League of United Latin American Citizens, the National Urban League, the National Association for the Advancement of Colored People and the Sierra Club signed the letter.

Doubts about reclassification stem from the possibility that it could complicate the regulatory situation and lead to protracted litigation, according to CWA spokeswoman Debbie Goldman.

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Telstra Agrees to Structural Separation

Australia will join Singapore and likely New Zealand as countries in which there is a single wholesale provider of broadband connections and all retail providers lease capacity from the wholesale provider.

Telstra Corp. essentially has agreed to break itself up into distince retail and wholesale companies as the result of a new deal with Australia’s national government. A new framework agreed upon by both the government and Telstra, essentially results in Telstra selling its network to the government-backed NBN Co, which is building the new national broadband network, and putting its customer traffic on the network as well.

The new framework, which still must be ratified by a formal contract, a "yes" vote by Telstra shareholders, and approval by regulators, will launch Telstra on a new path. It essentially will not own and operate its own fixed networks any longer. It will not be required to provide universal service.

And it likely will be a much-bigger player in the fourth-generation mobile business than it is in the fixed business.

Telstra will be paid A$9 billion as part of the deal, which remains only a framework, not a contract, which will have to be worked out over the next few months. The deal also means Telstra is free to bid on new wireless spectrum, and can keep its 50-percent stake in cable operator Foxtel.

As part of the agreement, the NBN Co. will be able to use Telstra infrastructure, including ducts and backhaul fiber, rather than building duplicate infrastructure. Telstra also agreed to transition its current customers to the NBN network, becoming an anchor tenant.

NBN Co will operate as the wholesale supplier of last resort for fiber connections in greenfield developments starting January 1, 2011.

Telstra also will be shutting down its copper ADSL network as part of the new agreement.

A new entity, USO Co Ltd, will be established to take over Telstra’s universal service obligations starting July 1, 2012.

The terms of the lease were not disclosed but sources close to the negotiations told AAP the agreement was for a period much longer than 10 years.

Telstra and the government have been at odds about the  A$43 billion "fiber-to-the-home" broadband network, and the necessity of Telstra agreeing to at least a functional serparation of its wholesale and retail operations.

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Does Moving Content Online Make Newspapers Viable?

Can you make an unattractive product attractive simply by moving it online? So far, the answer seems to be "no," at least for most newspapers with the salient exception of the Wall Street Journal.

Half or more of the circulation at most newspapers is composed of individuals who are aged 50 and older. This concentration means that newspapers on average have twice as many senior readers as exist in the population as a whole, and that, by logical extension, they are not engaging the younger readers that they must attract for a prosperous future.

There are implications here for the communications business as well. All products have a lifecycle. Several years we might have argued that legacy voice was a product in the declining part of its cycle, while VoIP was just at the start of its cycle.

These days, some of us might go further and argue that all forms of landline voice are in a mature phase in the developed world, and that mobile voice has become the replacement product, though mobile voice also is relatively mature in the developed world.

In part, it depends on how one defines the "market." One can argue VoIP is a new product, or view it as the latest version of an existing product. You would get different answers about where each of those "products" is in its lifecycle depending on your choice of definitions.

These days, I lean towards seeing VoIP as the latest version of an existing product.

Reflections of a Newsosaur: Make no mistake: Newspapers are still in trouble

Sprint T-Mobile: New mega-carrier or four-network nightmare?

Though the integration issues would be formidable, Merrill Lynch analysts say T-Mobile USA’s owner Deutsche Telekom might be interested in buying Sprint. But while such a deal might make financial and strategic sense, analysts said Sprint could become an operational nightmare for its new owner.

Merrill Lynch said Sprint’s operational problems might cause it to dramatically cut prices, which would put it in direct competition with T-Mobile USA, which has staked out that position among the big-four U.S. mobile carriers.

A takeover bid, Merrill Lynch analysts suggest, would avert such a price war. A positive: Sprint’s stock is priced low, while Deutsche Telekom could count on relative strength of the Euro.

Of course, the big objection has been the operational complexity. Sprint now operates three distinct networks with different air interfaces. Adding T-Mobile would make four. Ultimately, Long Term Evolution would the unifying air interface for all but the iDen network used by Nextel. But Nextel could be spun off.

It might be a long shot. But nobody thinks the market is stable at the top.

Sprint T-Mobile: New mega-carrier or four-network nightmare?

After 10 Years of Big Bandwidth, Where are the New Apps?

After a decade of fiber-to-the-home access, what do service providers have to show for it? Not as much as you might think, suggests Benoît Felten, Yankee Group principal analyst.

"Surprisingly perhaps, considering the decade’s worth of experience some Asia-Pacific countries have with FTTP, they face many of the same issues surrounding FTTP that have been prevalent in the West," says Felton.

The business model, for example, is no less an issue than in other markets. "Finding a sustainable business model" is as important for private players in the Asia-Pacific markets as you can guess it is for service providers elsewhere. High bandwidth provided at low cost might be great for consumers, but is challenging for providers.

Government subsidies and support in some markets is part of the answer for some providers, though.

Service innovation also is an issue. FTTH provides "more" bandwidth. But does it stimulate new applications and businesses that did not exist before? The answer, so far, seems to be "no." That is not to say broadband is unimportant as an enabler of economic activity.

But it is fair to say even after a decade of having FTTH, there is little to point to except online gaming, in terms of new and widely-used applications. "Even in Japan and South Korea, there aren’t that many disruptive or innovative services available to end-users, with the exception of online gaming," Felton says.

"While there’s been a vibrant development of Internet activities, especially in South Korea, this hasn’t necessarily resulted in the kinds of services that are generally expected, such as health care or connected communities," says Felton.

Sustainability, especially in a market context, remains an issue as well. While things have been slowly improving for early deployers, especially NTT, which announced at the conference that its average revenue per user  for FTTP services has increased from 4,800 yen to 5,590 yen between 2006 and 2009, the revenue from fiber-grade services that actually benefits the telco remains limited.

Regulators, on the other hand, must continually monitor the degree of competition in the access market as well, and Felton notes that NTT has 75 percent market share in the fiber access market, but only 30 percent or so in the digital subscriber line market.

Asia-Pacific is still by far the most advanced region of the world when it comes to fiber to the premises deployment and adoption. Asian FTTP adoption is estimated at 40 million subscribers, compared with just eight million in North America and 3.5 million in Europe.

The Korea Communications Commission and KT have ambitions to upgrade to a national target of 1 Gbps connectivity. That's an important national goal, but such government-lead policies arguably are not replicable in other markets that must rely on normal supply and demand constraints.

In some "state-lead" markets, the advantage for incumbent operators is an easier business case. In Malaysia, the government has decided to co-finance a fifth of the cost of an urban deployment of FTTP. As you would expect, Telecom Malaysia customers are able to buy service that is quite attractive compared to what one would find in a market where such subsidies are not available, says Felton.

In Australia and New Zealand, deployment models involve heavy government intervention, both in funding and investment structure establishment.

The biggest anticipated growth of this second wave is China. The Chinese government itself is not directly involved in the FTTP push, but all of the competing Chinese telcos are state owned, which imposes different constraints on their investment decisions compared to private players.

The somewhat discouraging news is that, after 10 years, FTTH has not produced unambiguously new and lucrative applications. That doesn't mean such applications will not develop, but simply that a private market cost-benefit analysis might suggest it still isn't so smart to charge ahead with a robust FTTH program at all costs.

Gulf Oil Illustrates Bigger Problem: People are Starting to See Govt. as Anti-Business

For over a month, Pres. Barack Obama watched the oil spill spread over the Gulf of Mexico with the same powerless horror as other Americans. Finally, lampooned by his countrymen for his impotence, he was spurred into action. He attacked the only available target—BP—and, to underline the seriousness with which he takes this problem, he gave his first Oval Office address on the subject.

The address got poor reviews; the attack on BP better ones. This week the firm bowed to pressure, and announced that it was, in effect, handing over $20 billion to the government to pay for compensation and clean-up, as well as cancelling the payment of any dividends this year and setting up a fund—of a mere $100m—to compensate unemployed oil workers.

This may do Mr Obama some good. Whether it will benefit America is more doubtful. Businessmen are already gloomy, depressed by the economy and nervous of their president’s attitude towards them. This episode will not encourage them.

American politics and business: Obama v BP | The Economist

FCC Moves Toward "Public Utility" Regulation of Broadband

Public Utilities do some things quite well. But innovation is not one of them. And that's the problem with common carrier regulation: it often results in good quality for basic services, but with high prices and very-low innovation beyond the basic service.

Electricity, water, natural gas, and until recently local telephone and cable services were usually classified as public utilities and regulated by government. Now, however, the Federal Communications Commission wants to classify the decentralized Internet as a public utility, as FCC chair Julius Genachowski tries to get around a Supreme Court ruling blocking his Net Neutrality ambitions.

FCC takes first step towards making the Internet a “public utility”

Wireless Broadband Would Account for More than 1/2 of Losses Under Net Neutrality Rules

Network neutrality rules would reduce the growth rate of the broadband sector by around 15 percent per year, according to an analysis by the Brattle Group. The loss—$5 billion in 2011, growing to $100 billion by 2020—increases over time and represents a 2.5 percent smaller sector in 2011 and a 17.7 percent smaller sector by 2020.

Wireless broadband would bear much of the brunt of the reduction, as mobile broadband is expected to be the driving force for broadband overall starting about 2013, Brattle Group says. The share of revenue from mobile broadband lines grows over the period, overtaking revenue from wireline broadband lines by 2013. The business versus residential split is fixed at its 2008 proportions of 37 percent business and 63 percent residential.

Residential fixed lines continue to grow at eight percent per year rate until they reach 90 percent of households and thereafter grow at two percent per year. The business fixed lines grow at the same rate.

Mobile broadband is expected to be the source of most of the broadband growth over the next decade and consequently would bear the largest share of the economic burden of network neutrality regulations.

In 2008, mobile broadband lines accounted for only about a quarter of all broadband lines, but would likely account for more than half of the economic losses over the coming decade if the proposed network neutrality regulations are put into place.

Link to full analysis

FCC to Allow "Re-Purposing" of 90 MHz of Mobile Satellite Spectrum

The Federal Communications Commission has initiated a proceeding to free up 90 MHz of spectrum
for mobile broadband by removing barriers to flexible use of satellite spectrum allocated for other purposes.

The FCC already has approved the Harbinger-SkyTerra transaction, which will enable Harbinger to
invest billions of dollars in building a 4G wireless network using spectrum that includes spectrum in the mobile satellite service bands that originally were licensed for mobile satellite only. Under new rules, that spectrum can be used for terrestrial fourth-generation mobile use as well.

The FCC had already allowed some terrestrial service over MSS, allowing satellite operators to build ground-based networks over the spectrum to augment the larger satellite network. But the FCC now has lifted the satellite requirement entirely from two other MSS bands, the L-band and the band known as Big-LEO (low earth orbit), where satellite operators like SkyTerra and GlobalStar operate.

The FCC apparently is moving towards allowing satellite operators could lease out their spectrum to terrestrial operators as well, allowing them to augment or build their own mobile broadband networks. Currently, the rules allow MSS-license holders to wholesale capacity on networks they build, but the MSS operators might also be allowed to sell wholesale access to the spectrum itself.

AT&T's New Smartphone Plans Could Send iPhone And BlackBerry Sales Through The Roof

AT&T's cheaper tiers of mobile data subscriptions, especially a $15 a month entry-level plan, could boost smartphone sales by making them more affordable to a much bigger market, which in turn should drive bigger unit sales and activations for Apple, Research In Motion, and other companies that sell smartphones at AT&T.

The new plans mean an iPhone becomes a much more affordable option for kids, lower-end users, and basically anyone who was turned off by the requirement to spend a mandatory $30 per month on data access, whether you used it a lot or a little.

AT&T's New Smartphone Plans Could Send iPhone And BlackBerry Sales Through The Roof

4G/LTE Standards Advance

The International Telecommunication Union is likely to approve two 4G standards.

IMT-Advanced (International Mobile Telecommunications Advanced) is the "real" 4G, whereas current wireless technologies such as LTE and WiMax 802.16e are pre-4G, or proto-4G, technologies.

The two technologies set to make the 4G cut are LTE Advanced, proposed by the 3rd Generation Partnership Project (3GPP) , and the Institute of Electrical and Electronics Engineers Inc. (IEEE) 's 802.16m (also known as WiMax 2.0), both of which have been under consideration since October 2009.

Light Reading Asia - 4G/LTE - CommunicAsia 2010: Two Techs Set for 4G OK - Telecom News Analysis

AT&T's New Data Plans Will Save Most People Money

BillShrink co-founder & CEO Schwark Satyavolu says AT&T's new data pricing plan is a good thing. Customers will now have the option to save hundreds of dollars over the course of their 2-year contract, and it's just an issue of figuring out how much data you use.

Plus, the cheaper plans could send iPhone and BlackBerry sales through the roof.
However, pricing could be an issue in the future if data usage continues to increase at the rate it has been over the past year and a half.

Here's How AT&T's New Data Pricing Plans Will Save Most People Money

Will Reclassification Derail FCC's Broadband Plan?

Some at the top level of the Federal Communications Commission may believe a new legal framework for its authority over broadband services will help keep its ambitious National Broadband Plan afloat, but some cable industry policy pundits wonder if the move might produce the opposite effect.

The FCC's reclassification effort could 'totally sidetrack the Commission from getting some pieces of the broadband plan done,' warned Steve Morris, VP and associate general of the National Cable & Telecommunications Association.

Light Reading Cable - Broadband - Will Reclassification Derail FCC's Broadband Plan? - Telecom News Analysis