Predictably, Dish Network alters AutoHop

Dish Network has made a series of software upgrades to its DVRs embedded with the "AutoHop" feature, that automatically removes all advertising from prime time broadcast TV network programming recorded using the DVR feature.


Subscribers now have the ability to choose which channels to record among the "Big Four" networks, where previously they were all automatically recorded.

Subscribers also can choose to delete programming off the hard drive at a time of their choosing, as opposed to accepting a default-delete date.

A third change switches the cursor default from "yes" to "no" when presented with the option to skip ads.

All those changes presumably are intended to bolster Dish Network's defense of its technology, as it faces major lawsuits from broadcasters who claim the AutoHop feature is a violation of their copyrights and also a breach of affiliate contracts Dish Network has signed with the broadcasters. 

The broadcaster challenges were entirely predictable. Whenever an upstart has challenged the over the air broadcast business model, there have been legal and regulatory challenges. In the mid-twentieth century, for example, broadcasters successfully convinced the Federal Communications Commission that some core cable TV industry values, such as offering out of market TV signals, were impermissible. 

Broadcasters and movie makers also challenged the legality of such devices as the video cassette recorder. So the challenge to the lawfulness of AutoHop was inevitable. 

That incumbent legal and regulatory resistance always is predictable when new technologies or business models pose a challenge to either communications or entertainment industry business models. 

Dish Network presumably hopes the changes will bolster the Dish Network argument that AutoHop only provides consumer choice and convenience, and does not constitute any sort of copyright infringement. 

Some Parts of the Telecom Business Are Shrinking

Virtually all experienced observers of the global telecom business are familiar with the notion that, over time, there always is consolidation. In large part, that is because there are scale effects in the business, meaning that the more volume a supplier has, the lower its costs typically are, per unit delivered.


But there is something more at work, as well. Generally speaking, global service provider revenues, overall, are flat. Some regions are growing, while some are shrinking. But if you assume any public company must continually grow its revenues, acquisitions simply are the only way to grow revenue, long term. That leads to supplier consolidation. 

There are changes beyond the tier-one service provider level, as well. Smaller or more specialized service providers likewise are consolidating. And so is the channel. 


"The channel is shrinking," argues channel expert Dave Michels.  "Enterprises are buying less, prices are dropping, models are changing."


"There will be fewer dealers tomorrow than there are today," he says. "There is still plenty of channel opportunity, in fact huge."


"Just not as huge as it once was," argues consultant Dave Michels.


Some of us might argue that the revenue opportunity might not be so much "huge," as it is "significant." The reason is that distribution by channel partners historically has made sense in the medium-sized business segment. 


Consumers and small businesses are best reached using mass media and now the Web. Enterprises can be sold direct. In the middle is where the channel has made financial sense. 


But some of us would argue that cloud-based application delivery will shift more of the mid-sized business opportunity away from channel partners and towards direct delivery as used in the mass markets. Not all mid-market applications can be delivered that way, to be sure. But a significant portion will shift. And that means suppliers will "go direct" rather than using channel partners. 


Veritical specialities also are likely to become more important, once cloud deliver makes it easier for enterprises, mid-market firms and small businesses to "buy direct" and provision from the Web. 

12.5% of Western Europe Smart Phone Users Buy from Phone

Of smart phone users in France, Germany, Italy, Spain and the United Kingdom, about 12.5 percent have made a purchase from their devices during the last year, according to the comScore MobiLens service. 


The study showed that the mobile retail audience in those countries nearly doubled over the past year, with 1 in 6 smartphone users accessing online retail sites and apps on their device, comScore reports.  

Mobile Retail Activity Among Smartphone Owners 3 Month Average Ending May 2012 Total EU5 (FR, DE, IT, ES and UK) Smartphone Audience: Age 13+ Source: comScore MobiLens
	Target Audience (000)	% of Smartphone Audience
Total Smartphone Audience: 13+ yrs old	117,609	100.0%
Purchased goods or services	14,552	12.4%
Type of goods or services purchased
Clothing or accessories	5,036	4.3%
Books (excluding e-books)	3,806	3.2%
Consumer electronics / household appliances	3,698	3.1%
Tickets	3,639	3.1%
Personal care / hygiene products	2,452	2.1%

Is "National Broadband Policy" Needed, or in Need of Adjustment?

U.S. broadband prices are not the lowest in the world, by any means, and some worry that neither speeds nor prices will improve much, in the future. That inevitably will lead to calls to “do something” about national broadband policy.

There are a couple issues there. The first is whether, under present fiscal circumstances, the federal government and U.S. States can do much of anything about direct investment of their own. Like it or not, the answer is that policy frameworks can be adjusted, but that there is precious little “investment” possible, from government quarters.

The more contentious issue is likely around what incentives properly can be provided for cable operators and telcos to voluntary boost their own investment, and how much those incentives matter, where it comes to investment decisions.

Some might say that almost no amount of incentives would convince a rational executive to invest “too much” in a business that cannot return a market rate of return, compared to all other alternatives that promise a higher return. It is not easy to balance end user welfare and industry incentives, under conditions of great uncertainty.

A new FCC study released in July 2012 does show that progress is being made. As always, the issue is whether the progress is fast enough.

Whether Google Fiber in Kansas City, Kan. and Kansas City, Mo. will have the intended effect of spurring more investment by telcos and cable operators remains to be seen. So some might say handwringing about the state of progress in the U.S. broadband market are overblown.

That is not to say issues exist. There clearly is an argument to be made that most telcos cannot outline a solid business rationale for aggressive fiber to the home upgrades, in many, if not most cases. In part the problem is that financial return is questionable. In other cases the argument is simply that alternative capital investments in mobile assets will drive a higher return.

Also, unlike the situation in many other markets, a powerful, facilities-based competitor with arguably better cost structure (both in terms of capital requirements for bandwidth upgrades, and workforce cost issues), competes head to head in virtually every market, with two powerful satellite contenders that reduce the potential gain from offering video entertainment services, a key element of the telco business case for deploying fiber to the home.

As far as the retail pricing, where the U.S. never ranks among the “best” providers, measured in terms of price per megabyte of access speed, one problem is simply that costs are higher in the U.S. market.

Population density might be the single most important factor determining the cost of any fiber to home network build. A related issue is average “loop length,” a metric that is roughly related to population density.

U.S. service providers have to supply service over much longer average loops than service providers in Europe, or in many “city states” that feature high-density housing. Basically, retail cost everywhere is related rather directly to network investment cost.

So Google Fiber’s $70 a month benchmark for symmetrical 1-Gbps access, along with a similar offering by Sonic.net, probably are best viewed as “stretch goals” for most U.S. telcos, arguably less a stretch for cable operators, and out of reach, for technical reasons, by satellite broadband providers.

Perhaps progress in the U.S. broadband market is not “the best of all possible worlds.” But options simply are not unlimited, or investment drivers very easy.

Notice What is Missing on Google Fiber

Virtually unmentioned in discussions about Google Fiber as it is being deployed in Kansas City, Kan. and Kansas City, Mo. is that voice is available as part of the service. That’s largely because the really unique aspect is the 1-Gbps broadband access.

Even the video service is a relatively basic offer lacking many channels many consumers will prefer.

But voice is less than an afterthought. it’s just something users can supply themselves, using over the top applications such as Google Talk.

That tells you much about potential future models for at least some access providers, if Google Fiber proves it can make an actual profit, offering 1-Gbps symmetrical Internet access and entertainment TV, on its own fiber to the home network.

Broadband access will be the foundation. Google Fiber believes video entertainment is a crucial service to drive higher average revenue per user. Sonic.net believes Internet access and voice is the more logical bundle for it to offer.

In either case, the real top draw is Internet access at 1 Gbps for $70 a month. Basically, voice or video are complementary services.

Cable operators and telcos, with higher operating costs, might always feel it necessary to offer the triple play as a way of creating enough gross revenue to support their services. But some service providers might try and optimize their offerings around broadband access, using either voice or video as a complement, but not both.

Will Google Fiber Economics Work?

“There’s no sense selling a product at a loss,” says Google CFO Patrick Pichette. “But it’s not only about profits, it’s about changing the access costs,” Pichette also has said. 


Assuming you believe that Google is serious about "making money" selling symmetrical 1-Gbps connections at $70 a month, and video service starting at $50 a month, the issue is what Google can do that cable operators or telcos have not been able to do to get capital investment and construction and other costs down to a point where retail prices at such levels still turn a profit.


Sonic.net might agree that it is possible, under some circumstances, to offer very high speed broadband access at shocking prices. Sonic.net already offers consumers 1-Gbps service for $70 a month. But Sonic.net also notes that its construction cost is about $500 for each home passed. And since Sonic.net gets about 33 percent take rates, the effective network cost for each customers is about $1500.


If Google gets similar economics for the network, and few observers are likely to think Google has found some magical way to avoid the actual costs of installing cabling, and also gets about 33 percent penetration, it should be possible to make money at $70 a month for a 1-Gbps service. 


Of course, operating costs will have to be kept in check as well, and that is an area of potential friction for Google, which arguably will not have the infrastructure a service provider might normally be expected to support. 


On the other hand, significant portion of the cost of delivering service is not the actual backbone network, but the drop network and then customer premises equipment. Google's "$300 connection fee" suggests the cost of activating a drop is that amount.


Then there is the cost of the customer premises equipment. Some might argue Google has a cost advantage in that area. To be sure, building custom boxes, in low volume, is not generally the key to low costs. 


But perhaps Google has built a really simple box, using its new Motorola expertise, that dramatically lowers CPE investment. On the other hand, some observers will note that Google actually supplies three separate boxes, plus a Nexus 7 tablet, for a customer buying the 1-Gbps plus video entertainment service.


Some will argue it is hard to see significant cost savings when using a discrete approach such as Google is employing, but perhaps that saves significant money. 


Others might argue that Google will save on marketing costs or other overhead, and that might be a more-reasonable argument. Sonic.net probably does not spend as much money on marketing as Comcast, Time Warner Cable or Verizon does. Google might be able to do as well as Sonic.net

Mobile Device Sales Hit by Economy, Globally

As much as people love their mobile devices, economic stringency is having an effect.But some would say tougher service provider policies, such as ending device subsidies or making upgrades at affordable prices more difficult, also are having an effect,  


Oddly enough, some service providers have concluded that they do better, financially, by slowing the rate of smart phone adoptions. Others have concluded they simply need to shift demand to smart phone brands that provide more favorable operator economics. 


The global figures also suggest that current demand now is driven by smart phones, rather than feature phones that traditionally have represented the sales volume. 


Global mobile phone shipments grew a modest one percent annually to reach 362 million units in the second quarter of 2012, Strategy Analytics reports. 

Samsung was the top performer, shipping 93.0 million handsets worldwide and capturing a record 26 percent marketshare to solidify its first-place lead.

Nokia’s global handset shipments continued to decline, at a negative five percent annually, reaching 83.7 million units in Q2 2012. 

Apple shipped 26 million handsets worldwide in the second quarter of  2012. 


Samsung was the star performer during the quarter, capturing a record 26 percent marketshare. 

Other findings from the research include:

• ZTE captured 5 percent of global handset shipments as shipments slipped minus 16 percent annually, partly because of weakened demand in major markets of Western Europe and China;
• LG’s shipments nearly halved year-over-year to 13.1 million units, as its feature phone volumes continued to slip. However, its global smartphone shipments encouragingly improved on a sequential basis.

Global Handset Vendor Shipments and Market Share in Q2 2012

Global Handset Shipments (Millions of Units)	Q2 ’11	Q2 '12
Samsung	74.0	93.0
Nokia	88.5	83.7
Apple	20.3	26.0
ZTE	19.6	16.5
LG	24.8	13.1
Others	130.8	129.7
Total	358.0	362.0
Global Handset Vendor Marketshare %	Q2 ’11	Q2 '12
Samsung	20.7%	25.7%
Nokia	24.7%	23.1%
Apple	5.7%	7.2%
ZTE	5.5%	4.6%
LG	6.9%	3.6%
Others	36.5%	35.8%
Total	100.0%	100.0%
Global Handset Shipments Growth Year-over-Year %	11.9%	1.1%