Archive for June, 2009

June 18, 2009

The disruption is beginning…

Time Warner faces backlash on broadband caps: Time Warner Cable’s plans to cap broadband speeds and charge $150 a month for unlimited broadband downloads has caused quite a stir among consumers and politicians.cnet news

The BBC reports that subscribers to BT’s lowest-tier broadband plan should be getting speeds of 8 megabits per second, but that speed is being cut to as low as less than 1 megabyte per second between the hours of 5:00 p.m. and midnight (prime video watching time!)

A spat has emerged in recent days between BT (BT) and the BBC. The telecoms group broke cover this week to say it could no longer afford to subsidise the cost of sending huge media files from the online video on demand service as its network was suffering. A spokesman for BT said yesterday: “We can’t give these companies a free ride any more.” –

As we all know, carriage fees, subscription fees and advertisements are sources of revenue for all players in the broadcast delivery value chain. With online video, the mantra has so far been -no subscription fee only advertising revenue.
The traditional carriage fee no longer applies as the internet pipes are not built exclusively for video. Hence ISPs (who map to cable networks) will find it hard to charge a carriage fee from content owners (who map to broadcasters). The reverse carriage fee (fees that certain premium content owners charge to allow cable operators to carry their content) will also not be applicable.
There are 2 additional players in the online video scene, the CDN (content delivery networks) and the amateur and proteur (between amateur and professional) producers.

Content Delivery Networks are a system of computers networked together across the Internet that caches content closer to end users, to improve performance and scalability. The CDNs charges the content owners to host content.

Today anyone with a camcorder and video editing tools on the PC can become a producer. The internet is used as a delivery platform

With content consumption, production and delivery becoming available to all, the role of the studios and networks are beginning to be questioned. While they are not going to go away in a hurry, it is an eventuality they are going to have to come to terms with. Studios and networks will have to find a way to adapt themselves to this new 2-way interactive, internet delivery and production.
Hulu, YouTube, revision3, etc. exemplify the transition. Hulu comes from the TV world, Epix from the movie studios, Youtube is the channel for user generated content, ,revision3 and are the channels that are creating content exclusively for the internet and Vevo comes from the music industry.

BT has been accused by BBC of throttling its iPlayer service and is looking to ask content owners to share the transit costs. This is probably one option for them to recover money as its going to be hard to charge the user. We have already seen the customer backlash from Time Warner trying to do the same.

There are few other options ISPs have to mitigate this problem. One way is to improve their peering relationships and use internet exchange points (IXPs). Another way is for ISPs to become CDNs or find a way of sharing revenue with CDNs. Yet another way is to use bit torrent like technologies to ease traffic and transit costs .  Maybe a combination of the the above will be the way to go….

What is clear however is that the balance of power is slowly shifting from the media companies to the consumer. Will this mean the beginning of the end of  TV as we know it?

It’s a very interesting time to be playing in this area….I am, as always, tuned in