[IP] DSLP: Future of TV: SBC's Closing the Net
Begin forwarded message:
From: Jennie Bourne <jennie@xxxxxxxxxxxxxx>
Date: October 23, 2005 7:26:19 PM EDT
To: work@xxxxxxxxxxxx
Subject: DSLP: Future of TV: SBC's Closing the Net
Policy folk: I'll have more on the SBC and access story. It's solid -
don't doubt it. Live video over the net will have trouble getting
through. Net neutrality is no long theoretical. Dave Burstein
May 17, 2005 Future of TV.net
SBC - First To Say Their Network Will Be Closed
Price of Bandwidth Continues Dropping
Guest editorial: Don’t Block Video over the Net
Japan’s Masayoshi Son Cutting Prices Changing Lives
Comcast: One month, 100 million ON DEMAND programs
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SBC Clamps Down on Outside Video
“Oh no,” SBC’s #2, Randall Stephenson answered me on whether his DSL
customers could watch live video beyond what SBC is selling. “We‘re
going to control the video on our network. The content guys will have
to make a deal with us.” Around the same time, Al Gore, a man who
might be President, had to come hat in hand to Marilyn O’Connell of
Verizon, seeking carriage of his Current TV channel on FIOS. She
found it interesting, so the odds are good.
Something is inherently wrong if the crucial innovators on the
net need to beg the carriers for basic freedom of speech. Peter Grant
and Jesse Drucker Friday brought the issue of video blocking to the
front page of the Wall Street Journal, changing the entire debate in
Washington. It should now be hard for the AT&T deal to close without
a clear solution. Martin is not joining to turn down the SBC - AT&T
merger over this, although Stephenson’s comment is a direct slap in
the face. Nevertheless, he can, if only to prevent a delaying tie
vote, demand a merger condition on this and the related open peering
issue that is more than the usual meaningless statement. Courage
Kevin, Katherine, Michael, and Jonathan - AT&T needs this merger, and
there will never be a better time to stand for an important principle.
Where the net is open, we will have remarkable choices.
Google, Yahoo, and many others have great plans we will be reporting.
If not, we get the ugliest side of media concentration. SBC’s Lea Ann
Champion described their offering “Eighty percent of the channels
come from about six companies.” This is media concentration at the
ugliest.
There is no major technical or cost factor preventing SBC or
Comcast keeping their network open, despite the carrier’s attempt to
spin. We have some of the hard data below, and much more to come.
SBC - First To Say Their Network Will Be Closed
Last year Mike Powell hit the roof when Grant and Latour reported the
beginning of this story In the Wall Street Journal. Therefore, SBC
responded with a clear statement, one of the best tests of net
neutrality I have yet found.
“SBC does not plan to give meaningful preference (in terms of
bandwidth allocation) to any particular video service or video
content provider. ... We don't plan to limit access from computers or
give bandwidth preference to content.”
That statement is now apparently inoperative.
I asked Randall Stephenson whether the Southern Baptist Church
Channel, MovieLink, or Google will be able to send live video at full
quality if they were not part of SBC’s chosen programming. “Oh no!”
was the answer I got, and feared. “They’ll have to make a deal with
us. We‘re going to control the video on our network.” Obviously, not
all content producers will be allowed to make such a deal, and hence
will not be available to SBC broadband customers. Instead, SBC will
try to sell their cable-like program selection.
Selim Bingol of SBC claims that Randall's comments only
pertained to what video is on their own offering, but that's simply
not so. I made a point of saying I was discussing video delivered
directly, specifically that not in their package. Selim wasn't there,
I was, and so were others who can be asked about the conversation.
I'm not misquoting.
Price of Bandwidth Continues Dropping
Liberty Global Pays $0.10 per gigabyte, $0.15 for DVD quality movie
Internet bandwidth isn’t “free,” but it’s become cheap enough to make
DVD quality video practical while discrediting absurd bandwidth
charges like BT’s. Tony Werner, CTO of the largest cable company
outside the U.S., has succeeded in peering 92% of his data traffic,
dramatically bringing down the cost. During analyst day in beautiful
Rose Hall, Werner noted that companies recently purchased by Liberty
had been paying about 20 euro per megabit of transit. Because of his
efficient volume buying, his direct cost is about 10 euro. John
Malone’s Liberty has major holdings in Japan, Holland, France, Chile,
Romania and has just bid for Switzerland. On peered traffic, the cost
drops to about 5 euro. I hear from others the U.S. is a little
cheaper, smaller customers pay more, and much of Africa, Latin
America, and India are high. That works out to $0.50 to $1.50 per
customer per month, based on typical traffic patterns reported by
other carriers, including occasional heavy downloaders.
About $1/customer/month is probably right for a large carrier in
late 2005. I have been using a figure of “less than $2/customer”
based on data now over a year old from several sources. More
recently, I have heard bandwidth costs similar to Liberty from a mid-
tier U.S. carrier, the remarkably efficient London Internet Exchange
folk, and the buyer for a major video provider. I can infer similar
costs from Randall Stephenson’s ARPU and profit analysis, given his
comment that one-third of SBC customers take a higher tier.
Translating the cost per constant megabit flow of traffic to a
cost per gigabyte of data requires making assumptions about usage,
but is important for analysis of video over the Internet costs as
well as whether bandwidth caps and charging are reasonable. (They
aren’t. at least up to 50 gigabytes.) I have not been able to get
firm data, so I am making assumptions that probably slightly
overstate the costs. If you get four hours per day by 30 days per
month, that is 120 hours per month. One-megabit continuous flow is
about 500 megabytes of traffic per hour, or 60 gigabytes of traffic
per month. For a company like Liberty, that’s about $0.10 a gig at
the rates Werner mentioned. BT, DT, etc. should do at least as well,
especially given their existing worldwide backbones and share of
major undersea fiber. A good confirmation of this comes from the
carrier commitments to IP TV carried across their network. They
wouldn’t be possible without switching/fiber costs that are this low.
Traffic costs remain at or below typical marketing costs unless
the user goes well over 50 gig consistently. Two gig or even 10 gig
“caps” have no cost justification. They are partially a way to keep
some users’ prices high, and increasingly a tool to prevent watching
video over the net in competition with the services BT and others
offer themselves.
The costs calculated in this item are lower than now out-of-
date estimates, projections from carriers trying to justify high
rates, and the internal cost figures in some large telcos. Both
Verizon and BT once overstated their marginal bandwidth costs and
shadow pricing to their own DSL divisions. That raised profits in
their (largely unregulated) internal backbone and produced “losses”
in their DSL division, although the money stayed within the same
company.
This should go down with Moore's Law, and fall by half in 2007
or 2008 and again by about 2010. The incremental cost of moving bits
over existing fiber is largely the switching/routing cost,
electronics constantly getting cheaper. In most of the developed
world, there's enough unlit fiber for several more years.
Guest editorial: Don’t Block Video over the Net
From Andrew McLaughlin of Google:
Our mission in Washington boils down to this: Defend the Internet as
a free and open platform for information, communication and
innovation. OK, that sounds a little high and mighty, so let me break
it down into something a bit wonkier with a sampling of the U.S.
policy issues we’re working on:
Net neutrality. As voice, video, and data rapidly converge, Congress
is rewriting U.S. telecommunications laws and deregulating broadband
connectivity, which is largely a good thing. However, in a country
where most citizens have only one or two viable broadband options,
there are real dangers for the Internet: Should network operators be
able to block their customers from reaching competing websites and
services (such as Internet voice calls and video-on-demand)? Should
they be able to speed up their own sites and services, while
degrading those offered by competitors? Should an innovator with a
new online service or application be forced to get permission from
each broadband cable and DSL provider before rolling it out? Or, if
that’s not blunt enough for you, what’s better: [a] Centralized
control by network operators, or [b] free user choice on the
decentralized, open, and astoundingly successful end-to-end Internet?
(Hint: It’s not [a].)
At Future of TV, we put it even more directly. Do you want to
choose what you watch, or do you want Brian Roberts and Ed Whitacre
to choose it for you?
Japan’s Masayoshi Son Cutting Prices Changing Lives
Son in Japan: Thousands of channels, millions of videos to download
Google, BT also building extraordinary server farms
Never laugh at Masayoshi Son; he already changed the world twice,
first by selling 7 megabit DSL service for $20 and taking millions of
customers from NTT, then by adding VOIP at minimal cost for 4.5 M
subscribers. He invested $2B along the way, sometimes finding the
cash in unexpected places, and now has turned EBITDA positive, as
reported in DSL Prime. The business models now changing Europe are
copying his success.
Next, he intends to bring IP TV to 7M Japanese. It's an
entirely switched network, with a typical office connected by dark
fiber supporting 4 gigabits of data and easy to upgrade. Massive
headends can essentially supply (and switch) as many channels and
programs as Son can acquire and digitize. The actual cost of
digitizing is $75/film and drops rapidly with quantity; the server
space is just a few dollars. In quantity thousands, headend costs per
channel should be in the low thousands by the time he's ready. Two
million videos, two thousand live channels could be encoded and
served for perhaps $150M today, dropping by half in two to three
years. That's about 60 cents per month per subscriber, by five
million subs - a cost that makes sense.
Where will all this video come from?
TV worldwide produces about 31 million hours of original programming,
Berkeley‘s Peter Lyman and Hal Varian estimate. Approximately 370,000
motion pictures were made around the world from 1890 to 2002. If the
entire universe of original film and video titles were played
continuously, the show would continue for 2,108 years. Less than 5%
of these programs earn anything at all commercially today, and
probably less than 1% command Hollywood prices.
Christian broadcasters, by the dozen, are finding it impossible
to get on many cable systems, and are demanding “must carry” from the
FCC. At many newsstands in New York, you’ll find papers in Russian,
Chinese, Spanish, German, French, and literally a dozen others. The
lower cost of video equipment will allow every university with a
football team, every large church or political body, every ski resort
looking for promotion, a dozen buddies from film school working
together, and thousands of other to create channels. 99% will find
small audiences at best, and many programs will prove unwatchable.
But the remaining 1% have enormous potential. Future of TV.net will
be featuring the new equipment whose low prices can chance a heck of
a lot.
Comcast: One month, 100 million ON DEMAND programs
Comcast proves VOD is today
In March, Comcast customer downloaded 100 million programs, most of
them without additional charge. Future of TV.net believes the tuning
point has already been reached - VOD is here. 94% of Comcast VOD
shows are without additional charge, clearly showing what customers
want. To do that, Dave Fellows has built a robust network with
central hubs and multiple intermediate caches for efficiency. Legacy
cost is about 30 cents a program streamed; forward cost, about ten
cents. The streaming servers and software are in the $100-150/per
range, but the full cost - including the fiber backbone, routers, gig-
E to the CMTS, etc. his colleagues estimated at about $300 per stream
last fall, falling.
The peak of VOD demand to date has been 8% of an area's homes,
and the current system is built to 10% concurrency. They intend to
raise that so that 30% of covered TVs can be watching different
shows, often time shifted. They’re guessing that 70% of people will
watch the streamed 400 channels or so or something stored on their
hard drive, at least for the next few years.
“Don’t Let Anyone Say HDV Isn’t Broadcast Quality. We’re Using It.”
Our Sony FX-1 costs less than a big TV, the sharpness is incredible
but be prepared for the whopping file sizes. Even Hollywood types are
using it.
.
“We used a Panasonic HDV to shoot scenes for one of this year’s most
acclaimed network series,” says Hollywood producer Robert Cohen who
also happens to be Dave‘s uncle. “The small camera was able to get
shots where our regular equipment couldn‘t go. No one noticed the
difference.” Cohen couldn’t mention the series name, but previously
produced for “24” and other shows you’ve watched. The Panasonic only
goes to 720P, but has a native 24-frame mode that fits well with
Hollywood workflows.
Our Sony goes to 1080i, and is an absolute delight. Premiere or
anything else running on a PC is still painfully slow sometimes,
although the Cineform Aspect plugin that comes packaged with
Premiere Pro speeds things up, that‘s just a Start. Download the
trial version of the full package it’s pricey but it will make you
remember why you went HDV in the first place.
Jeff Pulver, bought the same camera, and choose Final Cut Pro for
his Mac. For editing, dual processors and a RAID really make a
difference, but that’s now under $2,000. Intel has released dual core
Pentiums at a good price, and the supporting chipset controls a two
drive RAID. We priced dual core 3.0 megahertz Pentiums with 500 gigs
split between two hard drives under $2,000.
Good equipment without skill is worthless, but prices give
millions of people a chance to prove how good they are. A very small
fraction will be worth watching, but even so a very wide world of
programming is coming. Less than $10,000 now buys an HDV camera, an
edit station fast enough to work online, shotgun, lavs and regular
mics, pro quality software, basic lights, and two cases with wheels
that let you take everything but the PC on a flight to Paris. At the
Marconi Dinner featured below, you’ll see Jennie’s short piece
honoring Claude Berrou - shot on HDV.
Stories in the works:
China Telecom and China Netcom are starting to deploy half a million
IP set top boxes, likely heading towards millions. It’s currently
illegal for a telco in China to compete on video, so they are calling
it a trial. They’ve cut a deal with Shanghai Media Group, the #2
television producer, that should solve their licensing problem.
BSkyB bought Easynet to offer a satellite + DSL connection to a super-
TIVO set top box. That’s the same strategy SBC intends outside
Lightspeed territory. Interesting possibilities, under the working
title Separate, Not Equal, But Pretty Darn Good.
SBC’s choice of a proprietary video system from Microsoft isn’t
working out well, yet one more reason to prefer open standards. Phil
Thompson of mPhase will have some thoughts.
Email
One media analyst wrote skeptically about our Bronx Beats Babbio
story, about two entrepreneurs already delivering in the South Bronx
the kind of thing Verizon is promising for years in the future. He
wondered why the UrbanDSL folks had almost no reporting or web
description of what they've done. Wrote him back with an
introduction, saying , "I've visited their NOC, from which they have
fiber to 50 buildings in the South Bronx (some quite large) and an
active service with VDSL up the risers. They've been scrambling to
make things happen, and getting publicity and a fancy website haven't
made it up the priority list. So I had completely missed them myself,
despite being only three miles away, until I got an invitation to
visit." Another reporter's suggestion, however, that small folks like
UrbanDSL make Verizon unneeded is going too far; no likely funding or
growth path lets them do more than a small fraction of New York City.
Thanks to Om Malik and Broadband Reports for picking up our story.
Briefs
Amazing that staid old Auntie Beeb is perhaps the most progressive
network on earth, with 5,000 Britishers already in a trial using Bit
Torrent to download any of the week’s programs.
Ken Pyle debunks the notion that the picture in picture of
Microsoft’s IPTV is revolutionary. “One note of caution is that many
pundits are underestimating the ability of cable and, even satellite,
to provide the same interactive functionality as IPTV. Features like
multiple camera angles, which I hear touted over and over like they
are a new concept, were commercially proven in the early 1990s by
Canadian cable pioneer Videotron over coaxial cable television plant.
The MSOs will roll out these features as needed in order to stay
competitive,” the editor of the Viodi View believes. It’s a free
subscription, and more than value for the money.
Japan Telecom, dissatisfied with $15M of Scientific-Atlanta set tops
boxes, is shifting orders to an Asian maker who produced software
more appropriate for what Japan needs.
Wall Street
Eric Kainer of Needham has incorporated into his thinking what
MediaFlo and TU are shortly to demonstrate. "Instead of a 5-play,"
he corrects us, "think of it as dual triple plays, one mobile and the
other fixed. A 6-play, if you must."
Merrill’s Jessica Reif Cohen confirms the Comcast optimism on free
VOD, writing “In Philadelphia, where Comcast has offered VOD for over
2 years, over 85% of subscribers have used VOD over the past 3 months.”
Nikos Theodosopoulos of UBS confirms the discrepancy we noted between
the numbers of HD sets sold (high) and the numbers of people watching
HD programming, so far. He notes “HD set top penetration in the US
remains at under 33% of installed HD TVs, while demand for HD TVs
continues to be robust.”
People
Ken Ferree left the FCC broadcast bureau to be #2 at the Corporation
for Public Broadcasting. The top job came open, he went for it, lost
out to a political appointee, and now has decided to become a D.C.
lawyer again. He will probably make more than twice what the guy who
got the job will. Living well is the best revenge.
Editor Jennie Bourne has degrees from NYU Film School and Columbia
Journalism. She has produced for television, edited network news and
a fashion magazine, hosted the evening newscast on WBAI-FM in New
York, taught at Rutgers University, and still has lots to learn.
Jennie loves technology toys, hates their misuse, and takes pride in
explaining the geek stuff to humans. Email jennie (the usual)
futureoftv.net
Publisher and Research Editor Dave Burstein is also editor of DSL
Prime and Fiber News.
Jennie and Dave collaborate on DSL: A Tech Brief (Wiley, 2002) and
Jef, a forthcoming documentary about Jef Raskin, creator of the
Macintosh and much more.
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add you. Or "un" to be dropped. Please forward this and encourage
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Copyright, 2005, Jennie Bourne.
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