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Boxee CEO: The Cable Industry Is Lying About Encryption

2/10/2012 5:53 PM

Avner Ronen had a bone to pick with me. A couple, actually.

The CEO of scrappy Internet-video startup Boxee tweeted about my blog post (”Boxee: Who Needs Cable? Actually, We Do“) yesterday, “you get so many things wrong in your piece. may be a good idea to practice this thing call journalism and give us a call…”

Boxee is asking the FCC to preserve “clear QAM” — and reject the cable industry’s calls to eliminate the ban on basic-tier encryption. That will let Boxee set-top users access live broadcast TV channels from their cable provider, without the need for a CableCard. Boxee argues that there are no perceptible consumer benefits in letting cable companies encrypt basic-tier TV, a position the NCTA called “astounding.” (See NCTA: Boxee Is Wrong About Basic Cable Encryption.)

So yesterday I emailed Ronen to ask what his complaints were. He responded with a list, which I’ll summarize and comment on:

* Multichannel News is biased toward the cable industry because the private-equity firm that owns the publication, Wicks Group, also owns a cable operator. Well, this is a new one. It’s true that Wicks owns NewBay Media, which publishes Multichannel News, and also owns Allegiance Communications, a 50,000-subscriber MSO based in Oklahoma. But we have as much to do with that cable company as NASA does with the Library of Congress… i.e., the only connection is they’re both are funded by the government. Anyway, I thought it was interesting that was the first thing Ronen leveled at me.

* Boxee sees no contradiction in promoting its products as an alternative to cable TV while also relying on cable TV. Yeah, really. According to Ronen, “We make it clear to Boxee Live TV customers if they don’t have good reception from their antenna they should call their local cable company and ask for basic cable (via Clear QAM). For consumers trying to get the most value, this can still save them hundreds of dollars per year.” So they mean to position it as an alternative to expanded-basic or premium cable. Not as snappy on a marketing website, I guess.

* A cable customer doesn’t actually need to be home for an MSO to connect/disconnect service. This is Ronen’s most credible point. The filters used to block access to unencrypted cable TV are outside the home (e.g. on poles). Cable companies do have to do a truck roll to perform connects and disconnects, “but the whole ‘waiting for the cable guy’ argument is false,” Ronen says.

This may be technically true — and in a perfect world, it would all work just fine. But in practice, cable companies have found that a service visit on the first truck roll to make sure everything is copacetic helps cut down on the likelihood they’ll need to do follow-up service visits. Even though the trapping takes place outside of the home, most installs still do require a service call to ensure that signal is working and the equipment is hooked up correctly, especially if service is being activated for the first time. And for those who subscribe only to broadband, a service call is necessary to ensure that the trap is not interfering with the Internet service.

* Cablevision, which partially converted its New York City system to encrypted basic in July 2011, didn’t disclose how many affected subscribers rented a regular set-top. In an FCC filing, Cablevision said less than 0.1% of approximately 400,000 subscribers affected by the change — about 400 — requested a free set-top or CableCard. Cablevision also said there was not a single complaint from customers. Ronen believes those figures are suspiciously low, and he wonders if Cablevision customer reps offered only boxes that carried a monthly fee: “If a customer called to complain their TV had stopped working and the support rep told them for $7 a month you can fix that problem and get a box that does VOD, DVR, etc. then it’s likely they’d rent a box rather than be notified they could be eligible for a free one.”

Remember, Boxee is trying to make the case that millions of people will have to pay more and/or be inconvenienced by the move to basic-cable encryption. Too bad the evidence doesn’t fit that narrative.

* Cable companies should be forced to maintain the status quo in offering clear QAM because they have a monopoly granted to them by the government and need to operate based on certain rules. “They can’t compare themselves to other video providers that compete in a free market,” Ronen argued. But getting free access to cable TV is not a God-given right, and just because the industry has been forced to support unencrypted basic doesn’t mean it makes sense in perpetuity.* And again: Boxee itself it trying to compete with cable! Why a cable operator should be forced to make costly concessions in how it does business — at the behest of a party that is actively encouraging cable customers to bail — is beyond me. Boxee has been free to go the CableCard route like TiVo, but it’s chosen not to.

Avner Ronen is a smart guy, and he has some valid criticisms of the cable industry. But it just doesn’t make sense to me that the FCC’s should prevent cable from implementing basic-tier encryption, which undoubtedly would save time and money for not just the MSOs but their customers.

If you’re an over-the-top set-top maker, and you want to complain that there should be a universal way to tap into pay-TV, then agitate for the FCC to get going on AllVid. That would have the excellent benefit of significantly expanding your addressable market by adding satellite and telco TV.

On a different topic, I asked Ronen about Boxee’s supposed deal to bring Hulu Plus to the Boxee platform. “We are working with them to bring it to the Boxee Box. Our users are anxiously awaiting,” he said. What’s the holdup? “Lots of moving parts and parties involved,” Ronen replied.

By the way, I’ve tried out Boxee’s PC software. It’s interesting, but I don’t find it useful for the way I watch Web video — I go straight to YouTube, Hulu, Netflix, CBS.com or wherever. I’m sure there are hard-core cord-cutter types who love it.

Unfortunately, though, Boxee has now phased out the PC and Mac versions, in the hopes people will buy the set-top box with its software.

Consumer choice, anyone?

* Side note: Indeed, the concept of free, ad-supported broadcast TV is in decline. Broadcasters are demanding billions in retrans fees from cable, satellite and telco operators for “free” television. Online, where “everything is free” in Boxee’s formulation, premium television content is largely behind pay walls. Hulu, a defensive move against piracy by NBC, ABC and Fox, is pushing its subscription service with a more comprehensive VOD offering. Netflix and Amazon.com are bulking up on TV shows for their pay-video services. And now Fox, for one, is moving toward TV Everywhere deals with pay-TV operators and delaying free online episodes by eight days.

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