By Jimmy Schaeffler
Some three weeks after NCTA’s Cable Show 2010 in L.A., I find myself (and my contributing colleagues from the Wall Street, software, consultant, and trade group sides of the U.S. pay TV industry), still thinking about several notable challenges, promises, and universal truths that immersed the convention’s 13,000 attendees.
Those key challenges involved net neutrality, new technology, oversaturated programmers, and lots of folks looking for work. On the promises side, NCTA risked maximizing the potential for future development and collaboration, by holding the event in Los Angeles, thus permitting a rare mixing and matching of the Silicon Valley and Hollywood creative communities, together with cable’s core. Indeed, it worked.
Senior vice president of Starz and multi-decade cable TV veteran David Charmatz summed up the NCTA event from a policy perspective, noting an underlying focus on the reclassification of government control over the Internet, via either Title 1.5 or Title 2. This is the issue that arose from the recent appellate court decision questioning the FCC’s authority to regulate the Internet. Nonetheless, because of the late timing of that decision (relative to convention planning), it was not surprising that there were few sessions that dealt with the all-important reclassification. Therefore, this and other related topics — e.g., “net neutrality” — were more likely to be addressed in the hallways. Instead, Charmatz noted that the show focused on iPAD apps, cross-platform search, a few new programmers, and some of the usual show “attractions and distractions” e.g., awards, events, networking.
Charmatz highlighted several elements behind the issue’s importance, i.e., 1) its impact on a series of past rulings (that courts will now have to reconsider and resolve); 2) how its determination affects net neutrality — as but one measure of how it impacts future competition using the Internet; 3) how its resolution creates new opportunities for the telcos; and 4) in a similar manner for the satellite operators (e.g., Dish Network and DirecTV), how its determination affects their abilities to offer additional competitive products — such as branded voice and high-speed Internet data services — on leased third-party infrastructures (which consumers will know only as those coming from either of the top two DBS providers).
Charmatz’ prediction for Cable Show 2011 in Chicago: Much of the talk will be about random access networks, and location-based media.
Another long-term TV industry analyst and interpreter, Gary Arlen, the president of Arlen Communications Inc., agreed with the focus on net neutrality, yet also gave equal emphasis to the pending transition from switched-video to IP-based transmission services. This will happen because the cable industry wishes to protect its existing investment in switched-video, and because IP services offer better bandwidth utilization, which will be especially important for the delivery of ultra-high-speed data services and bandwidth intensive video, including HDTV and 3DTV.
On another front, Arlen noted the emergence of the “post-affiliate era,” highlighted at NCTA by the dearth of new programming opportunities. Indeed, even in a 5,000-channel universe, saturation can occur.
Arlen’s forecast for Cable Show 2011: Those attending the convention in the Second City will pay even greater (and more serious) attention to cord-cutting and alternative means of distribution, including wireless broadband access to premium content. Arlen further predicts that there will be even greater expectations for Canoe Ventures to deliver the targeted, cross platform advertising services it has promised.
Both the NCTA vice president Rob Stoddard and American Cable Assn.’s chief Matt Polka, highlighted the obvious advantages emanating from a positive dialogue with the federal government. At the show, not only were there a good number of FCC staffers walking the exhibit floor and attending various sessions, but, more importantly agency chairman Julius Genachowski, was front and center in a single one-on-one general session with the NCTA’s CEO. He was also seen walking the exhibit floor (and with the crowd), in several instances.
Noted a gratified Stoddard, “We felt positive about being able to engage with the chairman in a constructive fashion at this event. It’s our goal every year at The Cable Show to help policy makers better understand our industry.”
Added Polka: “I did a lot to answer questions about Title 2 implementation and the concern of many in the industry that the FCC would be too heavy-handed, which still is a possibility. I think it’s smart for the industry to take a wait-and-see approach, and I also think the [FCC] chairman said some good things (e.g., no rate regulation of the Internet and liberal forbearance), but the concerns we have about Title 2 implementation are real. And only time will tell what posture we need to take in response.”
Both Stoddard and Polka saw new technologies that caught their eyes. Polka focused, like many, on 3DTV, and its many displays on the show floor. For his part, Stoddard touted the cable industry’s “My World” exhibit, which was focused on broadband capabilities in numerous daily venues, both in the home and out, and emerging applications, as well as current services. Carrying the theme “a fully connected world,” Stoddard noted, “… the pavilion was one of the greater traffic generators, and it provided a fair amount of ‘buzz’ among Show attendees.”
Looking forward to next year’s show at McCormick Place, Stoddard foresees: “We hope to build on the momentum of tight, focused, and exciting trade shows, that provide real cable immersion to anyone who walks through the door.”
ACA’s Polka believes next year’s show will have more focus on the implementation of Title 2, and the National Broadband Plan, including Universal Service Fund (USF) reform to pay for continued broadband stimulus and deployment.
Wall Street Stance
As was the case with his show peers mentioned above, Credit Suisse’s Stefan Anninger and Spencer Wang noted cable MSOs’ worries about reclassification of broadband as a Title 2 service, and how Genachowski’s “third way” approach to regulating broadband stands on tenuous legal footing.
Further, MSO discussions revealed to the Credit Suisse analysts that video sub churn is in check; pay-per-view and premium businesses continue to stabilize; high speed data continues to show strength, tied to its speed and reliability; and a weak housing market remains a long-term concern.
Other issues observed were those of 1) retransmission consent, and hopes the FCC will intervene; 2) IP video and its uptake, and its use on devices beyond the TV (e.g., smart phones, iPads, laptops, eReaders) and throughout the customer premises; and 3) cable’s need to improve the user interface of its video product (e.g., program guide).
The Credit Suisse officiala believe the key concerns and topics at the 2011 Cable Show show will be:
1) Over the top (Internet video bypass); and 2) moving video around the home and onto wireless devices.
As for my view on what the Cable Show will bring to Chicago from June 14-16, 2011: a true focus on a complete rewrite of the Federal Telecommunications Act.
Jimmy Schaeffler is chairman and CSO of The Carmel Group, a Carmel-by-the-Sea, Calif.-based consultancy, event organizer, author, attorney, and publisher.