An Ignoble Experiment

2. Verizon's Shammo sees Wi-Fi, LTE as complementary; FCC's Rosenworcel says Wi-Fi deserves spectrum

Suddenlink has become the nation's largest MSO to enable its TiVo-enabled set-top boxes to provide direct access to Netflix (NASDAQ: NFLX), making the OTT service provider yet another interactive channel application on its cable TV lineup.

There is no date for when the service will begin.

The nation's seventh largest MSO joins smaller players Atlantic Broadband, Grande Communications and RCN as operators opening up their TiVo boxes to Netflix. Overseas, Netflix has agreements with U.K. provider Virgin Media and Sweden's Com Hem.

Suddenlink is, according to the Netflix ISP Speed Index for March, the third best performing MSO when it comes to carrying Netflix content with an average download speed of 2.67 Mbps, following only Netflix favorite Cablevision (NYSE: CVC) Optimum (2.98 Mbps) and Cox Communications (2.84 Mbps). The index is based on data from 44 million Netflix members worldwide and reflects the average performance of all Netflix streams on each ISP's network. Com Hem took the top spot in Europe.

The presence of Netflix on cable lineups has led CNNMoney's Fortune to question whether Netflix should still be considered a cable killer. The story also clarified a growing public misconception that Netflix is becoming a linear channel on the lineup. It's not; it's a non-linear, on-demand option.

"The notion of Netflix becoming an official channel is possible, although there may be changing definitions of what a channel is," Greg Ireland, research manager for multiscreen video at IDC told Fortune. "Having a presence in the guide with seamless accessibility is more channel-like than having to switch to a different box and bring up an app. But the overall notion of channels may evolve as on-demand evolves and for some viewers and for some content, live linear is less meaningful than it once was."

The deals with cable operators who offer subscribers their own TiVo-enabled boxes just removes a step from the process of getting Netflix via a broadband connection, said Joris Evers, a Netflix spokesman.

"It makes it easier for people to watch Netflix as you can watch it from the same device you use to watch regular TV," he told Fortune.

The presence of Netflix on any cable-approved lineup, though, is enough to create second guesses about its reputation as a cable killer. While some providers like Comcast (NASDAQ: CMCSA) may still resist the lure of the OTT provider, others are content to make it another feature of their broadband pipes, said Jim Holanda, CEO of RCN owner Patriot Media.

"When you go to TiVo Central on RCN you can see what is coming up live, catch up on the current season on our demand service and now you have the option to view previous seasons of a show on Netflix. The simplicity and ease of use is huge for our viewers," he said.

For more:
- Home Media has this story
- see the Netflix speed index
- and CNNMoney's Fortune has this story

Read more about: Rcn, Suddenlink
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By Jim Barthold

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3. DirecTV: Time Warner Cable Dodgers deal 'far above any rational view of the market'

Verizon Communications (NYSE: VZ) CFO Fran Shammo doesn't have any problem with the increasingly available wealth of Wi-Fi even if it cuts into the use of Verizon's increasingly available--and sometimes costly--4G LTE. That is, as long as Wi-Fi continues to do what it does best: offer a fixed wireless solution for handling data offload.

"They're complementary products," Shammo said during a presentation and Q&A at Jefferies Global Technology, Media and Telecom Conference in Miami. "We always get into the argument of whether we like Wi-Fi or we like LTE. We always tell our customers that when they're in their homes they should be running on their Wi-Fi network."

That's especially easy to tell customers who are part of Verizon's limited FiOS family and have access to high-speed fiber-fed broadband home networks. It's not quite as easy to tell the remainder of the customers who link into cable home networks and the increasing number of cable Wi-Fi hotspots throughout the country and who might start to see cable Wi-Fi as a mobile wireless replacement.

Cable's emphasis on building and lighting Wi-Fi hotspots has led to some speculation that the MSOs are planning a nationwide Wi-Fi network where subscribers can seamlessly roam from one operator's franchise to the next. Industry executives have been coy about why they're building this huge wireless network, maintaining, like Shammo, that Wi-Fi is "complementary" to mobile wireless.

Still, hints have been dropped, such as comments Comcast (NASDAQ: CMCSA) Chairman-CEO Brian Roberts made during a first quarter earnings call with analysts.

"Short-term, (Wi-Fi is) a big adder to broadband and longer term, including our MVNO potential and other wireless assets we have in the company, we're in a position to think about where wireless is going and how we can participate in a way to build value," Roberts said in answer to an analyst's question.

Roberts later backed off and said any discussion of a nationwide wireless network built on Wi-Fi were "premature."

They're also technically infeasible, Shammo said.

"Wi-Fi technology can't replace wireless; it's not a mobile technology but it is complementary," the Verizon CFO insisted. "If you're in your home you're going to run off Wi-Fi and not LTE."

Wi-Fi's strength, he continued, is its ability to offload heavy data traffic from Verizon's 4G networks.

"You can't build enough capacity to handle that so you need that Wi-Fi offload," Shammo said. But, "if you look at Wi-Fi growth and LTE growth they're both going in the same direction; they're complementary. We don't believe Wi-Fi is a replacement for wireless; it can't hand off. It's complementary, not replacement."

The telecommunications industry is not alone in defining Wi-Fi and what it means to American consumers. In an address at a conference, Moving Wi-Fi Forward at The Newseum, FCC Commissioner Jessica Rosenworcel outlined that agency's strategy for unlicensed spectrum and Wi-Fi, noting that it's first necessary to discard "the tired notion that we face a choice between licensed and unlicensed spectrum" because that argument "is a simplistic relic from the past that we should have long since retired--because good spectrum policy requires both."

She also refuted that Wi-Fi's success takes spectrum from "others who wish to use the airwaves."

In particular, she said, it is necessary to recognize that some services demand access to 600 MHz band spectrum but technology is providing a way to more efficiently use the "white space" within that low band.

"Let's be creative," Rosenworcel urged, including considering expanded duplex gap, finding new locations for unlicensed microphones that operate in that spectrum and providing unlicensed opportunities in channel 37. "If we do this right, we can increase the value of licensed spectrum without diminishing the number of licenses we sell at auction."

The FCC is working on a "new game plan" for unlicensed spectrum that includes opportunities in high-band, mid-band, and low-band spectrum, she said, and unlicensed spectrum is "a powerful force in the economy. More unlicensed spectrum means more Wi-Fi."

For more:
- the FCC has this transcript

Read more about: Wi-Fi, Unlicensed Spectrum
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By Jim Barthold

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4. ACA seeks FCC support against Viacom blocking online content

Other pay service providers shouldn't have to pay the freight because Time Warner Cable (NYSE: TWC) paid more than reasonable market value for the rights to broadcast the Los Angeles Dodgers on its SportsNet LA channel, DirecTV (NASDAQ: DTV) CFO Patrick Doyle told analysts during a first quarter earnings call.

"Time Warner Cable did an unprecedented deal far above any rational view of the market for a premier baseball team and created another channel that only has content six months of the year," Doyle said.

The deal, valued at $8.35 billion over 25 years, has rattled an L.A. sports fan base accustomed to watching their team on TV. Now those fans must purchase a TWC subscription if they want to see the Dodgers because, Doyle said, the MSO is "looking to double what the average RSN (regional sports network) charges DirecTV customers per pro game" and the satellite provider isn't buying.

"We'd still like to carry the Dodgers. We're still having discussions with Time Warner Cable. And we recognize that we would have to step up and pay more for the Dodgers this year" because the team is a "premier franchise," Doyle continued.

On the other hand, there are limits.

"I do think this kind of pay-whatever-price and then dump it on every pay TV provider in the market to pay for the decision that was made by Time Warner Cable management is just … not right," he continued.

The Dodgers donnybrook is only the latest in a series of controversies surrounding sports rights. DirecTV has been involved in a few of its own with cable operators who object to the satellite provider's exclusive NFL package and Comcast (NASDAQ: CMCSA) has long been embroiled in a battle in Philadelphia with satellite providers who don't have access to the area's professional and college teams.

Regional sports networks and disputes over who has the rights to broadcast local sports franchises has even seeped into Comcast's bid to acquire Time Warner Cable, with some critics suggesting the sports situation could worsen if the two companies merge.

Whatever the case, sports is a bigger deal than it perhaps should be.

"We recognize sports is a valuable asset," Doyle continued. "I think what we're all just trying to say is … it seems to be the only industry I know of where in some ways the more competition the higher the price is. And in this case it's a tax on most customers who wouldn't pay it if they had a choice."

For more:
- see this earnings call transcript

By Jim Barthold

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