Tag Archives: video

Video will drive the U.S. mobile market in 2018

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Consumer electronics is collapsing into a two-product industry – smart phones and big screen televisions – and the balance is tipping towards phones. The end of network neutrality will accelerate the shift, as the big four U.S. mobile carriers use their control over network traffic and service pricing to sell more content and capture more viewing time.

The big beneficiary is AT&T. Its DirecTv Now over-the-top platform just passed the million subscriber mark. The Federal Communication Commission’s decision scrapping net neutrality rules allows AT&T to exempt DirecTv from data caps – zero rate it – while subjecting everything else you watch to monthly limits and hefty overage charges. Combined with its national footprint, the access to content its market share gives it puts it in the lead position among video companies trying to manage the transition away from traditional linear television service.

Verizon, T-Mobile and, to a lesser degree, Sprint also have in-house mobile video services, although none with the content buying power of DirecTv. Expect innovative, competitive tactics from them in 2018. But read the fine print carefully: discounts offered on video content could be balanced by higher and effectively hidden charges on other services, such as simple broadband access.

On the network side, all four major U.S. mobile carriers were in land rush mode in 2017, as they tried to lock down access to poles and other property that they need to densify their networks and meet the rapidly increasing demand for mobile bandwidth that’s primarily driven by video traffic.

In 2018, they’ll begin to deploy the first 5G systems, although those will just be for fixed wireless service. It’ll be at least three years before there is enough mobile infrastructure and consumer devices to make a real difference in the early, high revenue potential urban area that will be first on the list. For most Californians, reliable 5G mobile service is five to ten years away and some will never see it at all.

Big cable, telcos bleed TV subs, but monopoly broadband pricing could be the cure

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It’s been a bad year for the traditional television subscription business. An analysis by Daniel Frankel in Fierce Cable shows that it’s not quite as awful as stock analysts expected, but it’s close and awful enough…

As earnings season has approached in each quarter of 2017, analysts have predicted the watershed moment where linear pay TV losses surpass 1 million customers.

The market came close in the always-volatile second quarter, losing 976,000 subscribers…

The top 10 publicly traded operators, which account for about 95% of the market, reported losses of around 398,000 video customers in the third quarter. Discounting gains made by virtual MVPDs DirecTV Now and Sling TV, these operators lost around 820,000 traditional pay TV users.

Factoring in the pay TV business’ record-breaking first-quarter subscriber losses of 762,000, the industry has lost around 2.5 million linear customers through the first three quarters of 2017.

Among the big players, the big losers were DISH Networks and Altice USA. Both lost about 1% of their traditional linear video subscribers in the third quarter of 2017. Aside from Cox, which is privately held and doesn’t publish its key subscriber metrics, the rest hovered around a half-percent loss – AT&T/DirecTv and Verizon just below that mark; Comcast and Charter just above it.

On the other hand, AT&T/DirecTv and DISH saw big gains in their over-the-top video services. AT&T reported a gain of 296,000 DirecTv Now subscribers and DISH is estimated to have added 113,000 Sling TV subs, according to the Fierce Cable story.

Cord cutting is changing the video game, although it’s too soon to start talking about the death of the linear TV subscription business model. The seven biggest operators still have close to 90 million subs. Taking a weighted average of the five companies that report revenue per subscriber (Verizon and Cox don’t), they’re getting about $123 per month per customer. That’s a total of $11 billion every month.

The trend is bad, though. The 2.5 million TV subscribers lost this year represent about $300 million a month in revenue. There will be pressure to replace it, and the first place to look is on the broadband side of the ledger. That’ll be tough for DISH, since it’s still a pure satellite play, but the rest sell – and price – broadband on a monopoly/duopoly basis. As TV viewing shifts to Internet-based services, consumer tolerance for higher broadband subscription prices will increase.

You can bet AT&T, Verizon, Comcast, Charter, Cox and Altice will test that tolerance, right up to the breaking point.

Google Fiber gives up on video, and maybe fiber too

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Google Fiber is throwing in towel on video service. In a blog post, the company announced that it won’t be offering a cable-like lineup of television channels along with gigabit Internet service in Louisville and San Antonio…

We’re trying something new in our next two Fiber cities. When we begin serving customers in Louisville and San Antonio, we’ll focus on providing superfast Internet – and the endless content possibilities that creates – without the traditional TV add on.

If you’ve been reading the business news lately, you know that more and more people are moving away from traditional methods of viewing television content. Customers today want to control what, where, when, and how they get content. They want to do it their way, and we want to help them.

Two years ago, a top Google Fiber executive, Milo Medin, said “if you don’t offer a good TV service your ability to compete with incumbents that bundle Internet and TV together is significantly impaired”.

So, what changed? A couple of things.

It’s certainly true that the availability of unbundled video content available directly via the Internet has grown considerably in the past two years, and there’s no sign of it slowing down. Declaring linear video subscriptions to be a legacy business and letting cable and satellite companies wrestle over its (slowly) dwindling remains simplifies Google Fiber’s operations and business model, and eliminates a lot of headaches. That alone could be a good trade for the potential subscribers they might lose as a result.

But something else changed, too. In the past two years, Google Fiber has become, in effect, Google Fiber and Wireless. Technically, it’s easy to add a hundred or two TV channels to a fiber-based service, but impossible on a terrestrial wireless system that has orders of magnitude less total bandwidth available. Google’s announcement should also be treated as another indicator that in the future the company is going to be even more selective about where it builds fiber to the home infrastructure. If it even installs any more fiber at all.

Internet TV eclipsing satellite services, says Ergen

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When one of satellite television’s great visionaries says that over-the-top (OTT) Internet delivery is the future of video, it’s worth taking him at his word. Charlie Ergen is the chairman and CEO of DISH Network, and the founder of EchoStar, a pioneering satellite TV manufacturer and distributor during the big dish days of the 1980s. According to a story by Daniel Frankel in FierceCable, Ergen believes that traditional linear television, the kind that DISH, DirecTv and cable companies sell, needs an overhaul if it’s going to remain a viable product…

Speaking to investment analysts and reporters during Dish’s fourth-quarter earnings call…Ergen said Dish had been “dragged into” this brand positioning by competitors such as AT&T’s DirecTV Now and Sony PlayStation Vue.

“Obviously, the DirecTV Now product is a direct replacement for cable and satellite,” he said. “So is the Sony product. We’ve gotten dragged into that, and maybe that’s not my first preference”…

“The decline of linear TV will be driven by how programmers react,” Ergen said. “If programmers continue to raise prices, if they continue to put 16-18 minutes of advertising into a show, it’s going to continue to decline. … You’ve got to make linear TV look more like an OTT product.”

For the next few years though, cable companies will be more vulnerable than satellite broadcasters like Ergen. Although small dish satellite platforms were never intended to be a purely rural product, they have a large, natural constituency outside of the mostly urban and suburban areas where cable companies offer Internet service that’s usually quite capable of delivering OTT programming.

It’s different in rural areas, where Internet service is a patchwork of expensive and poorly performing fixed wireless systems and generally slow DSL from telcos. And where AT&T intends to rip out copper networks, limit its customers to its own brand of slow wireless Internet service, and force them to rely on DirecTv – which it owns – or Ergen’s DISH for television.

Consumer electronics is smart phones and dumb TVs, and the rest is bits

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The consumer electronics technology market is congealing into two products: smart phones and televisions. And even the television segment is showing weakness. That’s what the raw numbers say, although there’s more to it.

The first caveat is that sales figures are measured in U.S. dollars, and the dollar is getting stronger relative to currencies in key consumer electronics markets, particularly China. So products made and sold in China for yuan will be undervalued on a year over year basis if reckoned in U.S. dollars. So in absolute terms, the market isn’t as soft as it might first appear.

But comparing product category to product category is fair game. On that basis, smart phones are the only major segment that’s still showing growth on both a dollar and unit sales basis.

Steve_Koenig, the senior director for market research at the Consumer Technology Associations, which produces CES, [gave his annual analysis of the market yesterday](), focusing, as he does, on the Magnificent Seven – the top seven consumer electronics technology segments.

That is a sufficient number of segments to find the beginning of the long tail. Smart watches displaced dumb mobile phones for seventh place, with a forward looking sales estimate of $12 billion in 2017. Cameras are increasingly absorbed into smart phones. Desktop computers, laptops and tablets are slipping in both unit and dollar sales terms. All three categories are down individually and show an aggregate decline from 515 million units in 2014 to 380 million units projected for 2017.

That leaves smart phones and televisions. Smart phone unit volumes are up and expected to near 1.5 billion units sold in 2017, although the dollar value is expected to only nudge up slightly.

But TVs are softening, with 2016 and 2017 projections nearly the same and down significantly from their peak in 2014. A big part of the reason is that people are watching video on a variety of devices. In the U.S., barely half – 51% – of video viewing was on a traditional TV in 2016, according to CTA’s research, down from 62% in 2016. Smartphone and tablet viewing is up. Computer viewing is flat, although there’s a distinct shift from desktops to laptops. Smart phones are making the big dent in TVs share of eyeballs though, accounting for 21% of U.S. video viewing in 2016, versus 16% in 2012.

Big screen you can hang on your wall. Small screen you can put in your pocket. Everything else is apps and content.

Cable franchise audit finds underpayment, misuse of fees

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California cities and counties don’t have much to say about the service cable companies provide and the prices they charge for it. When the state took control of cable franchises with the 2006 Digital Infrastructure and Video Competition Act (DIVCA), local governments were largely pushed out of the regulatory picture.

But not completely. Cities can still collect a franchise fee of up to 5% of gross video revenue and another 1% to pay capital equipment costs for public access channels. They also have the ability to take cable companies to court if there’s a dispute over whether all service and financial obligations are being met.

The City of Palo Alto recently did a thorough audit of the franchise and public access channel fees it was collecting from Comcast and AT&T and found problems on both sides of the table. Palo Alto manages video fee collection on behalf of several other Peninsula communities, and contracts with the Midpeninsula Community Media Center to run the region’s public access channels. The video fee money it passed along wasn’t spent legally, however, according to the auditor’s report

The Media Center inappropriately used an annual average of $340,000 of public, education, and government (PEG) fees, or $1.4 million during the audit period, paid by cable television subscribers in the Cable Joint Powers areas, for operating expenses. Neither the City nor the Media Center enforced the federal law that restricts the use of PEG fees to capital expenses associated with PEG access facilities.

On the other hand, AT&T and Comcast were shortchanging the cities…

Comcast and AT&T did not always calculate the fees due in accordance with DIVCA and the municipal code of each of the Cable Joint Powers. As a result, Comcast underpaid about $141,000 in franchise and PEG fees from July 1, 2010, through June 30, 2014, and AT&T underpaid about $76,000 from July 1, 2011, through September 30, 2014.

The auditor’s recommendations can be generally summed up as pay more attention to what the companies, the Media Center and you, the city, are doing.

Not many California cities take as much interest as Palo Alto in exercising what little remaining video franchise authority remains, but the auditor’s report, which includes a lengthy rebuttal from the Media Center, is a good template to use if any want to up their game.

AT&T tries to stop video bleeding with DirecTv tourniquet

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AT&T is cutting off its Uverse video service, according to a story on Bloomberg.com. It’s no longer making Uverse set top boxes and new video customers will be hooked up to DirecTv’s satellite service. With video customers fleeing to cable, AT&T’s move comes not a moment too soon…

The shift to DirecTV was reflected in fourth-quarter results. U-verse subscribers fell 4 percent, the worst loss ever, as 240,000 customers canceled service, the company said. And while DirecTV gains of 214,000 customers almost offset the loss, U-verse defectors helped pump up cable TV growth. Comcast Corp. had its biggest user gain in eight years.

AT&T says that while it’s focusing on DirecTV, it isn’t shutting down U-verse.

“To realize the many benefits of our DirecTV acquisition, we are leading our video marketing approach with DirecTV,” said Brad Burns, an AT&T spokesman. “However, our first priority is to listen to our customers and meet their needs, and if we determine a customer will be better served with the U-verse product, we offer attractive and compelling options.”

Translation: we will do everything we can to hang on to existing Uverse video subscribers until we can move a sufficient number of them to DirecTv. Then we’ll shut down the Uverse video stream and reclaim the bandwidth.

I recommend reading the whole article. It concludes with the assessment that AT&T’s future lay with fiber – which it is very selectively deploying – and wireless. It’ll squeeze what it can out of existing copper networks by offloading as much traffic as possible to satellite and terrestrial wireless, but upgrades aren’t in the picture.

Internet video won’t flourish in a walled garden

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Source: Cisco VNI 2012-2017

By 2017 Internet protocol video traffic will triple worldwide, according to Cisco’s latest Visual Networking Index (VNI). It’s an annual estimate of how Internet and Internet protocol traffic will grow over the coming five years.

IP video traffic totalled 24,000 petabytes a month during 2012 and is projected to grow to 76,000 petabytes a month in 2017.

The share of Internet protocol video delivered inside a walled garden will gradually decline, although like everything else it will continue to increase in absolute terms. In 2012, Cisco estimates that video delivered to subscribers directly from their service providers accounts for 37% of IP video consumption. But by 2017, that figure will drop to 30%.

The study does not predict much of a shift towards over-the-top Internet video delivery to television sets, however. By Cisco’s reckoning, 6% of IP video went over the public Internet to television sets, a number that’s expected to climb to 9% in five years.

The biggest relative growth will come from people watching video on other types of devices – computers, tablets, phones and everything else except televisions – via the Internet. That type of usage is expected to grow from 57% of total IP video traffic in 2012 to 61% in 2017.

Cisco’s VNI is a mash up of data collected from various sources and projections developed by several research houses. To a certain extent, it’s a consensus view of where Internet/Internet protocol traffic patterns are headed.

I don’t think it’s getting the TV/non-TV split right, but it’s becoming largely a matter of semantics. It’ll matter less five years down the line as the innards of various kinds of devices start to look more and more alike.