When the optical networking industry started going a little wobbly about a year ago, it was far from clear whether there was a fundamental reason for it. Things had gotten out of control in the previous year, but it looked as though the pendulum was now swinging too far in the opposite direction.
The pendulum, as we now know, kept on swinging – raising the need for some solid facts about what was really going on in the service provider market. So, to cut a long story short, Light Reading joined forces with tele.com magazine (now, alas, defunct) and commissioned a telephone survey of 300 selected carriers to get first-hand knowledge of what was happening.
The questionnaire examined the whole food chain – starting by looking at which services were likely to drive demand for high bandwidth networks and then going on to look at how this would influence investment in optical infrastructure in general. Then it mined down into specific equipment categories to get information on which types of product had the brightest prospects.
The results of the survey were presented in a Light Reading Webinar in October. In this hour-long online presentation, archived on our site, representatives from two service providers – EPIK Communications Inc. and Onvoy – commented on the results.
This report covers the same ground but aims to provide a quicker way of accessing the results. The hyperlinked summary below makes it possible to hop directly to whatever aspect of the survey most interests you:
As an advertiser, why would I pay lots of money to place a commercial during primetime, if I know that a majority of the viewers will watch the show at a later date and time, and, worse, not even record my commercial, much less view it? ____________________
This is an interesting question, particularly since most advertisers desire to create a customer relationship.
The technology to support individual ad insertion has been available, the rights to modify the content streams are not.
The smart ads will hit their targets, though this doesn't get rid of the need for the large demographic based blasts.
PS. If Princeton Video Imaging were able to get there technology integrated into the TIVO, then consumers could really be influenced to buy that domino's pizza ;-)
I should have phrased it differently- TiVo and ReplayTV are singlehandedly destroying the business models of free (i.e. advertiser supported) television- NBC, CBS, ABC, Fox, etc.
Today, a person can watch a TV show whenever they want, not have any commercials to sit through, and not pay a cent for that content. Granted, the number of TiVo and ReplayTV subscribers are still relatively small, but the growth is steady and robust, and will continue like that for some time.
I think it's safe to say that the business model of the major networks will be kaput- it's a question of when, not if (note: the business model will be kaput, not necessarily the networks themselves). As an advertiser, why would I pay lots of money to place a commercial during primetime, if I know that a majority of the viewers will watch the show at a later date and time, and, worse, not even record my commercial, much less view it?
Long term, I think everything goes to being subscriber-based, but that's a little unsettling for everybody- consumer, content owner, distributor. I have to admit I'm really fascinated by this whole issue...
I'm not sure cable providers and content producers (NBC, HBO, etc.) are ready for a knock down drag out fight over TiVo.
To give something to the consumer and then take it away is incredibly risky, because you severely damage your relationship with the consumer. Also, when you consider that from a technical standpoint these boxes are just souped up VCRs, the reasoning behind restricting them become hazy at best.
We're not operating in a vacuum here- just because a decision makes sense to the content owner doesn't mean the consumer will accept it. As a result, I think you'll see more waffling by the content owners and the cable companies on how to deal with the TiVos of the world. Politically, it's just too risky to charge forward and kill them, a la the record companies with Napster.
On the other hand, these boxes are singlehandedly destroying the business model of television. This can't keep up, so the cable and content guys have to do SOMETHING. It will be interesting to see how this pans out...
To continue with my previous point, though, whoever provides the VoD (telco, cableco, TiVo) will provide it on the floor of the consumer's home. In my opinion, smart settops are much cheaper, easier, and more scalable than a network VoD solution. Even head end VoD servers won't be as effective as the settop box.
My point about Tivo and its ilk is that by providing a lot of valuable services in the premise equipment, VoD as a network service has been made largely irrelevant. Why put on the network what can already be done with a cheap box on the floor? ________________________
A head end VoD server will be cheap enough for the cable operator when amortized across their customer base, it provides the content owner the ability to police the distribution of their properties, and the set-top is a strategic component that a cable network owner needs to control, therefore they'll fight to make sure any competitive products don't work with their content nor their program guides.
An open access set-top seems as important as open access to the pipes, though the FCC won't force either to be open due to the cable cos large debt obligations. And even if open, consumers won't buy their own set-tops because network owners will give them away for free with content packages. (And consumers rarely understand that free is merely the bait to the hook.)
Agreed that the rollout will take time. Maybe it will give telcos time to get into the ballgame and we'll see some competition. Though telcos have been slow with their abiltiy to compete in a pseudo deregulated market, and it may be in their shareholders best interest that they fight to keep their business customers.
For now, the first competitive race may be in whose long haul networks will feed the headends and the COs. (Hence all the overbuilders in LA) The winnner may always struggle to make money because the content owners will hold the better cards over the bw holders.
In the meantime Microsoft and Intel will be the "flourescent bulb" distraction in their feeble attempts to turn PCs, interconnected via straws, into a media distribution network. This will likley fail and Paul Allen didn't buy enough cable cos nor was he able to take control of AOL many years ago, so they seem out of the game for now.
My point about Tivo and its ilk is that by providing a lot of valuable services in the premise equipment, VoD as a network service has been made largely irrelevant. Why put on the network what can already be done with a cheap box on the floor?
fiber_r_us thinks that VoD will only cost the subscriber 2-3$ extra per month. Wrong- installing a VoD system is so expensive that it would probably be a pay as you go system, costing $3-5 per movie/TV episode downloaded. Who's willing to pay that much?
I suppose VoD might become interesting if consumers get comfortable with data warehousing (enabling a Tivo-like service over the internet), but that won't happen for another 3-4 years, at the earliest.
The math is simply very wrong. I'm sorry, but I think this is as stupid as it gets.
If you can sell line cards for an OOO switch for $3.84M and make a profit, then you can also sell the same damn line cards for $38.4M and make an even bigger profit!
This is how I see it: If I can sell a used Hyundai (i.e., an OOO line card... sorry Corvis!) for $60K (and make a hell of a margin), then why the heck should I sell BMWs (OEO line cards)?! DUH!
The problem is that even though the carriers ask about OOO in RFPs/RFIs, I don't think they see a need for them today and/or they don't believe the OOO vendors have dependable technology. Thats why Tellium and others are not hell bent on the OOO technology. And thats why Corvis has joined the OEO/grooming bandwagon.
TIVOs strategy was to be a monthly service. The box was subsidized by investors. Take away the subsidy as the Replay 4000 has done and the price goes to $2K. Consumer's did't adopt at $299 they won't adopt at $2K. On top of the direct investor subsidy these technology plays are also using the network's content as an indirect subsidy which irritates them, hence the lawsuits.
Consumers NEEDS are few. Making WANTS convenient seems to be the play here. My bets are that it will work once it becomes part of the remote control and on-screen menu, which leaves the telcos out of the picture.
TiVo, ReplayTV, etc... are only as good as the programming that is destined to be aired in the future and only if you are willing to wait for that content to eventually show up. VoD's market also includes access to the huge archives of things that have already been aired. How much would you be willing to pay for all of the episodes of:
1) Star Trek (original, NG, Voyager, DS9, movies, etc) 2) All of the James Bond movies 3) All of the episodes of "Days of our Lives", or "As the world Turns" 4) All of the educational material dealing with Planetary exploration to help your kids in understanding the universe. 5) Maybee you want a specific episode of Saturday Night Live (like a specific Coneheads show).
I'm sure most people are willing to pay a dollar or so for something they really want if they could get it WHEN they want for a reasonable cost.
VoD also encompases ideas like distance learning. Wouldn't it be worth a few bucks to audit a course from a University that you were really interested in? If Einstien's lectures had be videotaped, would you pay a few bucks to see them?
The real value of VoD has to do with the potential richness of content that could be made available. Comparing VoD to the crap that streams from the couple of hundred inane channels that satellite or cable TV offers us today is comparing apples and oranges. A real VoD system's content would be as rich in video as the Web is today for "static" content.
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