Cable Tech

Can Cable Do Products?

Set against the torrent of cybernews that hurtles across the glass every day, it seemed like just another so-what headline: ďComcast Discontinuing Secure Backup Service.Ē

The October 7 story was that the largest US cable company had sent customers an e-mail message telling them it would halt a cloud-style personal data storage service as of December 1. Some customers who had paid to subscribe would get refunds.

Behind the announcement lurk bigger questions: In a digital applications world, can cable companies do products? Or should they even try?

Consumers havenít exactly embraced cable company offerings. Whenís the last time you (or anyone you know) chose a cable-branded digital application over a like-minded alternative from Apple Inc. (Nasdaq: AAPL), Google (Nasdaq: GOOG), Microsoft Corp. (Nasdaq: MSFT), Facebook or, in this case, a cloud storage specialist like Dropbox? Thought so.

That hasnít kept cable companies from trying. In particular, Comcast Corp. (Nasdaq: CMCSA, CMCSK), has led the charge with products that have included a branded photo-sharing service (Comcast Photo Center), mobile text-messaging services (COMCAST4U in 2010 and Voice2Go in 2012) and an online video-subscription service (Streampix). None have achieved (at least yet) the level of brand recognition associated with trip-off-the-tongue platforms like Yahoo Inc. (Nasdaq: YHOO)ís Flickr, Netflix Inc. (Nasdaq: NFLX), or Google Voice.

Higher-profile efforts have fizzled, too. At the Cable Show 2011, in Chicago, Comcast Chairman & CEO Brian Roberts enthused about a new partnership with Microsoft to bring a high-definition, living-room version of Skype to Xfinity customers. It was shuttered in June of this year.

Itís not for lack of investment and creativity that cable has yet to press its way meaningfully into the application environment. I thought the Skype on Xfinity product was especially impressive. Comcastís product development team had thought hard about the limitations and failings of Skype Ltd. as most of the world knew it: an often-cumbersome personal video-conferencing platform that was prone to stuttering and dropouts.

Comcastís solution was a high-definition conferencing system that liberated users from the need to huddle around small laptop screens and shout into microphones. The Comcast product came neatly packaged in a stylish box, featured special light-sensitive cameras to account for low-light conditions in living rooms, and ran over a managed IP network that ran circles around the best-effort performance that frequently hobbled Skype sessions. It failed anyway.

What happened? I can think of three impediments that have hobbled cableís efforts to play in the applications space:

  • Competitors never stop innovating. A year before Comcast rolled out Skype on Xfinity, Apple introduced FaceTime, a gee-whiz feature for its new iPhone 4. It was a handy way to conduct live video calls with fellow iPhone users by pressing a button. No equipment to install, no cameras to rig up, and it worked beautifully within an existing user ecosystem. If you had a new iPhone, you were in without having to do anything except use the feature. While itís true that cable companies have made big investments in product and software development teams by hiring brilliant developers and giving them creative leeway to invent, these units are adjuncts to a much bigger and more complex business structure. For companies like Google and Apple, software and product design is everything. Itís what they do.

  • Itís hard to compete with free. Cable companies have a habit of wanting to synchronize new products with revenue streams, typically in the form of familiar monthly payments that jibe with existing billing practices. Comcast charged $9.95 per month for the premium version of its Skype service, competing with a well-established product that was free for most users. Thatís the thing. Digital media and application companies like Apple and Google have a habit of offering new features as value-adding free applications. Itís hard to compete with the combination of really good and really free.

  • Brand and reputation matter. In September, Apple supplanted Coca-Cola as the worldís top brand, according to Interbrandís annual Best Global Brands list. Google, Microsoft, Cisco Systems Inc. (Nasdaq: CSCO), Intel Corp. (Nasdaq: INTC), and HP Inc. (NYSE: HPQ) also make the top 15. In contrast, cable, satellite TV, and telecom-video companies routinely score poorly in customer satisfaction rankings published by researchers, including scorings from J.D. Power and Associates and the American Customer Satisfaction Index. A perceived absence of competition and years of customer distrust hurt cable and other video providers in a product realm where revered brands dominate.

  • Footprint limitations prevail. Despite significant geographic consolidation, wireline video and broadband companies still face footprint limitations that can prevent borderless marketing, and also may discourage customers from tying personal media choices to a land-locked provider. Digital media companies, whose products ride over any available network, donít face similar restrictions.

Why should cable bother with inventing new products?

I think the strategic impetus is irresistible to forward-thinking cable companies, and thus will remain. It revolves around a changing world where myriad providers and applications vie for share-of-mind and share-of-wallet with consumers.

The broadband networks that now prevail globally, coupled with a proliferation of digital end-user devices, allow for a near-infinite number of contenders to emerge with ideas and applications that appeal to consumers. But this very proliferation destroys, or at least challenges, the notion of differentiation that underlies scale. A key in this new world revolves around a customer relationship that is difficult to dislodge. (A less humanistic term is a ďbilling relationship.Ē) This is a differentiator that video and broadband providers possess. The ability to have conversations with customers, even if they happen to relate to service issues and problems, is a net plus in a world where thousands of voices seek to be heard. So too -- and this is commonly overlooked -- is the fact that broadband and television providers know things about their customers that others donít, such as where they live, what their subscription tendencies are, and what their transactional histories look like.

Finally, ownership and operation of network facilities provides, or ought to provide, a marketplace advantage that others lack. There are certain applications or product sets closely tied to network ownership and operation that should play to cableís strength. In particular, the ability to manage and prioritize certain types of network traffic -- sorry, neutrality police -- should offer ways for cable companies to simplify and optimize user experiences in a way that provokes interest and product loyalty.

Example: I recently played beat the clock at Boston's Logan International Airport trying to download an episode of Breaking Bad to my iPhone over a traffic-clogged WiFi network before the airplane boarded (I lost). A one-button, turbo-charged media download feature ought to be one area where cable and broadband network operators can rule.

Itís impossible for cable business-development strategists to look at these assets and attributes and not conclude that they ought to be able to play a bigger role in technology-rooted products and applications. Itís figuring out which ones make sense thatís the trick. Remote backup and storage may not be the killer app for Comcast or any other cable company. A living-room variant of Skype may not be, either. But something else probably is.

— Stewart Schley, Principal, Stewart Schley Content

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brookseven 11/19/2013 | 11:50:58 AM
Re: can cable to products Stewart,


That was me.  My comment is that you can't say "Cable is bad at products"  when what you mean is "Cable is bad at the kind of products that I am talking about".  Lots of companies are bad at the kind of products that you are talking about and in many cases including many of the ones that you think are good at them.

Pure app developers have few hits and many misses.  The cost to develop apps is low in comparison to many other kinds of products, so many are churned out.  The statistics of usage by folks show that.

As I posted earlier and in many other threads, I see no advantage for carriers of many kinds in app development (or cloud products) outside of the enhancement of their other businesses.  If you are focused on Apps, then I would argue that they should go the "Monkeys typing" approach and try lots of things.  The absolute cost is trivial for them and 1 hit will make it worth it.


No - I like the jealousy analogy used in another post in the thread...."Dang that Apple making all that money on our network."  What they don't think about is the business model around product development and the risks involved.  In general, a complete lack of clarity of what their competitive advantages are.


stewartschley 11/19/2013 | 11:31:28 AM
Re: can cable to products Alan, arrogance isn't the trait I would ascribe here at all. Maybe jealousy? Seriously, I think the question is whether broadband network operators at large have a significant role to play in developing and nurturing applications that make use of their delivery infrastructure -- or whether the better strategy is to partner with those who make a living doing such things.

To the point earlier (I'm forgetting the respondent, sorry), the "Triple Play" or even Comcast's very well-conceived Xfinity App aren't in the category of what I'm describing here. These are, broadly speaking, extensions of the fundamental content delivery and connectivity services cable providers have traditionally brought to market. I'm more interested in whether cable/broadband providers have the chops to bring non-aligned applications to the market, such as (again) personal data storage, photo-sharing, social messaging, etc. I submit it is going to be difficult for cable/broadband providers to play a meaningful role here. As evidence, ask your daughter/niece/nephew/son-in-law/generic young person to show you the list of apps he/she has loaded onto a tablet or smartphone or uses regularly on a laptop. If you find one that's created/branded by a broadband provider, I'll be (pleasantly) surprised.
22ten 11/19/2013 | 4:35:44 AM
can cable to products Nice analysis, but surely the issue is one of geography. App developers are aiming at a world market whereas cable operators are only looking to their geographical boundary and network technology simply because they can only control their own environment.

This is major problem because consumers want to take their app's with them as they travel regardless of who is providing the backhaul.

Of course, the other issue is as bandwidth and capacity increases the "free" applications take advantage and perform better whereas an in-house application stays static and ultimately the delta between the two diminishes.

It would seem more advantageous for cable operators to partner with app developers and provide them with better service than try to develop their own.



albreznick 11/18/2013 | 9:16:36 PM
Re: Great analysis I tend to agree. Which network operators would you consider exceptions to the general rule, if any?
brookseven 11/17/2013 | 10:54:46 PM
Re: Great analysis Al,

My view is that most network operators are significantly worse at products than others as they (in general) don't get the business model.  But I would say that internal focus is a problem for many companies (like why compete with a free service like Dropbox).


albreznick 11/17/2013 | 6:08:34 PM
Re: Great analysis OK, BrookSeven. Good points. So do you think that cable cos are no better or worse than other high-tech players at creating new producrts and apps? Should we let them off the hook then?
albreznick 11/17/2013 | 6:06:00 PM
Re: Great analysis Interesting analysys. So do you think the cable companies are just too arrogant to be truly innovative because they're the video and broadband incumbents in the US? Would you agree wiuthg that, Stewart? 
MordyK 11/17/2013 | 1:40:46 PM
Re: Great analysis The issue you raise of competing with your ecosystem is a serious one, and while it is a relatively rare occurence when it happens it can really harm a company. When Twitter shut out all the apps that got them the initial popularity it neary killed them and there was a significant reducing of new API uses for a while.

I would argue though that the Postini and iGoogle use cases are not good examples. Positini was acquired by Google and eas embedded in the Google Apps suite to fill the hole required to attract the enterprises, and iGoogle was a product that was simply no longer a thriving ecosystem due to its level of usage and so they simply pulled the plug. No product has an unlimited lifetime, so either it adapts and changes or it expires. That said the Google Reader would have been a better example, but in that case strategy affected the product, and if you weren't dependent on Google for somemany other things it would have effected their customer count. 

The Xfinity example is a perfect example where the incumbent decided to leverage their strength and create an experience of value, which nobody but an MSO could have done. The moat of proprietary access to a certain functionality means that you have a defensive position around products that depend on that functionality.

That said the ROI vs. the "If you build it they will come" model is an important factor, which is why I wrote the words "In addition" which was to say that I was simply adding to the columns existing points.
brookseven 11/17/2013 | 1:12:52 PM
Re: Great analysis First off, I think you are trying to make a mountain out of a molehill.  Google for example, just turned off iGoogle and you can no longer buy the Postini spam filter as a separate product.  How many times has Apple made a run at Apple TV and at at Pandora like solution.

It turns out that not all products work.  I think that is the challenge for carriers of all kinds.  The network model essentially is a guaranteed ROI.  The question on network investments is WHEN will the investment produce a positive return.  The product model is a potentially higher profit but higher risk model.  The question for products (and I am using the product term here to cover services like Dropbox) is IF there will be an ROI.  This is a very different investment model.

Let me look at some recent cable products from my cable company (Comcast) that I think have done well.  The Xfinity App, Xfinity WiFi and the Triple play bundle seem to be executing well.

So, like ALL products nothing is going to be 100%.  Some companies will be better than others at it.  You can't stop moving forward, but you can do a better job of thinking through the investment.  For example, online storage is available from so many folks it is unclear to me why I would buy it from my cable company.  I wonder what the original reasoning was.


MordyK 11/17/2013 | 3:16:16 AM
Re: Great analysis There are a few additional reasons why they fail at products, and this is not just cable co's but most incumbent companies.

1. If you develop a product to fill a need that's currently unfilled AND your companies particular position is the one to empower it you stand a chance of succeeding, but most products are me too clone's of other largely successful products and the incumbents get starry eyed and just see the gold and then simply copy. The problem is that copying is not innovating and in a fast paced market the limber startup/tech company will always be way ahead of you.

2. The arrogance displayed by incumbents makes them extremely difficult to work with, but in today's world the success of a product depends on creating an ecosystem around the product. Unless you open easy touse API's and be super welcoming, your application willbe ignored by the ecosystem which will basically consign it to the product dustbin, effectively letting it die a slow death.
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