Video services

DirecTV's Can of Worms

6:25 PM -- The new deal between DirecTV Group Inc. (NYSE: DTV) and the NFL for the NFL Sunday Ticket package highlights some interesting implications for network neutrality. Starting in 2012, the new deal allows DirecTV to market a broadband version of the package to non-DirecTV customers who can't access their satellite signal for whatever reason. (As a side note: How in the world will that be enforced?) Conceivably, broadband customers can then purchase the package and have it delivered via the Internet, rather than satellite.

So here's the rub, if I'm a telco TV (or cable) provider who competes with DirecTV, why should I be forced to carry their revenue-generating programming package via broadband? A commenter on my Telecompetitor blog compared this to CBS offering NBC programming on CBS for free, with the caveat "It'll never happen." OK, not an apples-to-apples comparison, but you get the point.

In the current multichannel video world, service providers insert their own margins for premium programming like HBO or even existing sports packages like NBA League Pass. But early indications suggest that's not translating to the online world. Should competitors be forced to offer access to each other's online premium services, without the ability to generate their own margins?

As more and more premium programming becomes available online, this net neutrality issue gets bigger. I'm not here to defend one position or the other. In fact I could argue both sides. The issue of restricting equal access to content for consumers who pay for broadband connectivity is a slippery slope -- one that has to be watched closely. But reasonable minds can surely see the conflict in this DirecTV situation.

— Bernie Arnason, Managing Partner, Pivot Group , and Chairman, TelcoTV 2009

Duh! 12/5/2012 | 4:08:17 PM
re: DirecTV's Can of Worms

Let me see if I got the premise right:

Let's say-áthat Joe the whatever is-áa cable or Telco-áTV subscriber.-á Joe has nothing better to do with his life than watch the NFL in every waking minute.-á So Joe's choice (now) is to either subscribe to DirectTV and presumably drop cable (telco), or (horrors!) live without the NFL Sunday Ticket.-á Either-ácable (telco) -áloses or DirectTV loses.-á

So DirectTV goes ahead and repackages Sunday Ticket for delivery over the Internet.-á Now Joe can get his Sunday Ticket over cable,-áor FTTx.-á Joe's dilemma is solved!-á Hurray!-á-á Now he can get the rest of his channel lineup from cableco (telco), plus his phone and Internet, at bundle prices!-á

-áCableCo or Telco... they've retained their customer!-á Hurray!

-áDirectTV... seems like a silly strategic move, but maybe they've figured that they can price the Internet-based Sunday Ticket so it makes up for losing subscribers.-á So, rah!

-áNet neutrality... well, I'm sceptical that glorious HD is going to work over the Best Effort Internet.-á So if that's true,-áthere's going to have to be some kind of-áassured service, with-áSLAs and resource reservations to back them up, for which somebody is going to have to pay something.-á-áOr -ámaybe there's a sucky version of Sunday Ticket over Best Effort, and a nice version with an added charge.-á-á So cable/telco gets a little chunk of profit on top of covering the cost of the resource.-á At least enough to match the marginal value of the service, otherwise frivolous/unncessary use leads to tragedy of the commons and -áthe network is going to get seriously congested and the assurances in the assured-áservice aren't going to work.-á But in any event, as long as the assured-áservice is available at non-discriminatory pricing to all comers, then Hurray!

-áEverybody wins!-á Hurray!

-á(So what was the problem again?)

pivotmedia 12/5/2012 | 4:08:16 PM
re: DirecTV's Can of Worms Like the rant. I agree - premium broadband tier which assures better video quality is probably the best way for broadband carriers to build incremental margin. At least as the rules stand today. Interesting though - lines are blurring between Internet/broadband and traditional multichannel video delivery, yet they're treated so differently. Aren't they both delivering bits (assuming digital cable or IPTV) - even over the same physical infrastructure, yet very different rules. How long can that hold up?
t.bogataj 12/5/2012 | 4:08:15 PM
re: DirecTV's Can of Worms

Maybe it's time for the US to follow the path of the EU.

What is missing is a clear cut between network providers (providing broadband access) and service providers (delivering video etc.) - a cut introduced with Open Access. On the horizon in the EU.

"If I'm a telco TV provider
who competes with DirecTV, why should I be forced to carry their
revenue-generating programming package via broadband?

Your problem is not as stated. Your problem is that you are one big happy operator providing both the access and the services. You should really be cut in half. You first half would provide broadband access to customers (lease network capacity to service providers). Your second half would act as a service provider, competing with others.

The real problem is that no one is forcing the cut.

Why Open Access? For the benefit of customers who gain fair access to services. For the benefit of service providers who gain equal terms. For the benefit of alternative network providers who can gain their share. Everybody wins.

Open your eyes, will you? To the bright ideas beyond your horizon.



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