Further Developments in the War on IPTV

A few weeks ago I noted that the networks shut down Boxee's efforts to deliver their content to viewers' TVs via Hulu's streaming web service. I speculated there as to why the networks would not want to play ball with Boxee. There is no question, on the other hand, why the cable companies are frightened of pure IPTV services, and it should come as no surprise that they are actively looking for ways to wall off content from them. Comcast and Time Warner are attempting to lock up cable TV content for online distribution (more details here). This content will be transmitted over the Internet in the same manner that a pure IPTV service would transmit it. The catch is that it will only be available to people who also subscribe to the cable companies' TV service.

Many cable TV programmers are likely to jump at this opportunity, as they've never been able to survive on a purely ad-supported basis and rely on cable carriage fees for about half their revenue. And, of course, even on that basis many cable channels could not survive if they were not tied together in cable tiers with other more popular channels (this is what much of the fight over a la carte cable revolves around). In fact, ESPN got out ahead of this game by trying (with considerable success) to strong arm ISPs into paying for its exclusive online content in a system analogous to a cable carriage agreement. What's next, regulatory battles over a la carte Internet? Oh, Kevin Martin, where have you gone?

On the other hand, for any really successful cable channels, my guess is they could do better by going it alone. This move will necessarily limit their online audience (as big as Comcast and Time Warner are, there are a lot of folks on the Internet who are not Comcast/Time Warner subscribers [though Harold Feld suggests that all MVPDs will be in on this game--anticompetitive conspiracy anyone?]). Moreover, they will be stuck in the position of subsidizing the crappy cable channels just as they have been through cable tiering all along. And if the good channels all flee, this may end up to be a pointless endeavor for the cable companies.

Obviously this move creates one more hurdle for IPTV providers to jump before going head-to-head with cable and telco video services. But it also creates potential net neutrality questions. This article suggests that Comcast will not treat this content any differently from other traffic for the purposes for traffic management or bandwidth caps. But if they or any other ISP were to in any respect preference this traffic, I'm calling it right now: instant FCC smack-down. This is exactly the sort of thing that net neutrality is intended to prevent.

In fact, I think the existence of monthly bandwidth caps at all will soon become highly suspect in the FCC's view. The Comcast Order hinted that monthly caps might be an acceptable network management technique. But anyone who routinely uses an Internet connection to view high def video will chew through these caps (I've seen estimates that HD video requires 4-12GB/hr (depending largely on the type of content), meaning a 250 Gb cap will last between 20-60 hours spread across all PCs and TVs in the household). In essence, monthly caps can be utilized to preference a non-IP-based video service over IP-based competitors.

ps. As you might note from my links here and in the previous post, I've been enjoying Silicon Valley Insider's Dan Frommer on this topic. He seems to be the go-to guy for this stuff.