BusinessWeek Online has an interesting take on Apple making a serious run for the living room, dip, chips and all. Given that Sony and Microsoft have missed launch dates for introducing updated versions of their own gaming consoles, the PS3 and the X-box Live, other vendors may be able to exploit these delays and grab market share; waiting in the wings are Nintendo, with its wii (pronounced “wee”) and Apple.

If you don’t happen to be a gamer, that’s fine too, because all of fuss about gaming consoles isn’t about really all about gaming anyway; BusinessWeek Online explores whether Apple’s iTV is a stalking horse for something else. While Hollywood struggles to come to grips with the fact that booming sales of big video screens over the past couple years (a trend expected to continue into this fall) just might have some connection to declining box office attendance (it couldn’t possibly be related to their fare, which has at least two meanings), and while telcos race to catch up with cable and satellite platforms to deliver content, there happens to be a weak link in the broadband video chain to your home.

In fact, that weak link is likely to be located within your home. I’m not talking about new signs of erosion in the housing market, but about how rich video content makes its way from the first stop in your home to that big video screen, and who or what will make this transfer happen. For some time I’ve been less-than-excited about this prospect, actually, given that the current, non-broadband-enabled linkage, with its attendant multiple remotes and birds’ nest of wiring, is less than crystal clear, but the thought of trying to change the channel only to see that same little hour-glass on my TV that I (constantly) see on my computer is enough to drive me up the wall, and any wall will do.

Verizon may have concluded the same thing – news reports from a week or so ago stated that Verizon is doing more of its own software development, in house, on its fiber-to-the-home FiOS service, rather than relying so heavily upon outside vendors. Now, one thing to consider – when weighing the impact of multiple software vendors operating on the same hardware platform, or just for fun, over multiple hardware platforms in-line – is that products by multiple vendors don’t always get along. This is one version of gaming: clicking your mouse to activate several programs simultaneously, and letting them struggle for dominance of your laptop screen, test your patience, and scramble for the top of your multi-tasking to-do list.

These various hardware and software vendors all have their own, highly branded visions of what the future looks like, in making the jump from broadband input to the big screen in your home. These competing visions of the future offer one key to understanding the net neutrality debate, at least from the industry side (media ownership is key to understanding the political side), as in “Who Runs the Show?" I’m really talking about wireline services, in order to reduce the number of unknowns (such as, say, subscriber take rates on streaming mobile video), but it’s the same idea, with the connection to the customer (and use of his or her purchasing preferences and other unique information) paramount in everyone’s mind.

So let’s say we’ve got a big time Hollywood type content producer, broadband pipe provider, and then, in the your "home network chain," a modem, router or game console vendor or set top box, etc., hard drive (for storing content) big screen TV, and more than a smattering of industry standards swirling around, all working together, seamlessly, cooperating with one another all the way down the line; or maybe not. Or let’s say you’re the content producer yourself, harnessing the power of additional equipment – video camera, powerful video editing software and processor, in addition to the home network chain, searching for your 15 minutes, or something else. Again, for this networked vision to work, everything has to work together, or the machine breaks down, as they say.

The other thing is that all the pieces have to be there, but, on this score, there looks to be even less agreement. I don’t think the various industry sectors involved have any notions of letting someone else decide what the ground rules are going to be; hence: the fuss. One side says rules are going to finish the game, the other side says you shouldn't even start playing the game without rules, and they aim to dictate the rules. This is the regulatory angle.

The FCC concluded its Advanced Wireless Services (AWS) auction on Monday, September 18, 2006, which Chairman Kevin Martin called “the biggest, most successful auction in the Commission's history.” The spectrum auction grossed almost 14 billion dollars and winners “are expected” to use this prime real estate to roll out advanced wireless broadband networks, with capacities beyond those currently deployed by carriers (although I have heard that the broadband capabilities of today’s wireless networks, from 250 to around 500 kbps, particularly Verizon’s, are not all bad and will do in a pinch, and heard this appraisal again yesterday).  

As expected, incumbent wireless carriers bid for and won licenses (would you expect them to do any different?), with T-Mobile shelling out the most, but the winners also include a consortium amongst the top 10 cable companies. The FCC has other auctions upcoming, including spectrum released by the transition to digital television. Meanwhile, back at the ranch, Craig McCaw plans on upsetting the apple cart once again, using Clearwire’s Wi-Max wireless broadband technology to reach consumers. Clearwire currently deploys in 27 markets domestically, and serves areas in Ireland and Belgium. Clearwire got a cool 900 million dollars in funding from Intel and Motorola, and may face some competition of its own, from Sprint’s planned 3 billion investment in Wi-Max to complement its current wireless-only plant.

Perhaps there is a need to remind some folks about the constantly shifting telecom landscape. While cable and the telcos act as if they're headed toward something resembling a duopoly, we don't seem to be living in a duopoly environment; and dire predictions from several years back of rising prices and lower rates of deployment now seem a little wide of the mark. If one dares mention that conclusion of the AWS auction brings us one step closer to having a third pipe to consumers, the likely response will be that "the incumbents" won a lions' share of the AWS licenses; but they didn't win all of them, as a peek at the top 10 winners will show.

Economies of scale dictate that companies competing nationally are going to be big companies. If you have any doubts, head downtown or across town to the nearest Starbucks at, say, around 9 AM, and you're likely to find the line snaking out the door. What you won't likely find is an alternative, unless it's one of the other chains; one-off coffee shops don't seem to predominate these days, and if you do find one, it will be a "one-off" - with only one location.

Other, very recent shifts in telecom and media (as in this week) are Rupert Murdoch's musings on trading in his satellite TV stripes for a stake in Liberty Media Corp. (ok, that was late last week); Echostar mulling over its options in light of this proposed move by John Malone (reported this week); Citizens Communications' $1.16 billion purchase of Commonweath Telephone Enterprises (reported Monday)(Citizen's operates in 23 states); YouTube's copyright deal with Warner Music (reported this week, but following hard on the heels of last week's announcement that YouTube and Level 3 had inked a carriage deal between YouTube's data centers). 

But no one, nowhere, has outdone the Italians (as in Telecom Italia) for sheer drama (well, there might be one exeption). Following the-then CEO's plans to split the company up into three divisions, to address the company's debt, and sell the wireless unit, and turn itself into a land-line/media outfit (see September 13 blog), seems that the Prime Minister thought this a lousy idea, and said so, and publicly (the company is one of the largest employers in-country), whereupon the-then CEO resigned (last Friday), and the last time I checked, twenty people had been arrested in connection with a security and securities probe, and I think we've about ventured far enough from telecom for me to have any reason to continue following what's going on. Just for the record, what interested me about what the company planned to do was the proposed transformation to a wireline broadband and media company, but other events have since intervened, and in a really big way.

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Reporting on a cybersecurity hearing before the House Energy and Commerce Committee’s Subcommittee on Telecommunications and the Internet on Wednesday, yesterday’s Washington Post touched on high points arising from the exchange between committee members and panelists. Panelists included representatives from both the public and private sectors.

While the hearing featured some political friction over the Administration having yet to fill the position of cybersecurity czar, I can safely take a page from subcommittee member Rep. Charlie Gonzales’s (R-TX) book by referring interested readers to Larry Clinton’s written testimony. Mr. Clinton is Chief Operating Officer of the Internet Security Alliance, and for more about them, what they do, and what's at stake with Internet security, I too would urge reading his testimony.   

In a nutshell, the hearing explored the complicated relationship between the public and private sector and determining “who’s the boss?” to orchestrate recovery from networks disruptions, and what's needed to prevent breaches. Our society is highly integrated and interlinked; according to Mr. Clinton, some 25% of the US economic value ("up to 3 trillion dollars a day") travels over network connections each day. Outages or even attacks one sector could lead to failures in other sectors, and pretty much the whole shootin’ match comes crashing down. 

The panelists sought to provide some insights as to what exactly is being done, and who or what is doing it, and where additional help is needed to clarify roles in event of emergency. Rep. John Shimkus (R-IL), for example, called what's needed as befitting the definition of leadership; Mr. Clinton agreed that he thought policy leadership was needed to further illuminate the proper roles in the complicated series of relationships.

Another point to emerge is that while leadership is critical, both companies and the government are working to address the issues as best they can. To recall the discussion of network security at the FCC's Technological Advisory Council meeting in July, customers expect their networks to be secure, but they also don't want to pay for it, which means that it's not a big selling point for companies (which Rep. Shimkus identified, and sought to tease out where financial incentives might lie for public companies to take strong positions with respect to security measures). 

Interesting stuff!

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For some time now, big telcos in the US have been concentrating their investment dollars in two growth areas, broadband and wireless. Meanwhile, some of their competitors have sharpened their focus even more, shedding wireline assets to focus exclusively on wireless services, including offering broadband services wirelessly (such as Sprint Nextel, which also recently announced a $3 Billion broadband project; while Alltel also sold its wireline plant).

While Verizon has indicated that it too would like to jettison some wireline exchanges to concentrate on its splendid little video war with cable, upgrading broadband infrastructure in the cities, primarily of the wireline sort, but including wireless too. (NTIA nominee John Kneuer mentioned the Advanced Wireless Spectrum (AWS) auction results in yesterday's Senate confirmation hearing as totalling almost $14 B USD; you can see Verizion in there, along with cable (Spectrum Co. LLC), Cingular and T-Mobile.) Private equity companies have emerged as willing and able buyers of the right wireline properties (Carlyle Group purchased Verizon’s wireline assets in Hawaii several years ago, former GTE Hawaiian Tel. properties there, with Verizon retaining its wireless service).

But nowhere have carriers forced the “what do we want to be when we grow up?” issue to the degree that Telecom Italia has, with a number of articles appearing in the Wall Street Journal over the past three days about the company’s plan to split itself into separate business units, and rid itself of its dearly, recently acquired wireless arm. One reason for the transformation is that the company is laboring under a fair amount of debt, and shedding the wireless business would bring in some much needed cash, and the transformation calls for evolution into a wireline based media company, with meetings on yachts and the like. 

On the other side of the planet, in San Francisco, Apple unveiled a movie distribution plan by which its iTunes service would make Disney & Co. (Miramax, Pixar, and Touchstone) movies available to consumers, and, as added bonus, help get your content from your computer to your TV, introducing a new device called the “iTV." About a year ago, Apple made a similar move, offering network TV broadcasts of popular shows over iTunes ("Desperate Housewives," anyone?), using the download-for-a-fee format that it pioneered for music, and this represents yet another step forward for the company, and the industry, toward making content available to consumers anytime, anywhere.

It may seem so long ago, that Apple was just a computer company that played to a different drummer, one heard only by a hard core legion of fans – then turned into something else. The “something else” has been on the warpath, and demonstrates the absolute contortions that occur in the convergence of access technologies over different platforms and the blurring of divisions between content and transport, who's providing them, and over what networks and devices (Disney + Pixar + Apple + cable franchises). Once technically and utterly distinct, occupying their own regulatory and marketing niches, these assets are now a blended-to-a-froth blur.

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FCC Chairman Kevin Martin and NTIA head John Kneuer appeared before the Senate Committee on Commerce, Science, and Transportation earlier today for a nominations hearing to the respective posts they currently hold. The hearing featured, among other issues, the ability of Senators to put babies to sleep (Sen. Demint's comment, not mine), as demonstrated by the nominees’ children, present and more or less accounted for along with other close relatives and family members of the nominees.

Given the crush of other ongoing business in the few legislative days that remain, Committee members passed in and out of the room, with Senator Conrad Burns (R-Mont) taking over for Committee Chair Ted Stevens (R-AK) and tinkering with the “batting order” of members with questions after Chairman Stevens left, until Senator Burns too was forced to venture on to other business.

While Chairman Martin faced a number of questions about “net neutrality” (Chairman Stevens hoped that it would not kill the bill, under construction now for 19 months) and Internet regulation (including content regulation), it would be fair to say that concerns about the Universal Service Fund (USF) and media concentration dominated the agenda, as evinced by members’ numerous queries on these two points.  

Perhaps reminded by the upcoming elections and the saying that "all politics are local," members’ questions about USF and media ownership focused on the importance of local, independent news and reporting to many citizens and the benefits that truly local businesses bring to many communities, particularly in rural areas, and their uncertain chances for their survival against large national companies – be they carriers (national wireless companies, for example, receiving USF monies and competing against small rural wireline telcos) or content large media outlets.   

In fact, if the nominations hearing demonstrated any one thing, it would have to include the challenge facing  policymakers (both legislators and regulators) in whether to apply old rules to new business models, with articulate proponents on both sides; those that want the old rules to protect established businesses and business models, and those that welcome new entrants, their innovative technologies, and potential for upheaval they bring to communications: easier said than done.  

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California passed franchise reform legislation late last week, becoming the most recent state to do so, but it's a biggie, and passage has significant consequences for telco and cable companies, and consumers – both in and out of state. California is home to a significant portion of AT&T’s access lines (about a third lie in the state) and Verizon has a sizable presence too (with about a tenth of its customers in state).

So here’s the deal – the telcos have now attained franchise reform in states containing a significant number of access lines. While they also are seeking franchise reform on the federal level, at some point, given political realities, their goals here slip further on the attainability scale. Using a little Kentucky windage, then, one might surmise that the majority of network investment funds will flow to states that have passed franchise reform, as opposed to those states which have not.

What this means, if you are not in one of those states, is that your list of competitive video and broadband options pretty much remains the same, which are not all that bad, but your hopes of obtaining the newest bundled package of video and broadband may have to wait for the next technological platform (Wi-Max or Wi-Fi) or rely upon existing marketing tie ups (satellite + DSL). Without going overboard, one might say there will be “video choice states” and "video no choice states," but I wouldn’t want to (apologies in advance) “overstate” things.