One of these days I’ll have to see if I can write an entire paragraph using only acronyms. I’m sure it can be done, but I am not an engineer by training, or even by osmosis.

In the past couple of days I’ve had discussions with a number of policy makers both inside and outside government on what issues we might expect to be dealing with on a long horizon.   

The rough consensus includes content issues, security and privacy matters, which cut across a number of industry sectors (access providers, both network and customer equipment vendors, programmers), and play out with a dull roar, with occasional spikes in volume, usually connected to some crisis that occurs, and those single issue political matters, like net neutrality and media ownership, which get a lot of people excited and are best served up shrill, since the whole thing is viewed to be in crisis.   

Two recent deals reported in the past several days illustrate industry momentum gathering around two of these areas. In one development, AT&T reportedly inked a Video on Demand (VOD) deal a with Time Warner Home Entertainment Group, for distribution on AT&T’s Fiber to the Node network service, which the company once called Project Lightspeed and now calls “U-Verse.”

Rich content and robust interactivity will give the telcos a weapon for taking the bundled services war to the cable companies, whereas offering “70 channels for 70 dollars” plus data plus voice, a package virtually identical to that offered by cable providers today, is a war the telcos cannot win, given the massive investments required for them to play catch up ball. There have been other deals involving telcos and their deep fiber deployments, and there will be more.

In another development, BT purchased a managed security company called Counterpane Internet Securities, Inc. As services across the board migrate to the Internet Protocol platform, providers to enterprise businesses must be vigilant about security for the sake of their customers’ customers – just the kind of issue that doesn’t seem that important until it becomes an issue, with customers leaving in droves in the case of security problems becoming known (widely publicized) and then it's too late. 

In August, IBM also purchased a security company, and in the corresponding August 23 blog, I referenced discussion of the security issue at the FCC's July Technological Advisory Council meeting. As with video deals, I expect there will be more deals involving security companies as well. 

Send me your comments

The week before last several vendor representatives participated in a rare opportunity to have lunch and share industry views with the head of a European telecom regulatory agency. The discussion emphasized lessons learned in navigating the unique currents of our home broadband markets; and more, as we also examined regulatory and market developments from other countries around the globe, where and when they so applied.  

Given the wide ranging conversation, I find myself returning to one or two themes that emerged during the two hour lunch – it was a Friday, taking place in one of those wood paneled meeting rooms that characterize not a few of the nicer Washington, DC restaurants, with oil paintings and shaded sconces balancing the panels, stiles and rails, glass paned French doors for privacy, and patterned carpet throughout.

First, there are few countries in the world with markets which accurately duplicate the US broadband market, with its extremely strong cable presence, with the possible exception of Canada (said properly, this has an “eh” on the end). Cable introduces a competitive element with dissimilar regulatory treatment, different financial underpinnings, and origins, not to mention the industry’s long time experience with a killer application that the telcos would just kill to have: video services.

In Europe, there is no such deal, where competition is less market-driven with a structurally distinct rival than it is highly dependent upon finding the right regulatory balance within the same technology platform. With regard to this goal, the US, with its Darwinian marketplace, characterized by rapid change, and numerous regulatory inputs, both federal and state, was never able to achieve – our European friends thought perhaps our competitive telco market matured too soon.

This was borne home during our discussion, where pricing emerged as the key point for ensuring that both competition and investment are able to thrive within the same, broadband platform. Elsewhere in Europe, and in this particular country, cable presents little competitive threat, inasmuch as the industry is largely preoccupied with stemming losses in its already minimal market share, struggling simply to stay alive. According to the Wall Street Journal, Comcast reports earnings today, and should present a very different picture, one of strong execution in grabbing market share in the bundled services arena, home of the triple play.   

The second point that arose during our discussion is one that I have touched upon previously, from time to time, and again relates to a unique quality of the US market. Our European regulatory guest professed to having a keen interest in US regulatory decisions because of our leadership. Really? If I recall correctly, and very much by contrast, the US global position in broadband deployment was held up for shame, time after time, during various telecom hearings earlier this year, disparaged for going from 11^th or 12^th to 16^th or 21^st in world rankings, and falling fast. Of course, this statistic was employed as justification to change this policy or that.

Ok, so we’ve got a complicated and brutal little market, with lots of policy inputs (about which there tends to be very little agreement, directionally speaking), coupled with a tendency to see things at their gloomiest (heard any good news about Social Security, healthcare, or anything related to the future, lately?), and an ever-hardening set of philosophical differences about how to implement policy; this latter "attribute" is very worrisome. As an aside, I might also add several of us prefaced our comments with “during the downturn” or “after the bubble” during the lunch; while one may credibly say "if it ain't broke, don't fix it," it certainly raises the question of what should be done when the subject in question has gone off the rails.

For the record, I should also state that, to the best of my recollection, our European guest also commented that he thought the US broadband market was expensive. From there we ventured into discussion of the situation in Japan, which the Europeans had also looked at, where broadband is cheaper and faster than that offered here. But I refer back to the confines of our regulatory model, with its hemming and hawing, widespread agreement that consumers should benefit from more broadband at cheaper prices, but little agreement beyond that, philosophically speaking, as to how to get there.

Send me your comments

The FCC’s twice postponed vote on the AT&T BellSouth merger review appears now to be winding out in oddly public fashion. Following the postponement of last Thursday’s open meeting, and at the heart of Friday’s postponement, two members of the FCC, Commissioners Michael Copps and Jonathan Adelstein, requested additional time for public comment on new proposals for conditions that might be considered and imposed for the merger. By way of background, the US Department of Justice signed off on the merger last week with no conditions, which in turn set the stage for last minute negotiating at the FCC.

Chairman Martin’s reply to Commissioners Copps and Adelsteins’ joint letter, continuing the theme of suggested future steps, rescheduled the vote on the merger for a public meeting on November 3, 2006. Chairman Martin’s reply also raised to the possibility that the FCC might complete its review before that date and approve the item using the less formal “circulation” process of voting, with any statements, conditions and whatnot presumably made by attachment to the public notice announcing action on the matter. The significant fact about the way all this is unfolding, however, is that AT&T, given the postponements, has agreed to adhere to certain, published conditions, as a starting point in negotiations with the Commission in order to get the ball rolling again – and the company’s opponents are not yet satisfied.

Even though the FCC was slated to adopt a Notice of Inquiry on net neutrality last week in tandem with the merger – first scheduled for Thursday, then postponed until Friday, and so it goes – there are some indications of or “allusions” to the fact that net neutrality has emerged as a big sticking point in merger discussions with the Commission. Now, in case you haven’t been following this fascinating issue all along, there is legislation pending before Congress containing language that addresses, to a fair degree, consumer rights in accessing Internet content, applications, and devices over network connections provided by operators such as the telcos and cable companies. Or perhaps to a degree not fair enough: while the House and Senate versions differ in their details, they are alike in not going far enough to please proponents of stronger net neutrality language that encompasses “non-discrimination” principles.

For those dissatisfied with the current legislation, which has passed the full House and passed out of the Commerce Committee on the Senate side, both bills driven in some large measure by telcos seeking to streamline the local franchise approval process by essentially nationalizing it, non-discrimination is a critical fifth principle that must be added to the four FCC connectivity guidelines adopted by the agency last August. The non-discrimination agenda is pushed, in part, by some large Application Service Providers and consumer advocates, sort of setting up a transport versus content struggle, with all the pieces moving at once, and like most big policy initiatives, has a changed somewhat over time, given political realities and strategies, which have been perched on a see saw all year.

Given this fall’s election dynamics, then, it is perhaps not unreasonable for one to surmise that the chances for telecom legislation passing this Congress are slim to none, and slim just left town. Having said that, strange things do happen, but, for the moment, let’s pretend that net neutrality protections are not going to be enacted by this Congress in any way, shape, or form without the video franchise legislative vehicles moving forward. Given that, the review process at the FCC for this merger may have emerged as a likely place to make far reaching, non-discrimination provisions stick, at least for a rather large population of American consumers, given the size of a merged AT&T and BellSouth.

If this is the case, and I am just speculating, then it would appear that stronger net neutrality provisions would be imposed unevenly across the industry, on one large carrier but not the other, nor on cable companies, with the recent Adelphia mergers having been approved by the FCC without net neutrality provisions, but I digress, and forget my “see saw” comment from earlier, and acknowledge that many policy commitments are in fact made over time, in piecemeal or incremental fashion. (Note: the net neutrality commitments previously made by Verizon and AT&T did not apply to BellSouth, since BellSouth did not seek merger approval from the FCC last year).

Ok, now that my head hurts, I think that’s enough serious stuff. I was looking at a link someone sent me on YouTube, and the short video itself was about a series of tubes, when I got this crazy idea that I was watching the “logical” offshoot of the early Monty Python sketches – at least in the bare bones way that the video in question played around with graphics. Of course, this observation may as well be applied much more broadly, inasmuch as one might make a claim that a great degree of user generated content submitted to file sharing sites such as YouTube is the logical offshoot of some other show, genre, sketch, video, character, etc., including, but not limited to, bad comedy or stupid pet tricks. On that note, and for a (I think comical) glimpse of the digital copyright future, take a gander at the complex relational diagram presented in this discussion of GooTube (it may take a minute to load, but it appears under the heading "the big picture"). 

Send me your comments

There are some big changes afoot in the wild and crazy world of user generated content, perhaps best known lately by the YouTube phenomenon, which may have something to do with why Google bought the video sharing site in talks that took place over last weekend. The going price for the year and a half old outfit was $1.65 billion. The YouTube brand name ostensibly will survive the match-up, and Google will continue offering its own video service, so it remains to see how this will all shape up.  

One thing is clear, though: consolidation is sweeping the world of social networking and content sharing websites, with Rupert Murdoch’s NewsCorp having swooped in a while back to pick up MySpace (for $580 million), and that this industry consolidation is realigning the relationships among large players. NewsCorp reportedly was sniffing around YouTube, was told it wasn't for sale, so news that they had been scooped by Google miffed them enough that they considered blocking MySpace’s links to YouTube… so there you have net neutrality, ASP style...

Since I don’t recall whether anyone has asked before what happens if one ASP blocks linking or cuts ties with another ASP, where exclusivity arrangements are triggered by relationships on the content or applications side rather than so-called vertical affiliations side of the aisle, between transport and content providers, but I guess it was bound to happen. Big liability follows widespread distribution of someone else’s copyrighted content, so that’s at least one reason to get excited.

Several years ago, digital rights management issues loomed as a big obstacle to making content available over broadband connections, with Hollywood taking a “wait and see and wait some more” approach, and it has been interesting to watch how consumers have found greater access to content, able to download their films, for example. This appears to have occurred largely by virtue of companies sticking their necks out and dealing with the risks by contract and technology fixes, and more power to these pioneers.

Today the FCC was expected to give the “ok” to AT&T merger with BellSouth, so there might just be a run on certain legacy corporate logo giveaways; retire those BellSouth golf shirts and golf hats PDQ. The US Department of Justice gave their two thumbs up on the deal yesterday, clearing the way for FCC approval with no conditions, prompting a raft of criticism about no conditions, and a one day delay of the FCC’s open meeting.

So tomorrow, Friday the… the FCC is expected to take up consideration of the merger again, at the same time the agency launches a Notice of Inquiry on “broadband industry practices,” which is really another name for the “net neutrality notice of inquiry,” or “NNNOI,” as it has been called by some – the designation seemingly well on its way to being mistaken for a mutual fund, although I haven’t heard of any such development yet, nor have I seen it on my 401(k) shopping cart either.

Earlier this week the Wall Street Journal reviewed some online movie downloading sites, with mixed results for those of us who might wish to see everything proceeding hunky dory; long download times, and variable image quality, it seems, may have a way of making that big screen TV look like a questionable purchase, but, here’s the hopeful part: nothing is static with technology, so these are concerns for here and now. If I recall correctly, this recalls at least one gripe about first generation, big high definition sets – the quality of image viewed at home wasn’t the same quality as that shown in the store, at the time of purchase

This isn’t the only fork in the road, either; consumers are presented with a choice of high definition DVD formats, able to purchase Blu-Ray high definition DVDs or HDDVDs, either of which will show the highest quality images currently available on those disks so encoded, with the part about “those disks so encoded” harboring most of the important details, since the two formats are mutually exclusive. The consumer, it seems, gets to be the arbiter of that deal, which is how I got to wondering the effect of grainy images shown on large screens, after taking two hours to download, and where this leaves most people: scratching their heads, and heading back to the video store.

Send me your comments

Last night the FCC released a public notice listing the items for consideration at the FCC’s October 12, 2006 open public meeting, and it's a doozy. There’s the 13^th Annual Report on Status of Competition in the Market for Delivery of Video Programming – can’t imagine that not being used by somebody, somehow, for policy ends – and, hmmm, there’s the BellSouth AT&T merger, which is a heavyweight in and of itself (no issues with the potential for generating conflict in that one, for sure) and then there’s the euphemistically described fifth and final item, wherein “[t]he Commission will consider a Notice of Inquiry regarding broadband industry practices.”

This is where the Commission looks at the euphemistically labeled concept known as “net neutrality,” which, in all due respect, is probably the right thing for the FCC to do, given the topic’s almost universal appeal, particularly for people selling advertising, be it in old world media, such as newspapers, TV, or in new world media alike, such as pop-up ads on the Internet, though I haven't seen any for a while, not that I miss really them. For some Washington, DC papers, it’s apparently been like money in the bank. The danger, though, in the FCC not taking up the issue, is that net neutrality begins to attach itself to everything, everywhere, showing up in this proceeding or that, or in this legislation or that, which may tend to raise or diminish appropriate consideration of what's at stake, by increasing the number of variables involved in both underlying matters or the complicated issue of net neutrality itself.

Send me your comments

Since this is the second time I’ve run into this story today, and relates to earlier comments (see "Arms Race" blog August 18, and "FCC Auction Ends and Other Drama, September 20, 2006) I’d made about the FCC’s recently-and-very-successfully-concluded Advanced Wireless Spectrum (AWS) auctions, I may as well touch down on the issue again. Spectrum Co. LLC, a consortium of cable operators including Comcast, Time Warner, Cox, and Sprint Nextel placed top bids for 137 licenses in various markets across the US, for which they dearly paid $2.37 billion.

Financial analysts are looking at this development for evidence of how it may help these cable providers bring the bundling war to telcos' front door, as it were, given their incumbent wireless status, by allowing cable to offer a "quadruple play" to consumers: phone, data, video and wireless services. Now, 2.4 billion dollars is not exactly chump change, and might fall under the heading of “expensive upgrades,” which investors might perchance view in dim light (see "Arms Race" blog on Cablelabs upgrade report, made public by the Wall Street Journal), but there are two sides to every story. Two sides, that is, if one overlooks the “who’s on first” barrage of daily press reports tallying upheaval in the telecom marketplace, with companies and sectorss alike jockeying for position, literally all over the map.

So let's say that one analyst thinks Vonage will rock next year because it can offer VoIP service more cheaply than cable, while another one takes the opposite view, concluding that Vonage doesn’t have a chance, inasmuch as cable can drop the price of VoIP and force Vonage to burn more cash in marketing efforts. I don't have a position, other than to note than to note that we’re talking about head-to-head VoIP competition here, seeking bottom dollar offers for consumers, as opposed to circuit switched voice competing with circuit switched voice, which was all the rage a couple of years ago, in a UNE* galaxy far far away, and we haven’t even mentioned Skype, a VoIP operator of some international acclaim.

My, how things have changed: Long Distance as a service as we once knew it doesn’t even factor into the equation at this point; winning the Long Distance market was one of the Holy Grails of the ’96 Telecom Act, which Senator Sununu (R-NH) has eloquently pointed out in at least one hearing this year, for the proposition that tomorrow’s market reality is today’s unknown, no matter what policy makers might think about this great idea or that. Senator Sununu was discussing net neutrality at the time, but his point is valid no matter the background topic; he's also been a big VoIP supporter for some time.

In yet another area of speculation, Apple (again) is subject to rumors that it may introduce an iPod cell phone iPod, and an article in Forbes explores how this might go forward, and also has some fun with Apple doing zippo to discourage the rumors. Given that Steve Jobs has some reputation as a “hands on” kind of guy, one might easily dismiss the potential for another iTunes cell phone as NEVR, given the market's wet dishrag reception of last year's joint effort with Motorola, which brought us the ROKR, and given the (perhaps similar?) problems of cross marketing through an existing cell phone carrier, possessed of stores that just miss capturing, by a country mile, the defined aura one feels when entering an Apple store. The article explores other ways in which Apple might market another iPod phone, such as shouldering network responsibilities from scratch, as a virtual operator, but I’ll let you read it and decide for yourself, and wonder what the future will like, when you're screening your calls because you like the song currently playing, and just can't be bothered. With all this functionality housed in one elegant unit, I can already see that it would give me fits.

While we're loosely on the subject of marketing, consider that when offering a service bundle, with the individual services rapidly evolving (cell versus Long Distance versus wireless VoIP and so on), it is apt to be very difficult to figure out how to present this bundle in one easy to digest, consumer-can-hardly-wait-to-sign-up-for-it package, particularly if one presents the consumer with more than one variable. Or if the provider omits any comprehensive reference point whatsoever, because the rapidly evolving market has thrown everyone for a loop, including the provider.

The FCC will hold a field hearing on media ownership today in Los Angeles, California. The hearing has been previously been announced, and indeed, discussed, at Chairman Kevin Martin’s confirmation hearing before the Senate Commerce Committee several weeks ago, in an exchange between Chairman Martin and California Senator Barbara Boxer.

This is the first of a series of hearings that the FCC intends to hold on media ownership issues. The purpose of the hearing, from the public notice on the FCC’s website, is “to fully involve the public in the process of the 2006 Quadrennial Broadcast Media Ownership Review that the Commission is currently conducting.”

At his nominations hearing, Chairman Martin found himself discussing wither the FCC’s media ownership efforts, including previously unreleased staff documents – a staff draft of a working paper on localism, and another draft review of the radio industry – which Chairman Martin then had posted on the FCC’s website. 

Today’s field hearing will have a first come, first served live audio and video webcast which may be found on the first link above. 

Send me your comments