Posts filed under ‘Cable/Telcos’
SkypeCast
The other day, Comcast (NASDAQ: CMCSA) announced a partnership with Skype, to allow–among other things–video chat on your TV while watching shows.
In addition to the usual candy-coated and breathless quotes from company officials, the NY Times had this comment: “Cable companies like Comcast have been trying to figure out how to make it easier to chat while watching shows.” That should have read, “...trying to figure out how to make money from subscribers while they’re chatting during shows.”
May I be among the first to say “Epic Fail”?
People are already chatting while watching shows; some of them on video, surely many on Skype. For free. I get using your TV as a large videoconference screen incorporating Skype. That has value. But how many are going to pay Comcast a hefty monthly charge so their friend’s face appears next to their favorite show on the TV set , instead of their tablet or iPhone? Not many, I bet.
Oh, they will undoubtedly snag some consumers who don’t know about Skype already, and who think the idea of chatting with Grandpa over American Idol (assuming you’re both watching live) is cool. I suspect there aren’t many of those.
Interesting how instead of watching together in one room, the industry vision has become one in which we’re in separate domiciles watching the same thing at the same time, using the Internet to chat about what’s happening on screen. Looks like Isaac Asimov had it right all along.
Perhaps there are other benefits from a Skype/Comcast hookup. I’m not holding my breath on this one.
Disclosure: I hold no position, either long or short, in any stocks mentioned here.
Lawyers and TVs and Tubes, Oh My!
The business models surrounding video delivery to consumers are sure evolving rapidly, aren’t they? And in sometimes surprising ways.
Time Warner Cable (TWC) has been sued by Viacom (VIA) over an iPad app it recently released. The app allows TWC subscribers to watch live TV on their iPads within their own home, effectively turning the iPad into a TV. It streams channels wirelessly to the iPad, typically from a router attached to the subscribers’ internet cable modem.
Cablevision (CVC) has released a similar app, although because it streams directly from the cable box (plus wireless adapter add-on), this one does not require cable subscribers also to be internet customers.
Broadcasters such as Viacom are claiming that TWC and Cablevision have “no iPad video streaming rights.” Time Warner Cable, for its part, insists it can send TV to any device in the home.
Meanwhile, ESPN (DIS) has taken another tack, releasing their own app that lets properly identified subscribers from Time Warner Cable, Verizon (VZ), or Bright House, to stream its live content to an iPad from any location. This is an example of the “TV Anywhere” initiative envisioned by the likes of TWC and Comcast (CMCSA) among many others.
And on another front, startup company Zediva is being sued by all 6 major movie studios over its service that “rents” DVDs to consumers and then streams them over the internet. Each customer has exclusive use of a DVD disc and a DVD player. Again, the studios are claiming copyright infringement, calling Zediva’s business model a “gimmick”. All Zediva is really doing is putting a DVD into a player, pressing play, and then sending the customer the output signal directly. They just happen to be using the internet instead of a wire.
[Next, I imagine, it will be illegal for me to stand outside my neighbor's house and watch a DVD on his TV through the window.]
Logically, Zediva and the cable providers seem to be on reasonably solid ground. Legally, who knows?
Regardless, the notion that this has anything to do with distribution or copyrights is beside the point. What’s really being fought over is the ability to make money in new ways by using the Internet. Or as the late Senator Ted Stevens of Alaska laughingly called it, “a series of Tubes.” Time Warner Cable’s app does in fact use IP to move video around, though it is exclusively on its own cables. And while Zediva uses the open internet, there is precedent in the form of virtual circuits to think of that transmission channel as being private and dedicated.
In a way, these links are functionally no different than wires. Perhaps Senator Stevens was more right than his detractors thought. Companies are using the internet just as if it was a series of private pipes, or tubes. So why wouldn’t these distributors have the right to send video this way?
Because it interferes with the content owners and networks from getting two things they dearly want: (1) unfettered control over using the internet to sell content directly to consumers, and (2) ownership of customer information for marketing (read: monetization) purposes.
Every movie Zediva rents and shows is one that a studio can’t derive its own rental income from. When people watch Mad Men or Survivor from the dining room on an iPad, that’s one more episode that can’t be monetized through iTunes or Netflix (NFLX), or viewed on ad-supported Hulu.
What’s worse, when an iPad, smartphone, or netbook is used to view video streamed through a cable or satellite provider, the content sellers have no information about the end user. If they could sell or rent directly, they’d gain valuable demographic and other information that could be used for marketing purposes or monetized via ad networks.
They know that content is not king; the customer is king. Networks and studios would love to be able to eliminate the middle man if they could. And they don’t want to be beholden to Apple (AAPL), the way music publishers are now and magazine publishers are quickly becoming.
To own the customer is to be prepared for the day when consumers “cut the cord” on cable. And when they use tablets and smartphones instead of a
TV.
In 1993, Nicholas Negroponte (the founder of MIT’s Media Lab) made a prediction that became known as the “Negroponte Flip.” He said, in essence, that what was wired would become wireless, and vice-versa. When you consider that our phones are becoming wireless, and over-the-air TV is increasingly via cable or fiber, Negroponte seems to have nailed it. We have a similar flip occurring with centralized mainframe computing moving to distributed (PCs) and then back to centralized (the “Cloud”).
Could it be that just as we’ve reached the point where most TVs are flat, and no longer have tubes, we are moving to a time when the “tubes” are what’s important, and video is no longer watched on TVs?
Disclosure: I hold no position, either long or short, in any stocks mentioned here.
Tele Visions
What will a TV “app” look like in the future? How will interactivity between viewers, social networks, and advertisers evolve? Is the linear model of TV dead? Will people continue to pay for content? What’s the frequency, Kenneth?
A few weeks back I attended a TalkNYC event on TV Apps, social TV, and Interactivity. More recently, the Connecticut Digital Media group hosted a similar panel covering online video. Quite a diverse set of speakers representing interests that spanned the spectrum of content owners, creators, advertisers, and technologists. Because of the multiplicity of viewpoints it’s not clear anybody really had answers to any of the above questions. Frankly it’s just too early to say with any certainty how everything will turn out. However, that’s not stopping many companies, investors, and other stakeholders from trying.
Nor will it stop me from sticking my neck out.
Interactivity is not new. It just jumped networks.
People have watched TV together, talked about it, and read about it, nearly since the time when television sets replaced the family campfire (radio). Discussing the popular show of the day at school, or over the back fence, is a time-honored tradition. I’m not sure which was invented first, the TV or the office water cooler, but they seem to always have been linked.
The difference now is that this interactivity, this social connection about video, has gone online. That means it’s no longer geographically bound. And technology has allowed viewing habits and preferences to be accessed, measured, monitored, interrupted, shared, and influenced, in ways that nobody dreamed possible.
In effect, social interactivity over video is now at scale.
The interesting question is whether that scale has come at the cost of depth. Are we now more involved with our TV, or less? Are we more deeply connected with those we share it with, or are our relationships numerous but more shallow?
If there’s nothing to watch on TV, maybe we don’t care
I see this as a massive tradeoff, because in the end attention is a finite resource. Teens and tweens are increasingly watching TV while at the same time reaching out over social networks, looking up facts, tweeting about what they’re seeing, and controlling what they watch. (Even digital immigrants like me sometimes embrace this multitasking.)
On the one hand we’re more involved with each other, as we converse over our portable, miniaturized water coolers, make an online purchase of the purse some actress is carrying, and signal an advertiser we like the blue convertible more than the red. On the other hand, how much attention are we really paying to the TV show now?
Are we seeing a move from long-form content to short-form video just because we require time between clips to text each other about it?
And this doesn’t even address the move to content-on-demand. What will there be to talk about when nobody is watching the same thing at the same time? Are we then simply interacting with databases? Or will we instead find ways to queue up our shows in synchronization with our friends?
Does Interactive TV even require a TV?
Watching “lean back” media like television still tends to be a shared experience. Conversely, using a screen on a computing device has typically been a solitary activity. You might be communicating with others over a social net but you’re likely to be physically alone.
This disconnect might explain past failures at “interactive TV”, and seems likely to limit the amount that televisions themselves can become interactive, despite the claims of some that want to build apps and widgets right into the device. Or—heaven forbid—turn your TV into a large screen PC.
I certainly wouldn’t want someone in the room updating their Facebook profile on screen and interfering with my enjoyment of whatever I’m watching. Or expanding an app that eats up screen real estate.
This means the TV isn’t going to get very smart, despite manufacturers ramping up production of internet-connected sets. Oh, there will be some small, useful, unobtrusive apps or “bugs” that will get built in, but for the most part widgets will be D.O.A., and the TV itself will remain passive.
Interactivity will be a multi-device experience. And the smarts will be—as they already are—in the other gadgets.
Whether via a laptop, an iPad, a smartphone, or some combination resembling a remote control, such connected devices will allow viewers to interact with shows, products, celebrities, ads, and each other. We will “check in” to the shows we’re watching, vote on outcomes, rate shows, comment on what we’re seeing, buy items, and share everything.
We will control the horizontal. We will control the vertical.
More importantly, our external devices will allow us to efficiently find content we want to watch, and then control how it gets to our TVs or other viewing devices. And even move it between devices.
These last two interactions—filtering and directing video—represent the stickiest problems. It’s clear that consumers are increasingly demanding a migration from strict linear programming (TV shows on a set network and schedule each week) toward a video-on-demand world. And the ability to move their content to any device they want, often in the midst of watching it.
But how do we find anything? What replaces the filtering function the old style networks performed for us? To what extent is passive profiling by content providers and marketers, and active participation in social networks, going to keep us from sinking in a sea of video dreck?
Even if we find the things we really want to watch, will we be allowed to access and consume them the way we want?
T
here is a lot of experimentation going on in the marketplace around these questions. Set top boxes, iPad apps, content aggregation sites, changes in theatrical windows, new DVR functionality, smartphone integration, and more. Precious little standardization and no agreement on business models, though.
Because of conflicting corporate interests, differing technical approaches, content licensing agreements, regulatory quagmires, and general resistance to change, it will take years for common approaches and standardized technology to make them a reality for a majority of us.
But many are trying, and a few will succeed. It will happen. Because after all, we humans are interactive creatures. And we still want our MTV.
Disclosure: I hold no position, either long or short, in any stocks mentioned here.
Ceragon Purchase Boosts Takeover Potential
Wednesday it was announced that Ceragon Networks (NASDAQ: CRNT) has reached an agreement to acquire Nera Networks of Norway. Both are in the backhaul sector of the wireless business. As frequent readers know, I have long been a bull on Ceragon for a number of reasons:
Large customer base and high growth- Low cost structure
- Excellent management team
- Outstanding market niche
As mobile networks grow, the interconnections between towers and switching hubs (backhaul) requires faster and faster connections. Putting in microwave solutions such as those Ceragon (and Nera) provide is signficantly cheaper than replacing pokey copper T-1′s with optical fiber. And in the parts of the world where growth is fastest (China, India, etc.) there isn’t even any copper to replace. Moreover, in many regions (e.g Africa, South America) the topology precludes wired backhaul.
Ceragon, with its roots in the Israeli military, has long been the technology leader in this segment. The addition of Nera’s complementary product line and customer set (particularly in South America) will provide a significant boost to its prospects. It also reduces reliance on Nokia-Siemens, Ceragon’s biggest customer.
But the biggest advantage coming from this consolidation is that it will ultimately make Ceragon a much more attractive takeover candidate than it already is. Potential acquirers are the large, diversified telecoms like Alcatel-Lucent, Nokia-Siemens, NEC, or Ericsson.
This has been a long-term buy-and-hold recommendation of mine for years, and that’s even more so now (though I’d probably wait a quarter or two for a lower price as Ceragon absorbs some losses from the acquisition and rationalizes Nera’s cost structure).
I would expect it’s even more likely to see Ceragon taken out itself, perhaps within 2 years or so. I plan on holding shares when it is.
Disclosure: I hold no position, either long or short, in any stocks mentioned here.
The Ship is Sinking
Well, you can’t say I didn’t see this one coming.
Recently I noted how badly Clearwire’s numbers looked (NASDAQ: CLWR). But long before that, I made the point that WiMax was overhyped and that founder Craig McCaw had a history of building up large wireless enterprises and exiting at the top–with as much coin as possible.
I got flamed from many for both opinions, largely from non-technologists who seemed more in love with their portfolio than they were well-versed in wireless telecom.
Today it was announced McCaw is practically sneaking out the back door, right after CLWR announced large layoffs amid doubts about its survival, and more important, right after a large $1.1B debt offering.
The smartest rat seems to have just jumped overboard.
Anybody wanna buy a deck chair on this puppy?
Disclosure: I hold no position, either long or short, in any stocks mentioned here.
Close to the Edge
With the New Year upon us, and a possible rally (well, sometime this year we hope), it may be time to think about dipping your toes back into the market. But how to put your money to work?
For technology stocks, I think it’s important to have an “edge”.
Over the past few years, I’ve been following a trend that–while not new–still has plenty of legs. Particularly coming out of this bear market. It’s not a stock screen, but it helps me see which technologies could be viable investment candidates, and which might instead require swimming against the current.
Things like control, intelligence, and value creation have long been shifting away from the center. Moving from large, centralized bodies towards the edge. The edge of markets, networks, locales. There are exceptions, of course, but this movement is still happening.
So I always check first to see whether any new technology–or its market–supports this trend towards decentralization and democratization.
“Uh, gee Scott, that’s great. I have no idea what the hell you’re getting at.” Fair enough. Let’s look at a few examples.
Healthcare
Lots of innovation here. Doctors interacting with patients and each other at a distance. Sending X-Rays to specialists abroad for review. Doctor-patient consultations over videophone instead of in the office. Glucose testers and home dialysis kits let measurements occur at home, not the hospital. Portable ultrasound machines and defibrillators allow diagnosis and treatment in remote areas.
Consumers are rating doctors, sharing treatment experiences, and finding health information via social networks and the Internet. Doctors themselves are forming “expert” networks to vet new research and treatments according to the wisdom of crowds thesis.
All of this is related to distributing power or value creation away from traditional central facilities and control.
Companies such as Sonosite (NASDAQ: SONO), HealthGrades (NASDAQ: HGRD), WebMD (NASDAQ: WBMD), Vital Images (NASDAQ: VTAL), and American Well (private) are among many in this space.
Manufacturing
Here’s a favorite.
Computer Aided Design (CAD) made it easier for companies to decentralize or even outsource much of their product design. But now they’re actually outsourcing the fabrication, and in some cases the end product manufacture can be done outside of a factory.
3D Printing (often more formally termed Rapid Prototyping or Rapid Manufacturing) has come of age, with machines that can take computer files and fabricate plastic or metal objects from nothing more than raw material and software. Before, even simple prototypes had to be fabricated over the course of weeks. Now, companies can turn a design into a marketing concept model within hours, and make needed changes much quicker, shortening design cycles. They also can avoid expensive tooling, since short-run items can be “printed” instead of made with traditional manufacturing processes.
Companies like Stratasys (NASDAQ: SSYS) and 3D Systems (NASDAQ: TDSC) make large industrial grade fabricators, as well as less expensive versions suitable for office use. Soon, they (and others like Desktop Factory–private) will make consumer versions cost effective.
Why have a replacement part for that lawn mower or kitchen mixer shipped from the factory, when you could simply download the file and print it at home?
Municipal Networks
While many think this is an idea that went bust, there’s still a huge demand for municipal networks. FCC statistics on broadband penetration are quite misleading, and plenty of Americans have either pokey DSL-like speeds, or no broadband at all. Towns and public utilities, often in partnership with private enterprise, are filling the gap.
True, many of these projects have not fared well–but that was usually due to faulty business models, not the underlying tech. Many ideas have been tried, and people are getting much smarter. There are many thriving wireless and Fiber-to-the-Home projects.
Instead of one giant centralized “mother of all” (Ma) Bell owning your phone or Internet connection, the end piece is owned locally. And its often faster, with more capacity, than many parts of the Internet. This is recapitulating what happened years ago to television in underserved areas, as Community Antenna Television (CATV) gave birth to today’s cable networks.
And it’s happening with energy generation too.
Others
Here’s a partial list of other innovations that are benefiting from “the edge”:
So how do we wrap our minds around this explosion of innovation? I think of this trend as occurring in 3 distinct ways:
Decentralization–moving utility to the edge
The basis for this first one is hardware, and typically some kind of disintermediation. It’s driven by things like the availability of leading-edge technology, shrinking hardware sizes, falling costs, and the Internet.
Examples–3D printing, TiVo, municipal networks, distributed energy generation
Authoring–tapping users to create
Here the basis is centered more around software, the demand for mass customization, and hobbyists. You know, that class of people with time, passion, interest, and the willingness to work for nothing but recognition and/or personal satisfaction. The availability of software tools, Broadband, and the Long Tail (everyone’s a hobbyist in something) are drivers.
Examples–Blogs, mashups, personalized ad streams, podcasts, YouTube
Emergent Systems–enabling collective/cooperative effort
This last is typically facilitated by an enabling service. Often with the existence of an intermediary to provide a control or filtering function. But while the result mimics a more centralized function, the value is created on the edges–a true “whole is greater than sum of parts”. Here the driver is simply networks of people in easy, rapid communication. I think they call that the Internet. 
Examples–Wikipedia, open-source software, eBay, prediction markets, grid computing
Then according to the man who showed his outstretched arm to space,
He turned around and pointed, revealing all the human race.
I shook my head and smiled a whisper, knowing all about the place.
Yes, “Close to the Edge”
Of course, like all classification systems, the answer you get will depend on which consultant you talk to. The concept is pretty general, and sometimes unwieldy. Regardless, I find the edge idea to have a lot of merit, and hope you do too.
The key is to find companies that create, use, and benefit from the technologies that are fostering these trends. Or the markets that they enable. It might be tool, a marketplace, an ad platform, a device, a network, whatever. Then do your research.
Once you get down to individual companies, it’s caveat emptor. Picking stocks based on trends alone is what cost people so much money investing in the likes of Webvan (another “edge” play) or Pets.com.
I have done research on some companies that are emblematic of this trend–including a few mentioned here–to a greater or lesser extent, some more recent than others. In fact many I covered as an analyst fell into this mold–and not by coincidence. But do your own due diligence before investing, or hire someone to do it for you.
Let me know if you think of other ways this idea might be manifesting in technology markets.
Disclosure: I currently hold no positions, either long or short, in any stocks mentioned here. However, I do consult with companies in some of the markets discussed.
Up And Down Vote
The Wall Street Journal had an article out yesterday that has created a real firestorm of controversy. It’s about how some of the large Internet players (such as GOOG, MSFT, and AMZN) are backpedaling on their previous Net Neutrality stances.
Moreover, they’re variously negotiating with telecablecos to gain “favored nation” or preferred treatment status on their networks.
Holy Turnaround, Batman!
Some writers quickly noted–here, and here–that Google at least is simply caching content closer to customers, just like Akamai (NASDAQ: AKAM) and other CDNs do. And that much of the Journal article reflects the kind of sensationalism many feared would appear once Rupert Murdoch (NYSE: NWS) bought the paper.
[As an aside, when I was doing research a year or two ago on Akamai, top management there vehemently denied my suggestions that they would ever be in competition with Google. Heh.]
If any of this is true, it’s a sad development, but hardly unexpected. As competition heats up for everything from ad serving to video downloads to cloud computing, everybody wants an edge. And they’re willing to pay for it.
Those that can afford to will get better services, better access, better distribution. Which means the little guys get shafted again. If you want to buy from Amazon, you get speedy page refreshes (not to mention faster access to things like S3). Google apps will work faster than, say, Zoho.
The rich do, indeed, get richer.
This plays right into telecableco hands. It’s what they’ve been lobbying for, after all. (I can almost see the big, fat, spider sitting there in the middle of its web inviting them all in. ) The result will be a vertical model, with only a few players controlling the entire value chain, up and down.
If this was just about commerce, I’d be less concerned. But it’s also about access to information. And about control of content. Ultimately, it’s about exclusion and higher costs for everyone. As well as a loss of the kind of innovation that has made this country successful.
Imagine if TV stations were free to broadcast good signals from those advertisers (or news programs) that spent more. Everyone else, they deliver fuzzy pictures with the sound continually dropping out. Pay to play. Eventually, everyone gets their news and entertainment from a few large companies. Welcome to the 50′s. There’s progress for you.
Critics argue: “But as businesses they should be allowed to offer different levels of service”. If there was true competition at the last mile level, I’d be inclined to agree. However, most of the large telecablecos built their networks–and their competitive advantage–on the revenue streams from exclusive franchises and government mandated monopolies.
You and I paid for their broadband networks through our monthly TV and telephone bills, mostly at a time where we had no choices. Or they used the proceeds from bonds whose attractive terms were based on the existence of those same “guaranteed” payment streams, which is basically the same.
Now that the moats around them have been fortified, we shouldn’t think that they’re entitled to operate as normal businesses. Monopolies (or even duopolies) don’t get the same rights as firms in a free marketplace. It’s not that I believe Network Neutrality should be regulated. (I agree about the principle but not the solution.) It’s last mile competition where the natural monopoly lies, and that’s what should be regulated. Until it’s no longer a monopoly, or until the telecablecos no longer have insurmountable market power.
Or until there’s structural separation.
Many thinkers (at least the ones whose salaries don’t depend on the success of telecablecos), have long recognized the most efficient market structure is to go horizontal–one company does the infrastructure, one does the content. Each competes within its own level, but not up and down the stack.
The PC industry helped this country thrive with the same model. Some companies built chips, some sold computers, some provided software. This drove innovation and helped keep costs low and falling. (Even the emergence of intra-level monopolies like Microsoft couldn’t halt the effect–some argue the standardization even helped.)
But now the big players are changing the game, in order to become even bigger. The Internet guys want to differentiate on performance, because they’re finally getting into each others businesses, and have to compete–some for the first time. The pipes guys want a piece of the content pie, because as network usage grows their costs go up, and they face resistance in trying to charge consumers more money for Internet access, especially as they’ve been billing flat rates for so long. But we will pay, one way or another.
Not everywhere, thankfully. Much of the rest of the world actually has competition in the last mile. They’ve created a more horizontal model, with providers competing “across” levels. If we fail to adopt this kind of structural separation in the U.S., we can watch our innovative spark and competitive advantages slowly drain away.
And just as many around the world laughed at us for voting to re-elect George Bush, they’ll laugh at us again, for voting to go “up and down”.
Disclosure: I hold no position in any of the stocks mentioned here.
C’mon In, The Water’s Fine
The blogosphere has been abuzz since last week about Comcast’s (CMCSA) new policy limiting the amount subscribers can download. Starting October 1st, Comcast will limit users to 250 GB of total downloads per month. Violators will first get a warning if they exceed the cap. A second “offense” within 6 months will risk loss of service for a year.
I continue to be amazed at the ISP business. The telecablecos are the only companies I know that limit the use of what they provide, instead of selling you more of it. As I wrote some months ago, the reason is largely due to the fiction of unlimited usage banging up against the reality of limited network design and oversubscription models.
I could rail at how unfair Comcast is being, or how out of touch they are with Internet users, or how ridiculous it is to punish people for exceeding usage limits they can’t measure. But I’ll leave that to other, better minds.
Instead, I’ll point out how Comcast isn’t even solving the right problem. The trouble with its network isn’t so much capacity in bytes. It’s peak speed.
[Let's ignore for the moment that the Internet is a two-way connection mechanism, and think like a telecableco, where the purpose of ISPs is to shove stuff downstream to you. We know different, but bear with me here.]
Ever take a shower at the same time as someone else in your house? What was the result? Yup, low water pressure, and a singularly annoying experience. Now imagine that on a neighborhood scale. Five people on your street decide to get clean at the same time and all you get is a dribble out of the shower head.
So what’s the solution? Well if you’re Comcast, you limit the size of the swimming pool your subscribers can have. Huh?
How many bytes you download is much less important than when you download them. If a thousand people try to stream a movie (shower) at the same time, they only use up 5 GB or so, but the experience sucks, because the speed (water pressure) is reduced for all. Conversely, download 250 GB (fill your pool) overnight when hardly anyone else is online, and you not only get a fast download but you don’t bother others.
Instead of limiting bytes–a poor proxy for usage–Comcast might be better served by limiting speed. Then they’d be in a position to charge different prices for different speed tiers. This would be relatively easy to do by capping modem speeds, would allow more accurate network capacity planning, and would solve the actual problem, namely congestion at busy times.
In other words, charge for water pressure (or size of water pipe), not the amount of water you use. If you want better pressure, pay extra. An alternative would be time-of-day charging, like traffic on interstates, bridge tolls, and electricity usage. (I suspect that would get too complicated for consumers, but you never know.)
Honestly, Comcast isn’t dumb. So why are they capping total bytes? Two explanations spring to mind, both only small contributors in my view:
- It’s easier to simply monitor total usage and kick people off. (Admittedly, most subs won’t run afoul of the new limits any time soon.)
- They’re clinging desperately to the fixed price, all you can eat model of bandwidth, and are loathe to change it unless their competitors do (that assumes they have competitors, of course).
But the real reason is that Comcast and their ilk want to be in the water business, not the pipe business.
Anybody think that the new usage caps won’t apply if the content you’re downloading comes from Comcast? Like, say with the new Network DVR service some of the telecablecos are itching to charge you for? You bet.
I have no doubt that if Comcast provided most of the video and other content you consume over its connections, their congestion problems would magically disappear. They’d probably even be advising you to build a bigger swimming pool.
And reminding you to fill ‘er up.
Disclosure: I hold no position in any of the stocks mentioned here.
Alias Mr. Moneybags
Who benefits the most from the recently announced Sprint/Clearwire deal? It may not be who you think.
This massive ($3.2B) infusion of money seems like a lot, but it’s just the beginning for this boondoggle. WiMax is a nice technology that works in some circumstances, with the right business model. But then so will WiFi, and it’s much cheaper. Besides, the mobile providers have a huge head start. Why buy new cards and sign a new contract when I already have what I need from my cell phone (or hotspot) provider?
In terms of becoming a successful business, WiMax is vying for the “most hyped” award with social networks. Expect more bags of money to be tossed into the trough before long.
So who gets what?
Sprint (S) – Removes one monkey from the back of CEO Dan Hesse as he is now free to focus on why Sprint has been shedding customers for so long. Also distracts everyone from noticing the delays in its own WiMax buildout.
Intel (INTC) – Intel has been peddling WiMax like a desperate streetwalker to anyone with an open car window. And its been seen hanging around the Clearwire convertible before. Intel wants to be the undisputed standard for WiMax chips, a role it failed to capture in WiFi. Not to mention selling lots of new processors for next generation laptops and smart phones.
Google (GOOG) – Yes, critical mass for Android will help extend its search and advertising dominance into mobile. And this network might turn out to be actually open. Despite Google’s game playing at the FCC auction, the “open” spectrum Verizon won will–in practice–be anything but. Fundamentally, Google has become a VC firm. A billion here, a billion there, something just might stick. All it takes is one 10-bagger to make it work. This ain’t it.
Time Warner Cable (TWC), Comcast (CMCSA) – the Rosencrantz and Guildenstern of mobile will be exactly as successful here as they were with Pilot, the failed MVNO venture with Sprint. And for the same reasons.
Clearwire (CLWR) – Now we’re getting somewhere. Big cash infusion, lots of media attention. The rights to resell Sprint 3G will allow it to grow its top line, giving it time to progress on the buildout. In the end, though, even with a working network it won’t be enough to either satisfy consumers or to make it a viable competitor to the telecableco ISPs. ( And I’m not alone in my thinking, here.)
But you see, by then Craig McCaw will have made his money.
McCaw has a history of promote, build, and sell. Usually at the top. And always with someone else’s money. He’s going to extract himself from this before long, and come out smelling like a rose.
Or a crisp thousand-dollar bill.
Regardless of what happens, whether the network succeeds, whether or not anyone else makes any money, you can be sure of one thing: McCaw has this all mapped out. There’s your winner.
Disclosure: I hold no position in any of the stocks mentioned here.
Open Sezmi
Startup Sezmi is beginning to get some notice–in a short piece on NewTeeVee, and a longer one on Forbes. Sezmi is aiming to become a new video distribution platform, combining over-the-air broadcast and internet delivery. While their strategy is ambitious, I have some doubts.
What it gets right:
- Video on Demand. These guys seem to get the transition from channels (called “nothing more than playlists for shows” by Sezmi co-founder Phillip Wiser) to VoD.
- Storage vs. Delivery. Storage is still cheaper, and Sezmi will “pre-load” it’s Terabyte box with some content, based on the results of a predictive software algorithm.
- Navigation. Sezmi is developing a viewing guide that will combine traditional TV fare with internet content, in customized “channels” that automagically group content by category.
What it doesn’t:
- Content. None announced yet, and Sezmi is attempting to extract per-sub pricing from the networks that’s identical to what the telecablecos pay. Good luck with that.
- Pareto’s Rule. The model relies on the fact that only a few shows account for most of the viewing at a given time. True enough. But take away the option for (or even impede) viewing that occasional odd show, and you’re D.O.A.
- Inertia. Such a new paradigm will create difficulty with viewers who are more interested in plopping down in front of the tube than in learning a new technology, box, and way of viewing TV. Certainly not impossible, but not easy either. At least with TiVo (TIVO), consumers could always default back to their old habits if they wanted–Sezmi will require jumping in with both feet.
- Cost Structure. This is where the wheels fall off, I think. Sezmi claims it can deliver TV for half the cost of cable, not having to pay for physical pipes. But it must pay to lease extra local broadcast spectrum. And it piggybacks on telecableco internet pipes that are largely cross-subsidized by the very content distribution it aims to disrupt. Let’s see how long that lasts. Not to mention beaucoup marketing and subscriber acquisition costs just to get off the ground–investments that incumbents like Comcast (CMCSA) and Time Warner Cable (TWC) have largely made.
My bet is that this will get lots of press, a few rollouts, and ultimately fail. If Sezmi is able to get some of its predictive algorithms right and create a useful way to combine internet and TV programming into a single guide structure, someone will buy it eventually–at a price disappointing to its VCs–for that technology alone.
Otherwise, Sezmi simply becomes Sezyu.
Disclosure: I hold no position in any of the stocks mentioned here.
by Michael Mauboussin
