In our very first post, we promised to bring you guest commentary. I’m pleased to present our first contributor: David Broberg, Vice President of Consumer Video Technology for CableLabs.

“Honey (or Dad) will you fix the network again?” That’s the kind of greeting I’ve been getting far too frequently when I come home from work lately. Have you heard that one yet? Clouds are often used graphically to represent the network connections and it seems my personal cloud (home network) has been suffering some growing pains lately. This growth has required far more attention from the local IT-guy (me).

A few months ago, I attended CES in Las Vegas and this was one of the greetings waiting for me when I returned home from my travels. At the show I saw dozens of new products that will connect to your home network and it frightens me to think these problems are likely to get worse before they get better. I recently took an inventory of the number of IP devices on my personal home network and here is what I found: Up to 8 PCs at any given time; two webcams, two NAS drives, two IP printers, one Xbox360, one DVR, two Nintendo DS units, one Windows Mobile Phone with WiFi access and a Chumby! All of these asking my router for an IP address - that’s 20 devices!

I traced what seemed to be most of the problems to the fact that most of these devices were using dynamic IP assignments and a few were fixed IP addresses; many with the dynamic-IP assignments would store their IP address when they were in power-saving mode, yet act as if they were disconnected from the network. If the router got rebooted for any reason while any of those devices was asleep, the device that just woke up would most likely find an IP address conflict because another device was now assigned to its original IP address. Another reboot of the router only pushed the problem down to the next device that was temporarily off-line. As a fix, I went around the house and reassigned fixed IP addresses to all 20 devices – so far this strategy seems to be helping but it wasn’t easy. Perhaps there is another way to avoid this problem, but that’s not really the point.

One of the trends from this year’s CES was for more and more consumer IP devices for your home. Soon, many of the flat panel TVs and STBs are likely to have IP connections, BluRay players with network enhanced features are coming too. Many mobile phones already connect to WiFi, soon this may be a standard feature on all cell phones. The sales of Xbox360s and PS3s are skyrocketing – they need a network too. There are more IP-connected devices coming including robots, music players, Internet radios, media center extenders, cameras, picture frames, flash-memory, lights, thermostats, sprinkler timers, beds – a few years ago there was an Internet-capable refrigerator and I’ve even got an Internet-connected wristwatch (thankfully it doesn’t need its own IP address since it goes through the PC connection.) If you like gadgets like I do, your home will become its own cloud over the next few years.

To make matters worse, another trend at CES was for far more fragmentation in this home networking market, not more uniformity. My house was prewired with structured wiring and has Ethernet available (at one socket) in every room. I’ve added two WiFi access points at opposite corners of the house (one up, one down) to provide good wireless coverage with 802.11b/g and I also added an original HomePlug powerline modem to connect the IP webcam in the garden shed. That accounts for three separate physical layers (one wired, one powerline and one wireless) and more are coming.

On the wireless forefront, many routers are moving to 802.11n or “pre-N” since the standards aren’t quite finalized. It promises faster rates and better coverage, but with all the “pre-standardized” units, interoperability is in question. There were also product introductions for portable TV based on WiMax technology from Motorola and something called a femto cell providing CDMA access inside your home from Samsung. For shorter ranges (3M), there are high speed and low speed choices including the new 480 Mbps wireless USB standard and the popular Bluetooth technology (3 Mbps) which just released version-2.1+EDR. Wireless mesh networks are also growing in popularity and innovation, with competing solutions from ZigBee Alliance and Z-Wave Alliance, both are low-speed technologies aimed primarily at home control and automation.

Networks connected through power-lines also saw innovation and chaos at this year’s CES. There were at least two updated competing power-line networking technologies that offer faster speeds capable of sending HD video with better noise immunity and more reliability. One was from Panasonic called HD-PLC (190 Mbps) the other system is called HomePlug AV (200 Mbps). Some of these technologies are being built into flat-panel DTVs to eliminate the need for the unsightly video/audio cables.

The third physical layer in the home is the coax network. This is usually what is used to connect the TVs in your house. Recently a number of companies have introduced technology to use this cabling for home networking connections too. It offers many advantages because of its shielding and design for high frequencies. There were many innovations described at CES this year including demonstrations of HDMI over coax, 1394 over coax, Ethernet over coax, one that combines 1394 and GigE over coax and a popular system called MoCa which is now introducing components that support the latest version 1.1.

There are other groups working to standardize the home network connections too. CableLabs has published home networking extensions to the OpenCable Host & OCAP specifications and has approved content protection systems for IP-based home network connectivity. The 1394 trade association was demonstrating technologies and devices that can bridge 1394 protocols to coax, fiber and other new physical layers. The Hana Alliance was demonstrating whole-home high-definition video networking solutions also based on 1394 technology at CES and released their Hana 2.0 design guidelines. Meanwhile CEA’s own R7 Home Network Committee maintains a variety of home networking standards as well as active projects to define future remote user interface protocols.

A recent market study from MultiMedia Intelligence reported that shipments of Internet-Protocol (IP)-enabled consumer electronic products reached 64 Million units in 2007. They say this represents a nearly 73% growth. They also report that semiconductor revenues from technology that enables these interfaces will exceed $2 Billion by 2012. Clearly we are just at the beginning of a growth of home networking technology as this trend extends to more and more homes. This growth will impact some homes earlier than others. Those with pre-teens or young teens at home now, are likely to see the most significant growth over the next 5 years. Others will be impacted more gradually. If you still haven’t been asked to fix the network yet, you soon will be.

We created this blog to tell cable’s story. The cable industry has spent $130 billion on our network since the 1996 Telecommunications Act was passed. That investment of private capital has spurred fundamental change in how we work, play, communicate, and entertain ourselves.

Today a friend sent a link to a video that illustrates that point beautifully. It’s a spoof of the Fox series 24. Allegedly the ‘long lost’ original pilot made in 1994, the video clearly shows the changes in technology we’ve seen over the period of time that we were building our network. Take a look.

NCTA President & CEO Kyle McSlarrow testified today at the Senate Committee on Energy and Commerce hearing “The Future of the Internet.” You can hear an MP3 of his delivered remarks and, earlier today, we featured a post that summarized his remarks.

 

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I particularly note his remarks at 2:22, when he said:

Every single person here has a blog or a website or has content that has distribution and has enabled consumers, millions of them around this country, to [access] that content and no one is blocking it… We want as much content, we want as many applications to succeed as possible. That’s what makes our broadband service attractive to consumers. And if we ever engaged in conduct that consumers were outraged about, they do have a choice. They can go somewhere else.

He said that while we can have a discussion on what is the most appropriate method of network management, “…there is zero evidence that any operator is engaging in anticompetitive conduct.”

However, despite the paucity of evidence of such behavior, Professor Lawrence Lessig, a big proponent of net neutrality, said that some might argue that we should wait until we see discrimination before we do something about it - which strikes me as a sensible approach to legislation - but that hi-tech investments are made today based on what investors think the network will look like in the future. He says there is such extraordinary uncertainty about what the future holds that it threatens innovation. Threats about what might happen without net neutrality have been around for five years, back to Columbia Law Professor Tim Wu’s 2003 paper Network Neutrality, Broadband Discrimination. I wouldn’t say that investors are shying away from promising broadband applications.

There was also a great deal of talk about what one person referred to as the United States’ “precipitous freefall” in terms of our global broadband ranking. I refer you back to our series on the problems with the OECD rankings, especially this post: The Truth About Japanese Broadband.

The cable industry has consistently demonstrated its commitment to policies that ensure all Americans have access to affordable broadband. This includes:

• Proposals to create a fund tailored to expanding broadband into unserved areas.
• The Broadband Data Improvement Act which would improve federal data collection regarding where broadband services have been deployed in the United States to achieve the goal of ubiquitous broadband availability for all Americans.
• Tax credits or other tax incentives to providers that build out in rural areas that are unserved by an existing broadband provider.
• Reform of the RUS broadband loan program so that funding is targeted specifically to unserved areas.
• Expansion of the FCC’s Lifeline and Link-Up Programs to help ensure that broadband access is extended to low-income households.
• Public-private partnerships to provide broadband in unserved areas.

We recognize that the government can play an important role in making certain that the economic and social benefits of broadband connectivity are extended to all areas of this country. While broadband deployment to every community in America merits the full attention of policymakers, legislation calling for “network neutrality” or government intervention into the operation of networks would undermine the goals of broadband deployment and adoption.

The government’s consistent light regulatory touch since the introduction of broadband has worked. Only that continued regulatory freedom is likely to spur the investment and innovation that consumers have come to expect.

The cable industry is on the verge of making the leap — from “broadband” to “wideband” — with a technology which can enable dramatically higher download and upload speeds. Several weeks ago, for example, Comcast launched a “wideband” service in Minneapolis-St. Paul that offers speeds of 50 Megabits per second. Comcast expects to have wideband available to 20% of its systems by year-end 2008 and to all homes passed by mid 2010.

The efforts of broadband network providers to build larger and faster networks have helped ensure the success of countless numbers of new Internet businesses and applications. Despite concerns about alleged limited access to broadband, use of Internet video on demand has grown at the most dramatic rate. In February 2008, nearly 135 million U.S. Internet users spent an average of 204 minutes viewing 10.1 billion online videos. YouTube represented 34% of those online videos, or nearly 3.5 billion.

For years, net neutrality proponents have argued that without government intervention, broadband providers would stifle competing services and content providers; Internet development and usage would stagnate; and consumers would be unable to use their broadband connections to download video or access other emerging applications. In fact, cable’s investment in broadband has driven innovation and investment in new content and applications at the edge — the exact opposite of what was predicted by advocates of net regulation.

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It’s worth revisiting a topic that never goes off the radar: Concern about content. Everybody can agree that cable transformed the television landscape by vastly expanding viewing choices, but not every viewing option is to everybody’s taste.

But the important point to remember that what cable delivers is choice. You get a ton of options and then you pick out the ones that appeal to you. Spouses, partners, kids, friends and neighbors all are likely to make different choices. But by starting with a wide initial set of options, everybody can have a better chance of being satisfied.

Some people are very concerned about certain programs. This is very understandable, because not all programming is appropriate for all ages. Some content may not be to your taste or may even offend you. Fortunately, there is a solution: parental control features.

You can find out more at our website Control Your TV or from a report prepared by the Progress & Freedom Foundation’s Adam Thierer. Suffice it to say that between your television’s V-chip controls and those of cable’s digital set-top boxes, you have the ability to block by channel, rating or show. (Also, read this chronology to see how long the cable industry has been addressing this issue.)

Philosophical argument #1: I don’t like a piece of content, so it ought to be stopped. The problem with this approach is that what’s a problem for you may not be a problem for me and vice versa. The best solution is not to ban, but to allow me to choose that content and allow you to block it out.

Philosophical argument #2: That piece of content is so offensive that it’s wrong that I’m “forced to subsidize it” with my cable subscription. Currently, the best and most economically efficient way to deliver a broad array of viewing options is through bundles of channels. You may feel like you’re “subsidizing” the channels you don’t watch, but your fellow subscribers who don’t watch your favorites may be “subsidizing” yours. There is plenty of evidence to show that a mandatory a la carte system would lead to fewer viewing options, less diversity of content, and higher prices overall.

The issue of mandatory “a la carte” for cable television service continues to be a hot topic. This is actually a pretty broad and complex topic, so I’d like to break it down a bit.

For some people, when they think of “a la carte,” they simply mean, “I feel that my cable bill is too high and I’d like to pay less.” Just remember than any discussion of price ought to include an examination of value. Is the product or service delivering value in proportion to its price? (For more on the relationship of value to price, see this earlier post.)

But, let’s accept the premise for a second. You think your cable bill is “too high.” Many fans of a la carte are making this calculation.

• Average Monthly Price for Expanded Basic Programming Packages: $42.76
• Average Number of Channels in Expanded Basic Package: 80
• Average U.S. Household Tunes to Channels per Month: 15.7

“So, wait,” the thought goes. “If I pay 43 bucks for 80 channels, but I’m only looking at 15 of them, than the other 65 are wasted. There are channels I never look at. Why am I paying for them? If only I could pay for exactly what I want and nothing more, surely I would pay less.”

Let’s also accept another premise. You like some cable channels. You probably don’t watch them all, and there may be a few you actively hate. But if you get some kind of multichannel video service, it’s because there are channels you enjoy and want to see continue and prosper. So, while you might want to pay less, you don’t want that to happen at the expense of the viewing choices you now enjoy.

There’s the conundrum. Mandatory a la carte won’t satisfy either of these desires. You probably won’t end up paying less and you’ll also endanger the economics of the channels you love.

The Yankee Group recently issued a report entitled “A-la-Carte: The Demise of Television as We Know It.” The Research Recap blog has highlights of the report. It’s important to remember that most cable networks - except for premium services such as HBO, Showtime and Starz - have multiple revenue streams. They make money from cable operators for allowing them to carry the service (i.e., to deliver it to you in your home) and they also get advertising revenue. Both of these revenue streams rely on being in as many households as possible, even separate from the issue of ratings.

If I am the president of the Fly Sneaker Channel, in an a la carte world, I now have to market to each household individually to convince you to buy my channel. So, my marketing costs go up. Plus, I won’t make my advertising revenue, because now I’m in zero households to start and I’ll probably never build up to a very large number except very slowly. You might like my channel; you might want to skim it occasionally to check it or there might be a positive review that makes you want to see a particular program. But because it’s not on your lineup unless you choose to subscribe to it, that won’t happen.

Now read the recap of the Yankee Group’s analysis.

• Under a la carte, programmers will lose their current economic model. Surviving networks will have to charge consumers between $5.00 and $10.00 per channel to overcome the decrease in carriage fees.
• With a la carte, casual viewers go away, decreasing both viewers and advertising revenue. Niche networks won’t have enough reach to survive.
• With mandatory a la carte, the 565 national video programming services and networks will dwindle.

Some networks will not be able to financially survive. Before you say “Good riddance,” don’t assume your favorites will survive. Many networks may not have the money to invest in new and innovative programming, so you may have to kiss your favorite shows goodbye as well. The networks that do survive may have to charge several bucks a month for subscription fees. Odds are you could select very few channels before you’re right back up to the price you’re paying now.

The cable industry has spent more than $100 billion since the Telecommunications Act of 1996 to create the most extensive and robust broadband network found in America. This robust technology platform now passes more than 117 million households with high-speed Internet Service, serves 65 million households with video services, and provides telephone service to 15 million customers.

Digital Phone

Consumers now have access to more competition than ever thanks to cable. Digital telephone service provides consumers with a true alternative to standard telephone service. While some cable operators have offered traditional circuit-switched telephone service for years, most are now offering digital phone service. This service often comes as part of a “bundle” where multichannel video, high-speed Internet and voice services are offered as a package and billed in a single invoice, providing a better value and more simplicity for customers.Through the use of software, digital phone service provides all the functionality of the public switched telephone network (PSTN), while making possible new features not available through traditional telephone service, such as Web portals that allows customers to review their calling history or listen to voicemail messages online when away from home. Digital phone service is a revolutionary technology that has the potential to completely change how phone calls are made and how voice services are used.

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There are many ways that the cable industry has expanded consumer choice. You don’t have to be that old to remember a time when you had maybe a half-dozen TV viewing choices - maybe a few more, maybe less - and now you probably have hundreds. Not that long ago, it was the same situation with the telephone.

A couple years ago, NCTA created a video to explain cable’s impact on America. Take a look and skip ahead about two minutes in. That image of the phone industry as stodgy is amusing because it was so true. Rotary dials, touch-tone, mobile phones - the pace of these innovations was pretty slow.

But today, consumers are finally enjoying true facilities based competition in local phone service. Cable’s service is reliable plus it offers many of the standard features for a great price. Generally, you get unlimited calls anywhere in the U.S., Canada and Puerto Rico. You get to keep your current home phones, wall jacks and phone number. Many operators include services like Call Waiting, Caller ID, Call Forwarding, Speed Dial, and so on. But you also see features like digital voicemail that can be accessed over the Internet from any location, and new features like Caller ID on the TV are beginning to be introduced in some communities.

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More than 15 million Americans have switched to cable’s digital voice service. One big reason that consumers are switching is the significant savings that can be found, especially if the service is included as part of a bundle that includes video and high-speed Internet.

In fact, in the past four years, consumers that have switched to cable phone service have already saved $23 billion. Evidence of that can be found in a study by Microeconomic Consulting & Research Associates, Inc. (MiCRA). The report, “Consumer Benefits from Cable-Telco Competition,” was first prepared in 2006 and then updated in November of 2007.

According to MiCRA, consumers and small businesses across the country have already saved $23.5 billion and may save a total of $111 billion on their phone bills over the next five years as a result of robust competition. MiCRA estimates that residential consumers could save an average of $144 or more each year, while small businesses could save 50-70% on their phone bills – although the projections conservatively assumed that small businesses would save about $240 each year.

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In 2007, J.D. Power and Associates’ annual rankings of telephone service provider customer satisfaction ranked cable companies #1 in customer satisfaction in all six US regions. More than 15 million customers currently enjoy cable’s phone service, and it’s no wonder cable companies are signing up millions of new customers every year.

Cable’s telephone service often comes as part of a “bundle” where multichannel video, high-speed Internet and voice services are offered as a package and billed in a single invoice, providing a better value and more simplicity for customers.

Cable’s digital phone service makes possible new features not available through traditional telephone service - such as Web portals that allows customers to review their calling history or listen to voicemail messages online when away from home. Digital phone service is a revolutionary technology that has the potential to completely change how phone calls are made and how voice services are used.

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