Given the FCC approval of the XM – Sirius merger, and the release of the “voluntary commitments and other conditions” that sealed the deal, one natural question that has arisen is “If satellite radio can do a la carte, why can’t cable providers do it?”

The answer, of course, is buried in the details.

To understand the answer, you need to understand several major differences between cable providers and satellite radio.  Some of these include:

• Ownership of content
• Advertising support and business models
• Delivery and ease of reproduction/pricing

Most XM/Sirius channels are produced and owned by XM/Sirius so they do not compete with each other for listeners or access to the satellite radio lineup because the company only produces channels that they launch.  In the video world, most channels are not owned by the distributor so they compete against each other for access to viewers, ratings and advertising dollars.  In an a la carte world, this competition would require each video channel to spend significantly more money on marketing and promotional costs to attract viewers, driving up the cost of that programming to the subscriber.

In addition, satellite radio was founded on the notion that most of its channels would be commercial free or have very limited advertising.  Unlike video programming which relies heavily on commercial advertising, XM/Sirius programming is supported almost entirely by subscriber fees.  So with each channel relying on little or no advertising support, applying an a la carte model to satellite radio would not require each channel to boost its price (or reduce its quality) to make up for lost advertising revenues.  In the video world, that is exactly what would happen.

You also must consider the programming.  While satellite radio does have a respectable diversity of programming, each of the channels is essentially a technical reproduction of the other and the cost of production (which largely consists of recorded music and other material) is lower than video production and generally does not vary widely. Obviously attracting well known personalities like Howard Stern can affect costs (including potential litigation costs), but generally speaking, music and talk programming are fairly consistent.

In the video world, however, the cost of producing channels varies greatly and the cost gaps continue to widen with the growth of high-definition and more and more original programming. For instance, it costs more to produce an episode of Burn Notice than it costs to produce How Do I Look? So, while XM/Sirius may be able to offer customers the opportunity to purchase any fifty of its music channels at the same per-channel price, it is impossible for cable operators to offer video channels in this manner.

Finally, aside from the structural business issues mentioned above, it’s also important to understand that what Sirius-XM has agreed to is not actually ”a la carte”. Despite the marketability of attaching the words “a la carte” to their new options, according to their channel lineup and pricing document, XM and Sirius are offering consumers the opportunity to purchase smaller bundles.  You can choose either 50 channels from ONLY one provider (out of a total of 100 possible choices) or 100 channels combined from both.

The pricing document makes it clear that the “a la carte” option will not be available for a year, and will require new equipment.

A la carte programming will be available beginning within one year following the merger, and the other programming options will be available beginning within six months following the merger… A la carte programming will only be available for subscribers using new radios, which will be developed following approval of the merger.

There is no opportunity to buy only 1, 3, 5 or 6 channels.  You have to start with at least 50 channels.  That’s not what most people describe when they talk about a la carte.

There’s no comparison between cable’s business model of delivering ad-supported television purchased from multiple competing providers and satellite radio’s model of delivering ad-free content of their own design.  People may try to make such a comparison in order to argue that since XM and Sirius have agreed to provide “a la carte,” cable must be able to do it, too.    Unfortunately, as study after study has shown, the facts just don’t support the fiction.

This Friday, the FCC will hold an Open Meeting and the first agenda item is the complaint by Free Press and Public Knowledge against Comcast. According to an article in the Wall Street Journal today, the agency “will rule that the cable giant violated federal policy by deliberately preventing some customers from sharing videos online via file-sharing services like BitTorrent…”

As I wrote just last week, it’s critical that we can all agree with the principle that “some kind of network management is necessary to ensure a quality experience for our customers.” Once we get past that concept, we can discuss and debate what’s the best way to achieve the goal of a quality Internet experience, but we can hopefully also agree that the government is not the best body to make these decisions.

In this morning’s Washington Post, FCC Commissioner Robert M. McDowell poses the question: Who Should Solve This Internet Crisis? He outlines past network challenges and describes how “engineers, academics, software developers, Web infrastructure builders and others” came together to find solutions. He then answers his own question.

The Internet has flourished because it has operated under the principle that engineers, not politicians or bureaucrats, should solve engineering problems.

P2P apps present particular challenges for network managers, as McDowell acknowledges, and just building bigger pipes doesn’t fix the problem. That’s not to say that this challenge (and others) can’t be addressed. McDowell points out that we need to avoid creating a bigger problem.

Our Internet economy is the strongest in the world. It got that way not by government fiat but because interested parties worked together toward a common goal. As a worldwide network of networks, the Internet is the ultimate “wiki” environment — one that we all share, build, pay for and shape. Millions endeavor each day to keep it open and free. Since its early days as a government creation, it has migrated away from government regulation.

If we choose regulation over collaboration, we will be setting a precedent by thrusting politicians and bureaucrats into engineering decisions.

You may recall last week’s discussion of network management, provoked by our FCC filing. Michael Willner also posted about this issue, which then garnered some interesting comments from the likes of George Ou and Robb Topolski.

It’s a good idea to take a look at the whole thing, because it illustrates an important point.  I hope we made the argument sufficiently in our post that some kind of network management is necessary to ensure a quality experience for our customers.  This online discussion illustrates that achieving this is a complex issue. Almost any decision requires you to balance pros and cons. It’s complicated and it’s not clear what the correct path is, which then probably requires a period of some experimentation.

Given all of that, why would you want to put a government agency in charge of deciding what particular method of management should be used?  Or worse, have it decide that no methods of management can be used at all?

Well, that’s the way it’s being positioned anyway…

The Emmy nominations came out today and the historical part was that, for the first time, two basic cable programs (Mad Men & Damages) were nominated for Outstanding Drama Series, along with Showtime’s Dexter.   (Aaron Barnhart also has a rundown at TV Barn.) HBO got 23 nominations for John Adams.  Fan fave Battlestar Galactica got five.  Check the Emmys site for more.

We say this over and over, but this is part of the cable success story. I recently wrote about how cable became a big player in the summertime, but ratings have been up overall for some time. It was back during the 2001/2002 TV season that cable networks first topped all national broadcast networks collectively in terms of primetime television viewership. It was in 2004 that 11 cable networks collectively garnered 50 awards during the Primetime Emmy Awards, surpassing for the first time broadcast networks, which only earned 37 awards.

This doesn’t just happen by accident. Operators and programmers invest billions in programming – the networks spent $20.32 billion last year in making it and the operators also spent over $23 billion in paying fees to the networks for carriage.

And don’t even get me started about what mandatory a la carte might do to this situation…

There’s a very amusing picture painted of NCTA on Ars Technica, literally Shakespearean in nature.

“Once more unto the breach, dear friends, once more,” cried William Shakespeare’s Henry V in the play so titled. “Or close the wall up with our English dead!” Perhaps in said spirit did the National Cable and Television [sic] Association (NCTA) veep Michael Schooler and Insight CEO Michael Willner march up to the eighth floor of the Federal Communications Commission on the ninth of July to plead the cause of ISP “network management”…

Taken in conjunction with yesterday’s post on DSL Reports, it sounds like we painted a portrait of Biblical apocalypse. NCTA’s own Michael Schooler and Insight’s Michael Willner supposedly warned of “the impending destruction of the Internet by P2P users.” Or else we said “that the Internet would all but collapse.”

Wow! That sure sounds scary. But since neither Karl Bode nor Matthew Lasar was actually at that meeting, they instead apparently based their accounts on a letter we filed. If you read it for yourself, you find that four points were made.

• Network management is necessary to prevent serious congestion.
• Service for customers would be degraded without such management.
• Network upgrades alone won’t solve problem.
• The government should not pre-determine the tools and technology to be used for network management.

So I ask: Which of these four points are in contention? The DSL Reports post even says “Most techs don’t oppose reasonable network management (booting extreme gluttons, some QOS and prioritization)…” So, we can start by agreeing that reasonable network management is a good thing. Without some kind of management, problems will arise.

Let’s look at service degradation. Was complete congestion claimed? The phrase used is “can cause substantial (and sometimes complete) congestion of the system’s upload capacity.” Let’s emphasize three key words: can, sometimes and upload. This is critical, because peer-to-peer applications are the focus of attention.

This goes to the point about simply upgrading a network. A peer-to-peer application looks for users with the best upload connection. Building a bigger pipe does not eliminate the necessity of network management.

Finally, is the federal government really the best body to judge what network management tools are appropriate? I’m not convinced it is. Nor am I convinced that the answer is a big dumb pipe that treats all bits equally, whether it’s a phone call, streaming video, a P2P download, an e-mail, or a Web page request. And anybody who actually understands how networks work wouldn’t either.

Both of these posts claim that we are crying “Armageddon!” for nefarious reasons. But should nothing be done at all? We want to give our customers the best Internet experience possible, now and in the future, and we need network management to accomplish that goal.