First, and perhaps most importantly, we are very pleased that the Plan is so clear that the only way a retail video device marketplace can fully work for consumers is if all MVPDs participate.  And, as part of a proceeding to do this, we have already committed to a series of consumer principles governing video devices which we think can and should serve as the foundation for Commission and inter-industry efforts:

Our industry is committed to providing content to consumers where and when they want it, on all possible consumer devices, and for those devices to be innovative platforms for new applications. We want consumers to be able to buy video devices at retail and to know that cable content can be among their video sources.

The cable industry has consistently asked the Commission to take a fresh look at the CableCARD and navigation device rules in light of today’s market where 40 million consumers subscribe to video service from satellite and telephone providers.  Most of cable’s competitors have been exempted from the rules which clearly haven’t led us to the place that Congress envisioned in the 1996 Telecommunications Act.

As far back as August 2007, NCTA called on the Commission to implement an “all MVPD” solution:

For CE manufacturers who would build devices that can operate not just across cable but across a wide variety of MVPD networks, there could be a new network interface device. Such a device could handle most of the complexities of network consumer premises equipment functionalities and deliver an MVPDs services across an interface that can also be used by other MVPD networks. This approach could offer consumers a low cost option for accessing all cable services on bi-directional retail devices, the ability to use their televisions with other MVPD providers, and the capability to access new services on the same television as new and innovative services are deployed. The cable industry could work on such a solution should the Commission bring those networks into meaningful regulation.

We renewed our call for a broad Commission proceeding last December and highlighted some of the reasons why a cable-only retail video device marketplace has failed to develop:

It may be that consumers simply prefer the option of leasing devices that are available at government regulated “cost-plus” rates (or whose rates are otherwise kept low in markets where effective competition exists) and which can be upgraded when the next model is released rather than purchasing a device at retail and assuming the risk of obsolescence.  Leasing also makes it easier for customers to switch from cable to satellite to telco video services and back again, especially since today’s retail CableCARD devices are not supported by the DBS providers or many telephone-company MVPDs. It may be that the CableCARD, while well supported, is becoming outdated: AT&T’s U-verse and other IPTV services use DRM-based security methods.

The Plan also suggests replacing the CableCARD regime in favor of  a “gateway” approach.  As we’ve pointed out before, a gateway approach is certainly one of several approaches that should be thought through, and we are pleased that the Broadband Plan acknowledges that “functional equivalents” should also be reviewed.  But, while we are committed to working constructively with the FCC on this and related issues, we still firmly believe that technology mandates should be a last resort.  And to meet different consumer demands and needs, it is important that innovation be encouraged by both MVPDs and third party manufacturers.  Proposals to “disaggregate” a service purchased by a customer, and provided by a MVPD, over-the-top or other service, would undercut the very premise of innovation we should want, and are likely to fail.

We also welcome an informed debate on the Plan’s proposed short-term fixes. However, the focus on cable-only changes is, to be candid, at odds with the effort to incentivize all-MVPD solutions, and its proposals to change the CableCARD regime seem inconsistent with the Plan’s overarching recognition (which we pointed out last year) that cable-centric CableCARDs do not appear to be the key path to success.  We’ll make the case to the FCC that it is far better to focus on improving the marketplace for consumers in light of the exciting changes taking place before our eyes than to dwell on issues that are increasingly stale and, more important, increasingly irrelevant to the marketplace of today, let alone tomorrow.

Staci Kramer at PaidContent neatly sums up their positions:

…Cuban believes in subscription TV and sees Ronen… as representing free-only; Ronen believes TV over the internet is the present—and the future but a la carte. He’s not anti-pay per se—Boxee is working on a pay offering—but anti-establishment TV. Cuban doesn’t see an internet TV business model that works yet.

“How will content be paid for?” is a key question, and the Current Events blog notes that Cuban made strong points in this area:

Cuban pushed hard, arguing that other than a few big players, like Apple, you simply can’t get people to pay on a scale to make a solid business case for internet delivery of media. Ronen fired back with the question “What you are saying is that because you have lack of choice, you are going to win?” Cuban kept going back to the fact that Boxee can’t monetize their business, while Cuban won’t broadcast anything he can’t make a dollar on, and he has a point. Everyone wants to be able to pick and choose what they want to watch, but with the internet giving so much of it away for free, few are willing to pay.

At several points, Cuban argued that the Internet isn’t really set up for efficient delivery of video, but that cable’s infrastructure is. The Gearlog blog highlighted this point:

“But people are willing to pay for Internet video right now,” Ronan responded.  “They are paying for Netflix, they are paying for MLB, they are paying for a lot of things,” he said. “It isn’t about free or not free. It is about whether the Internet can deliver video and it can.”

How much video and how reliably it can be delivered is a different question. And that is where Cuban made his strongest points.  Having a few million users download programming a few times a week is one thing, but what about when it is tens of millions? The Internet simply wasn’t built to support that kind of delivery.

Ronen kept arguing that the old models are dying, that distribution via the Internet is the future, and that it is therefore foolish for content owners for Cuban to not make content available online. Cuban countered that no one is making significant money online and made it clear that he wasn’t going to give his content away for free. For example, Cuban joked, perhaps the producers of the show The Office should just give their program away for free and then tour the production as a play around the country.

Two colorful Cuban quotes:

• “The a la carte model is for morons.”
• “If you think that the Internet going to replace cable, you’re crazy.”

His larger point is that in an a la carte universe, content players have to include significant promotional expenses, because in a world of unlimited choices, you have to find a way to stand out. To an audience member who complained about “ paying $100 a month to watch three shows,” Cuban responded, “In an a la carte world, you’re one of zillions. Marketing is expensive.”

But I think the key point of the whole discussion slipped by most of the audience, and I haven’t seen it reflected in the news coverage. An audience member asked how an Internet-based subscription service – one where the consumer contracts with a company, that then delivers video over the Internet for a fee – would differ from what we have now. Cuban said this was a good question. It is, because the answer is that it wouldn’t look different at all.

I went up afterwards to discuss this with Cuban and confirmed what I was thinking. Consumers don’t care how programming comes to their house, whether it’s over fiber or coax, by satellite or by IP transport. They turn on their TV and watch stuff. So, as long as the economics of producing content remain the same, and there’s no reason to think they won’t, then the technical means of getting programming into the home are immaterial.

Cuban said to an audience member after the session that many of the elements of Internet-based  content look just like digital cable: streaming content on demand, storage costs, capacity issues. As cable becomes increasingly digital, those similarities increase. And if those two worlds – Pay TV and the Internet – are alike in many ways, then it becomes even more important to look at the ways they are different.

Cuban thinks that cable’s subscription model works better for him financially. He also thinks that cable does a better job of delivering video, especially as hi-def becomes more prevalent.  Consumers aren’t going to care about the nuts-and-bolts of how it all works. As Cuban put it, “The future of television is… television.”

[NOTE: Photo above used by kind permission of Staci Kramer.]

Many of the news stories and blog coverage have attacked the business model of multichannel video providers (which includes cable, DirecTV & DISH, AT&T’s U-verse & Verizon’s FiOS). Such arguments invariably lead reporters and bloggers to one of two conclusions: We need à la carte or all video should be available online to all consumers.

Over at AllThingsD, Peter Kafka revealed a rate card from an unknown cable operator that reveals what said operator pays each programmer for the right to carry their signals. Kafka thinks that the hidden cost of programming is the problem.

As I’ve said before, I think that many cable viewers are probably okay with most of the bundle–or at least unwilling to foot the bill for real a la carte pricing. But maybe if you waved this list in front of them, they might rethink that.

Of course, there are a few problems with this. First, there’s no way of knowing what these prices really mean. Could this be the same rate that all companies pay? After all, Wal-Mart doesn’t pay the same price for product as another retailer might. In addition, the “wholesale” price that a video distributor pays (or any business for that matter) isn’t the same price that a consumer pays, especially if you purchased channels on an individual basis versus the savings of a bundle.

At the Atlantic, Derek Thompson points out more problems:

Monthly cable bills are about $50, [Kafka] says. An American’s average monthly TV time is 150 hours (via Nielsen). So today we pay about 30 cents per hour of TV, right? Not exactly. Monthly cable bills are by household. Monthly TV hours are by individual. I live with two roommates. I pay $17 for cable and consume 150 hours of television. My TV experience costs more like 11 cents per hour.

Thompson also points out how a la carte would affect advertising and notes that this analysis doesn’t reflect how people watch TV in the real world.

…a great deal of TV time is spent “surfing” for nothing in particular, or watching shows to which we ascribe no real monetary value but we watch anyway because we’ve already paid the monthly access bill.

Eduardo Porter, in the New York Times, also argues that Americans might be more likely to pay for content if they knew what they were paying for, even suggesting that a coin slot attached to the TV or PayPal account would enable purchase of individual shows, regardless of which network they are on.  But all Porter has to do is look at the cost of pay-per-view to realize this is a much more expensive way to watch your favorite shows.

We’ve covered the topic of a la carte several times before, but the point is that cable networks will lose the broad carriage they have now and be forced to spend considerable money to market and sell the channel to individual consumers. Revenue goes down, operating costs go up. Programming will be impacted.

There’s usually a conclusion to all these “analyses,” even if they don’t say it flat-out: “If you would only move to à la carte or some kind of metered plan – then consumers would pay less.”

Except, perhaps, they wouldn’t.

Earlier this week, Cablevision announced the PC to TV Media Relay service. This LightReading.com article spells out the details.

Cablevision Systems Corp. said it will begin testing a new service in June that delivers all sorts of media sourced from a customer’s PC — including iTunes content, digital photos, and even over-the-top video shipped in from the Web — to digital set-top boxes.

Cablevision’s “PC to TV Media Relay” service will enable cable TV customers to replicate the information and images appearing on their PC screens onto their TV screens without any extra special home networking equipment, other than the cable modems and the non-IP digital cable set-tops they’re already using.

After downloading a special PC software client, you stream content from your computer up to the cable headend, and then that content is fed to a dedicated digital channel you tune to on your set-top box. You could connect your laptop to your TV now, but this service would eliminate the need for a VGA cable.

This VideoNuze post suggests this could have implications for other video services, but Netflix seems quite pleased at the announcement. I wanted to focus on two other elements.

This article on Entertainment Weekly’s site offers some criticism:

…Cablevision’s plan has the disadvantage of, well, requiring that you have cable — it only works if you have both Cablevision cable and Cablevision Internet. Quite simply, Cablevision is in the business of making sure you don’t drop your cable TV subscription when you discover you can watch just about anything online, while other HTPC outfits are in the business of just getting content on your TV.

…does Cablevision’s plan seem like best of both worlds (cable and Web content on your big TV screen), or does it just sound like having to pay one bill too many? Who’s already unplugged the cable from their TV and taking an Internet-only approach?

Yes, I know I sound like a broken record when I say this, but every time I read someone claim that you can replace cable programming through the Internet, I have to point out that you can’t. I most recently addressed this issue in a post, but the simple fact is that most full-length cable programming is not available online for free. There is a lot to watch, but not cable programming (for the most part).

My second point is that this new service is another example of cable shifting its resources to manage bandwidth. I have written in the past that cable is having its own “digital transition,” which is separate from over-the-air broadcast television’s DTV transition of last year. One important step is moving from analog to digital, which takes up less space. Another way is through sending content on-demand, such as with VOD or this new PC to TV Media Relay service. Yet another example is Cablevision’s announcement this week of an April deployment for remote storage-DVRs, a service in which content is stored on servers at the headend and then streamed to the home as requested.

This trend will continue, with cable’s infrastructure being used in new ways that will allow even more stuff to be sent over the pipes. Kyle McSlarrow made this point just last week:

Today, a typical cable system has a total capacity of 5 Gbps, meaning our typical customer already has well over 1 Gbps of data available to his or her household. Today, we use that capacity to deliver hundreds of channels of analog and digital video (including high-definition television) and phone service as well, of course, as Internet access. As new applications and services emerge and consumer demand changes, the cable industry is well placed to redeploy bandwidth to meet those changing needs.

Expect more developments along these lines.

First, in a speech earlier this week before NARUC, the association of state communications regulators, FCC Chairman Julius Genachowski provided the initial  preview – starting with his forward-looking challenge to the communications industries to provide Internet speeds of at least 100 Mbps to 100 million U.S. households by 2020.

Our industry remains committed to leading in the effort to meet America’s broadband goals.  That will require the continued evolution of the cable plant from a one-way, analog video programming service to a platform that delivers an ever-changing array of two-way, digital services; the continued deployment of next generation broadband; and continued innovation to use capacity more efficiently.

Today, a typical cable system has a total capacity of 5 Gbps, meaning our typical customer already has well over 1 Gbps of data available to his or her household.  Today, we use that capacity to deliver hundreds of channels of analog and digital video (including high-definition television) and phone service as well, of course, as Internet access.  As new applications and services emerge and consumer demand changes, the cable industry is well placed to redeploy bandwidth to meet those changing needs.

Most of this will involve private investment and private sector innovation.  But, as we have said before, there are clearly ways the FCC can help.  We appreciate the FCC’s recognition, for example, of the need to provide flexibility that encourages the continued deployment of switched-digital video which uses bandwidth more efficiently and low-cost set-top boxes which aid the drive to all-digital systems.  Measures such as these also promote the continued rollout of DOCSIS 3.0, a technology which offers speeds over 100 Mbps today.  Multichannel News recently estimated that DOCSIS 3.0 – commonly referred to as wideband – is currently being offered to more than 52 million U.S. consumers and businesses.

But while more than 90 percent of U.S. households have high-speed Internet service available, only about 65 percent have chosen to subscribe, according to a report released this week by NTIA.  As he has before, Chairman Genachowski correctly identified this broadband “adoption gap” as one of the key problems confronting us:

Right now, more than 100 million Americans that could and should have broadband don’t have it. Because they can’t afford broadband, don’t know how to use it, or aren’t aware of its potential benefits.

I was pleased to see him compliment NCTA’s proposed Adoption Plus (A+) Program, which would offer digital media literacy education, discounted computers, and discounted home broadband service to low-income families.  But there are many other good ideas out there — and the bottom line is that this challenge will only be met successfully by 1) treating it as a multi-faceted problem and 2) and addressing it through public-private partnerships.  Here too, our industry remains committed to be a constructive partner with other industries and government at all levels.

Second, the FCC’s meeting yesterday also offered a lengthy set of “working recommendations” by the broadband team that are intended to integrate broadband  into the nation’s key economic, government and societal priorities, including “high quality healthcare, world-class education, smarter energy tools, 21^st century jobs, greater public safety, more opportunities for civic engagement, and a better quality of life.”  Credit goes to the Chairman and his staff, particularly the broadband team, for placing broadband policy in its proper context.

In each of these areas, there is an enormous amount of work to be done, and some intriguing opportunities.  Many cable operators and systems have already embarked on unique partnerships and other relationships which advance many of these goals, including a new smart energy initiative launched earlier this month by the Society of Cable Telecommunications Engineers.

During our annual Cable Show last May in Washington, D.C., we showcased some of these projects at our Broadband Nation exhibit:

• A rural medical clinic where patients can access a custom video-on-demand library to learn more about their conditions and treatment, and use a secure broadband connection to share vital signs and electronic medical records for a video teleconference with a specialist hundreds of miles away.

• A broadband connected middle school that allows students to read a book with the author, research any video ever produced by C-SPAN, travel the world with Discovery’s vast online collection of video content, enjoy the unique experience of interacting with a Promethean smart board.

• A high-definition video conference center that uses broadband to improve communication and productivity by connecting co-workers that appear to be right across the table, when in reality could be anywhere in the world.

The Broadband Nation video below highlights the innovative services that were on display for the home, school, and office, as well as specialized applications for medical centers, schools, and retail and entertainment outlets.

In the days ahead, we look forward to learning even more about the National Broadband Plan.  There’s much work ahead of us, but I have no doubt we can make this shared vision a reality.

For more thoughts on the interview, check out John Eggerton’s preview of the show in Broadcasting & Cable.

UPDATE: Just a reminders that The Communicators also airs Monday on C-SPAN2 at 8 a.m. and 8 p.m. ET. You can also subscribe to the show’s podcast. If you’re interested in seeing the comments about Google, they appear about the 17:45 mark.

It’s not a question of whether more television content will move to the Internet or whether IP transport will be used more in the future for video distribution. It’s two questions:

a) Are a lot of people canceling their cable subscriptions for cord-cutting alternatives?

b) Can you replace your cable subscription through online video?

In a previous post I attempted to answer these questions, but it’s quite simple: a) No. b) No.

This debate does show that consumers have more choices than ever before, which one would hope can finally put to an end to the view that insufficient competition exists. I might argue that cable subscriptions provide the best combination of services and value, but those who don’t agree clearly have many other options.

This week also brought two new pieces of evidence which tend to support the subscription model, one scientific in nature and one anecdotal.

Parks Associates released the All Eyes on Video study, which looks at “consumer use of and interest in video experiences.” From this WorldScreen.com article, the report found that “Less than 8 percent of U.S. broadband homes — about 5.5 million homes — are considering canceling their pay-TV subscriptions in favor of online video…”  This Broadband TV News article reports the profile of these consumers.

The households likely to switch or cancel their services watch a whopping 10 hours of online video each week, much higher than typical video consumers. They express strong interest in having online access to pay-TV channels (e.g., TV Everywhere), which highlights an opportunity for traditional pay-TV providers to solidify their base through the deployment of such features. Offline video consumption is also higher. Their median number of DVD rentals from the last six months is 18, compared to two rentals among other households.

Janko Roettgers, in this NewTeeVee post, thinks that the real winners will be DVD rental services like Netflix and Redbox, although it’s worth noting that the DVD business is going through its own problems right now and Netflix does not yet have a deep catalog of content that can be watched online through its Watch Instantly feature.

The Business Insider’s Dan Frommer quite famously cut the cord on cable, as noted as recently as this December 2009 article on the proposed Comcast-NBC deal:

Nielsen recently reported that although online video viewing has risen 35 percent in the past year, 99 percent of TV viewing is still done on a traditional TV. But that’s not the case for younger people, like my pal Dan Frommer. He’s 27 years old and works as a writer for a technology Web site. Frommer pulled the plug on cable TV in May 2008 and instead gets shows from the Internet via a Macintosh computer hooked to his LCD television. He can’t get everything he’d like to see, but he’s saved $1,500 on cable-TV fees. “I’m not going to let myself get ripped off for a bunch of garbage that I don’t watch anyway,” he says.

And here was the title of a Frommer post yesterday: Why I Caved, Bought Cable TV, And Gave Up On My ‘Hulu Household’. Read it for yourself, but you’ll find many of the issues I’ve discussed here before; high-definition television, live sporting events and the costs of high-quality TV productions all play a role.

Final note: I draw your attention to this Mari Silbey tweet from Monday. Roku, frequently mentioned as one of those great alternatives to subscribing to cable, has recently talked about how subscriptions will play a greater role going forward. In fact, they’re “looking to line up at least 100 content partners this year.”

Mari tweeted, “I’m sorry, but does no one else see the irony of Roku’s plans to bundle free hardware with subscription content? It’s called a cable set-top.”

The more things change…

The good news is that some cable operators receive high marks from consumers about the service they receive. While some cable companies are not viewed positively, there seems to be a general air against incumbents. In other words, when it comes to video service, the incumbent cable providers are not viewed as positively as newer competitors; however, when it comes to telephone service, cable is viewed more positively than traditional phone providers.

In addition, Consumer Reports’ reader survey points out something that’s been known for some time: Customers who take bundled service are happier with their provider. Since cable first rolled out Internet access and then telephone service – as well as services such as DVRs, HD and digital cable – we have seen the take rates increase dramatically for the new services. Consumers are getting more out of their cable subscriptions, and by bundling Internet access and phone with their video service, they’ve also been able to see savings.

Now for a few factual problems…

The article lumps together the services provided by the phone companies (AT&T’s U-verse & Verizon’s FiOS) as “fiber-optic service.” In fact, while Verizon has widely deployed fiber, AT&T is still using twisted copper pair. You may recall that cable has a hybrid fiber-coaxial infrastructure.

A sidebar of the costs of TV service completely bungles its analysis of the impact of CableCARDs, but more distressingly, the article gets its description of E911 wrong.

Emergency 911 service varies among technologies. Fiber phone service uses the same long-proven location system as a landline phone. New cable-phone and other VoIP 911 services are less universally dependable.

The section on emergency phone use seems to confuse cable’s phone service, which transports your call over cable companies’ privately managed IP networks, with VoIP services such as Vonage, which use the public Internet for transport. The concern is that when a customer calls into a 911 operator, emergency responders should be able to know where the household is located – and that in the case of VoIP calls transport entirely over the public Internet, that may not be possible. Cable operators do not have this problem. As the article notes, phone service from cable or U-verse/FiOS may need to instead rely on a cell phone in the case of a power outage.

In a section on Internet speeds, the article argues that only 1 Mbps is necessary for most customers. That’s not a problem for cable customers, since the average standard speed typically exceeds 5 Mbps, but it seems a little silly to argue that very high speeds, such as cable is offering now through the DOCSIS 3.0 standard, are mostly a “marketing game.” Certainly, not everyone needs 50 to 105 Mbps, but I think 1 Mbps is hardly adequate these days.

I also found it telling that they buried the cord-cutting strategies at the back of the article. You can just rely on an antennae and over-the-air broadcast television, but if you have reception issues, then you’ll be out of luck. You can turn to the Internet, but content is limited there as well, and you’ll still need to subscribe to an Internet connection.

In the end, it seems like consumers are being serviced quite well by today’s vibrantly competitive marketplace.

On this blog, I have many times written about so-called “cord cutters” – people who have canceled their cable subscription in order receive movies and television shows over the Internet. CES was filled with talk of Netflix’s deal with Warner Bros, the Boxee box, the introduction of VUDU Apps, and more. Sessions with titles like Rethinking the Future of Creative Works and Defining Internet TV focused on emerging models for the distribution of content.

What struck me at CES – as I have also been reading in the blogosphere and the mainstream press for over a year – is that we’re moving away from the current model, where 85% of U.S. households get video through a Multichannel Video Distributor, to a new disintermediated world, where you’ll get content over the Internet directly from content creators. To hear some talk about it, the current model is a dinosaur and the sooner that the cable industry can figure that out and move on, the better.

But let’s note again that 85% of U.S. households get their television from cable, DBS (DirecTV & DISH) or from the phone companies (AT&T’s U-verse & Verizon’s FiOS). In December, NewTeeVee noted that Nielsen reports that “99 percent of video is watched on a TV in the U.S.”

Americans spent 129 hours and 16 minutes per month watching TV in the latest 3-month period, seven hours and 12 minutes watching time-shifted TV, and three hours and 24 minutes watching online video.

Things will undoubtedly change. But what might account for everyone not rushing to cancel their cable today?

One possible answer can be found by looking at the example of noted blogger Ben Drawbaugh. I don’t mean to pick on him, because he’s a nice guy, but when I last wrote about cord-cutting in December, he posted this comment:

For the most part I agree with the premise of your post, the notion that more than a small percentage of people will cut the cord and use legit streaming services is just crazy.

That being said, I do cancel my cable service in January and don’t feel the need to add it back until August. So yes, I pay $50 a month to Verizon to watch ESPN and the NFL Network — because college and pro football is worth $50 a month to me — but the rest of the crap on cable can wait. What I mean is that instead I subscribe to Netflix and wait another 5 months for Netflix to mail the first Burn Notice Disc to me. So in other words, Discs and OTA HD have everything I need for much less money.

Fair enough.

This week, though, Drawbuagh wrote a post entitled, “Canceling cable: the failed experiment.” He says that he needs to a subscription for work purposes, since he writes about cable technologies. Then, he says this:

The bottom line is that I love me some football in HD, so I can’t ever see myself going without cable year round, and with the hassle involved in canceling and signing back up, the $327 a year ($62 for 7 months minus $110 savings for signing a contract) I’d save just isn’t worth it… I suspect for many it just isn’t worth it either. Sure there is lots of content out there available via other legal means, but the bottom line is that when it comes down to it, cable really isn’t that bad of a deal considering all the HD viewing options you get for the price.

As I’ve said before, cord-cutting proponents love to suggest or outright claim that you can substitute online video for cable service, but there is much you can’t get online. One of those big categories is sports.

The Return of the Subscription Model

But all this discussion may be for naught, because some new developments suggest that online video may be moving to a subscription model anyway, which puts us right back where we are today. Hulu may soon be charging a subscription fee for some of its content, as may Boxee. Brian Barrett at Gizmodo added up the numbers for your access to even get online, plus the subscription for services like Netflix, and concluded that you might end up paying “hundreds of dollars a month,” perhaps “nearly $1,000 a month.” Nicholas Carr, in a colorfully-titled post, also looks at the numbers and asks, “Now somebody remind me how we all came to think that information wants to be free.”

And yet, on that previously mentioned Rethinking the Future of Creative Works panel, the speakers couldn’t think of what the role of service providers (such as cable operators) might be in our connected future. The panel didn’t really answer an audience question on how all the content will be paid for. They didn’t really answer a question on why service providers would invest in infrastructure.

On another panel, Mitch Berman of ZillionTV said that claims that production values for movies and TV won’t be there without subscription model are overblown. On an FCC panel, Commissioner Robert M. McDowell reminded us that quality content costs money and that right now, the ways to cover those costs are through advertising or subscriptions. Even the NY Times has now announced a new plan to require some sort of subscription.

So, we may be moving to a Bright New Future a little more slowly than some are claiming. And it may be that subscriptions serve a purpose after all.

Time will tell.

For those unfamiliar with TV Everywhere, it is just one of several concepts, based on different technologies and business models, being developed for the online video marketplace.  TV Everywhere, specifically, would provide a new service at no extra charge to consumers who subscribe to a multichannel video programming service – whether provided by cable, satellite or telephone companies:  the ability to watch TV programs on PCs or laptops, and potentially other Internet-connected devices.  It could significantly increase the amount of high-value video content available online – something the FCC has said would help drive broadband adoption.

But Free Press’ theory seems to be that TV Everywhere poses a threat “to kill” online video competition because it would only be available to cable and other pay TV subscribers.  But they get it exactly backwards:  It is an effort to ensure more content than ever is distributed over the Internet at no extra charge to consumers.

Moreover, the TV Everywhere concept involves a multitude of competing program networks, most of which distribute their content on competing cable, satellite, telephone and online platforms.   As publicly announced, TV Everywhere envisions separate, bilateral agreements between one content company and one or more individual distributors.  It is purely vertical in nature – like any arrangement between a content company and a distributor.  As online video evolves, various distributors and content companies may – and likely will – come to widely varying bilateral arrangements.

It is no wonder that developing and implementing this concept isn’t easy, given the vast numbers of possible participants; however, calling any of this “collusion” is, to be kind, strange.  The fact that distribution of content requires a number of differing and competing parties to enter into a multitude of bilateral agreements is normal.  Contrary to Free Press’ suggestions, the antitrust laws do not prohibit, but encourage collaboration, even among competitors, that lead to innovation and new products and services for consumers.

Distributors do not have the ability to unilaterally decide how content is distributed.  Content owners, through individual business arrangements with a growing array of distributors, ultimately make those decisions – in much the same way every other sector of the economy works.  No single content owner or distributor is controlling this process or could do so.

What is remarkable about the online video industry, even at this early stage of development, is just how dynamic it is.  Content providers can elect to distribute their content through advertising models such as Hulu or subscription models such as iTunes.  MLB.TV will give you live programming, an online DVR, picture-in-picture, and much more for an annual fee.   Indeed, there are a growing number of “paid content” models emerging on the Internet—and a large and growing number of competitors using different models – from Netflix to Blockbuster to Vuze to Veoh to iReel to Sezmi to Apple TV to ESPN360 to VUDU to Miro, and on and on.

So, Free Press is really complaining about the decisions content owners make as to how their content should be distributed.  As it happens, many programmers rely on the subscriber-based license fees they receive from cable operators and other distributors to remain economically viable.  In order to sustain that model and continue investing and creating, many content owners may want to ensure that they are compensated for the viewing or use of their programs online.  There is nothing nefarious or mysterious about this:  Programmers invest tens of billions of dollars a year to produce high quality content; they have the right to experiment with different business models and determine how to recoup that investment in terms of distributing their content on different platforms.

As much as Free Press would like to suggest that something is radically different in this case, the TV Everywhere model would be nothing more than content owners extending their copyright licenses to allow multichannel video providers to make their programming available online.

 The fact that market participants are experimenting with models in addition to fee or advertiser-supported models is not a sign of anti-competitive conduct.  It is a sign of a dynamic and rapidly-changing market in which no one knows the ultimate outcome.  Free Press may prefer one video distribution model over another.  But that is for the marketplace – and content owners exercising their rights to distribute their content in the manner they choose – to sort out.  A model that would give consumers the option to get more value – by access to online content – as part of the TV subscription they already pay for is something that consumers should have the right to embrace or reject.