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DSLP: Future of TV: SBC's Closing the Net
From: David Farber <dave () farber net>
Date: Mon, 24 Oct 2005 07:20:36 -0400
Begin forwarded message: From: Jennie Bourne <jennie () futureoftv net> Date: October 23, 2005 7:26:19 PM EDT To: work () dslprime com Subject: DSLP: Future of TV: SBC's Closing the NetPolicy folk: I'll have more on the SBC and access story. It's solid - don't doubt it. Live video over the net will have trouble getting through. Net neutrality is no long theoretical. Dave Burstein
May 17, 2005 Future of TV.net SBC - First To Say Their Network Will Be Closed Price of Bandwidth Continues Dropping Guest editorial: Don’t Block Video over the Net Japan’s Masayoshi Son Cutting Prices Changing Lives Comcast: One month, 100 million ON DEMAND programsSubscriptions are free. Just reply with subject "subscribe" and we'll add you. Or "un" to be dropped. Please forward this and encourage colleagues to subscribe. If you're on the DSL Prime List, you'll get this automatically
SBC Clamps Down on Outside Video“Oh no,” SBC’s #2, Randall Stephenson answered me on whether his DSL customers could watch live video beyond what SBC is selling. “We‘re going to control the video on our network. The content guys will have to make a deal with us.” Around the same time, Al Gore, a man who might be President, had to come hat in hand to Marilyn O’Connell of Verizon, seeking carriage of his Current TV channel on FIOS. She found it interesting, so the odds are good.
Something is inherently wrong if the crucial innovators on the net need to beg the carriers for basic freedom of speech. Peter Grant and Jesse Drucker Friday brought the issue of video blocking to the front page of the Wall Street Journal, changing the entire debate in Washington. It should now be hard for the AT&T deal to close without a clear solution. Martin is not joining to turn down the SBC - AT&T merger over this, although Stephenson’s comment is a direct slap in the face. Nevertheless, he can, if only to prevent a delaying tie vote, demand a merger condition on this and the related open peering issue that is more than the usual meaningless statement. Courage Kevin, Katherine, Michael, and Jonathan - AT&T needs this merger, and there will never be a better time to stand for an important principle.
Where the net is open, we will have remarkable choices. Google, Yahoo, and many others have great plans we will be reporting. If not, we get the ugliest side of media concentration. SBC’s Lea Ann Champion described their offering “Eighty percent of the channels come from about six companies.” This is media concentration at the ugliest.
There is no major technical or cost factor preventing SBC or Comcast keeping their network open, despite the carrier’s attempt to spin. We have some of the hard data below, and much more to come.
SBC - First To Say Their Network Will Be ClosedLast year Mike Powell hit the roof when Grant and Latour reported the beginning of this story In the Wall Street Journal. Therefore, SBC responded with a clear statement, one of the best tests of net neutrality I have yet found.
“SBC does not plan to give meaningful preference (in terms of bandwidth allocation) to any particular video service or video content provider. ... We don't plan to limit access from computers or give bandwidth preference to content.”
That statement is now apparently inoperative.
I asked Randall Stephenson whether the Southern Baptist Church
Channel, MovieLink, or Google will be able to send live video at full
quality if they were not part of SBC’s chosen programming. “Oh no!”
was the answer I got, and feared. “They’ll have to make a deal with
us. We‘re going to control the video on our network.” Obviously, not
all content producers will be allowed to make such a deal, and hence
will not be available to SBC broadband customers. Instead, SBC will
try to sell their cable-like program selection.
Selim Bingol of SBC claims that Randall's comments only pertained to what video is on their own offering, but that's simply not so. I made a point of saying I was discussing video delivered directly, specifically that not in their package. Selim wasn't there, I was, and so were others who can be asked about the conversation. I'm not misquoting.
Price of Bandwidth Continues Dropping Liberty Global Pays $0.10 per gigabyte, $0.15 for DVD quality movieInternet bandwidth isn’t “free,” but it’s become cheap enough to make DVD quality video practical while discrediting absurd bandwidth charges like BT’s. Tony Werner, CTO of the largest cable company outside the U.S., has succeeded in peering 92% of his data traffic, dramatically bringing down the cost. During analyst day in beautiful Rose Hall, Werner noted that companies recently purchased by Liberty had been paying about 20 euro per megabit of transit. Because of his efficient volume buying, his direct cost is about 10 euro. John Malone’s Liberty has major holdings in Japan, Holland, France, Chile, Romania and has just bid for Switzerland. On peered traffic, the cost drops to about 5 euro. I hear from others the U.S. is a little cheaper, smaller customers pay more, and much of Africa, Latin America, and India are high. That works out to $0.50 to $1.50 per customer per month, based on typical traffic patterns reported by other carriers, including occasional heavy downloaders.
About $1/customer/month is probably right for a large carrier in late 2005. I have been using a figure of “less than $2/customer” based on data now over a year old from several sources. More recently, I have heard bandwidth costs similar to Liberty from a mid- tier U.S. carrier, the remarkably efficient London Internet Exchange folk, and the buyer for a major video provider. I can infer similar costs from Randall Stephenson’s ARPU and profit analysis, given his comment that one-third of SBC customers take a higher tier.
Translating the cost per constant megabit flow of traffic to a cost per gigabyte of data requires making assumptions about usage, but is important for analysis of video over the Internet costs as well as whether bandwidth caps and charging are reasonable. (They aren’t. at least up to 50 gigabytes.) I have not been able to get firm data, so I am making assumptions that probably slightly overstate the costs. If you get four hours per day by 30 days per month, that is 120 hours per month. One-megabit continuous flow is about 500 megabytes of traffic per hour, or 60 gigabytes of traffic per month. For a company like Liberty, that’s about $0.10 a gig at the rates Werner mentioned. BT, DT, etc. should do at least as well, especially given their existing worldwide backbones and share of major undersea fiber. A good confirmation of this comes from the carrier commitments to IP TV carried across their network. They wouldn’t be possible without switching/fiber costs that are this low.
Traffic costs remain at or below typical marketing costs unless the user goes well over 50 gig consistently. Two gig or even 10 gig “caps” have no cost justification. They are partially a way to keep some users’ prices high, and increasingly a tool to prevent watching video over the net in competition with the services BT and others offer themselves.
The costs calculated in this item are lower than now out-of- date estimates, projections from carriers trying to justify high rates, and the internal cost figures in some large telcos. Both Verizon and BT once overstated their marginal bandwidth costs and shadow pricing to their own DSL divisions. That raised profits in their (largely unregulated) internal backbone and produced “losses” in their DSL division, although the money stayed within the same company.
This should go down with Moore's Law, and fall by half in 2007 or 2008 and again by about 2010. The incremental cost of moving bits over existing fiber is largely the switching/routing cost, electronics constantly getting cheaper. In most of the developed world, there's enough unlit fiber for several more years.
Guest editorial: Don’t Block Video over the Net From Andrew McLaughlin of Google:Our mission in Washington boils down to this: Defend the Internet as a free and open platform for information, communication and innovation. OK, that sounds a little high and mighty, so let me break it down into something a bit wonkier with a sampling of the U.S. policy issues we’re working on:
Net neutrality. As voice, video, and data rapidly converge, Congress is rewriting U.S. telecommunications laws and deregulating broadband connectivity, which is largely a good thing. However, in a country where most citizens have only one or two viable broadband options, there are real dangers for the Internet: Should network operators be able to block their customers from reaching competing websites and services (such as Internet voice calls and video-on-demand)? Should they be able to speed up their own sites and services, while degrading those offered by competitors? Should an innovator with a new online service or application be forced to get permission from each broadband cable and DSL provider before rolling it out? Or, if that’s not blunt enough for you, what’s better: [a] Centralized control by network operators, or [b] free user choice on the decentralized, open, and astoundingly successful end-to-end Internet? (Hint: It’s not [a].)
At Future of TV, we put it even more directly. Do you want to choose what you watch, or do you want Brian Roberts and Ed Whitacre to choose it for you?
Japan’s Masayoshi Son Cutting Prices Changing Lives Son in Japan: Thousands of channels, millions of videos to download Google, BT also building extraordinary server farmsNever laugh at Masayoshi Son; he already changed the world twice, first by selling 7 megabit DSL service for $20 and taking millions of customers from NTT, then by adding VOIP at minimal cost for 4.5 M subscribers. He invested $2B along the way, sometimes finding the cash in unexpected places, and now has turned EBITDA positive, as reported in DSL Prime. The business models now changing Europe are copying his success.
Next, he intends to bring IP TV to 7M Japanese. It's an entirely switched network, with a typical office connected by dark fiber supporting 4 gigabits of data and easy to upgrade. Massive headends can essentially supply (and switch) as many channels and programs as Son can acquire and digitize. The actual cost of digitizing is $75/film and drops rapidly with quantity; the server space is just a few dollars. In quantity thousands, headend costs per channel should be in the low thousands by the time he's ready. Two million videos, two thousand live channels could be encoded and served for perhaps $150M today, dropping by half in two to three years. That's about 60 cents per month per subscriber, by five million subs - a cost that makes sense.
Where will all this video come from?TV worldwide produces about 31 million hours of original programming, Berkeley‘s Peter Lyman and Hal Varian estimate. Approximately 370,000 motion pictures were made around the world from 1890 to 2002. If the entire universe of original film and video titles were played continuously, the show would continue for 2,108 years. Less than 5% of these programs earn anything at all commercially today, and probably less than 1% command Hollywood prices.
Christian broadcasters, by the dozen, are finding it impossible to get on many cable systems, and are demanding “must carry” from the FCC. At many newsstands in New York, you’ll find papers in Russian, Chinese, Spanish, German, French, and literally a dozen others. The lower cost of video equipment will allow every university with a football team, every large church or political body, every ski resort looking for promotion, a dozen buddies from film school working together, and thousands of other to create channels. 99% will find small audiences at best, and many programs will prove unwatchable. But the remaining 1% have enormous potential. Future of TV.net will be featuring the new equipment whose low prices can chance a heck of a lot.
Comcast: One month, 100 million ON DEMAND programs Comcast proves VOD is todayIn March, Comcast customer downloaded 100 million programs, most of them without additional charge. Future of TV.net believes the tuning point has already been reached - VOD is here. 94% of Comcast VOD shows are without additional charge, clearly showing what customers want. To do that, Dave Fellows has built a robust network with central hubs and multiple intermediate caches for efficiency. Legacy cost is about 30 cents a program streamed; forward cost, about ten cents. The streaming servers and software are in the $100-150/per range, but the full cost - including the fiber backbone, routers, gig- E to the CMTS, etc. his colleagues estimated at about $300 per stream last fall, falling.
The peak of VOD demand to date has been 8% of an area's homes, and the current system is built to 10% concurrency. They intend to raise that so that 30% of covered TVs can be watching different shows, often time shifted. They’re guessing that 70% of people will watch the streamed 400 channels or so or something stored on their hard drive, at least for the next few years.
“Don’t Let Anyone Say HDV Isn’t Broadcast Quality. We’re Using It.”Our Sony FX-1 costs less than a big TV, the sharpness is incredible but be prepared for the whopping file sizes. Even Hollywood types are using it.
.“We used a Panasonic HDV to shoot scenes for one of this year’s most acclaimed network series,” says Hollywood producer Robert Cohen who also happens to be Dave‘s uncle. “The small camera was able to get shots where our regular equipment couldn‘t go. No one noticed the difference.” Cohen couldn’t mention the series name, but previously produced for “24” and other shows you’ve watched. The Panasonic only goes to 720P, but has a native 24-frame mode that fits well with Hollywood workflows.
Our Sony goes to 1080i, and is an absolute delight. Premiere or anything else running on a PC is still painfully slow sometimes, although the Cineform Aspect plugin that comes packaged with Premiere Pro speeds things up, that‘s just a Start. Download the trial version of the full package it’s pricey but it will make you remember why you went HDV in the first place.
Jeff Pulver, bought the same camera, and choose Final Cut Pro for his Mac. For editing, dual processors and a RAID really make a difference, but that’s now under $2,000. Intel has released dual core Pentiums at a good price, and the supporting chipset controls a two drive RAID. We priced dual core 3.0 megahertz Pentiums with 500 gigs split between two hard drives under $2,000.
Good equipment without skill is worthless, but prices give millions of people a chance to prove how good they are. A very small fraction will be worth watching, but even so a very wide world of programming is coming. Less than $10,000 now buys an HDV camera, an edit station fast enough to work online, shotgun, lavs and regular mics, pro quality software, basic lights, and two cases with wheels that let you take everything but the PC on a flight to Paris. At the Marconi Dinner featured below, you’ll see Jennie’s short piece honoring Claude Berrou - shot on HDV.
Stories in the works:China Telecom and China Netcom are starting to deploy half a million IP set top boxes, likely heading towards millions. It’s currently illegal for a telco in China to compete on video, so they are calling it a trial. They’ve cut a deal with Shanghai Media Group, the #2 television producer, that should solve their licensing problem.
BSkyB bought Easynet to offer a satellite + DSL connection to a super- TIVO set top box. That’s the same strategy SBC intends outside Lightspeed territory. Interesting possibilities, under the working title Separate, Not Equal, But Pretty Darn Good. SBC’s choice of a proprietary video system from Microsoft isn’t working out well, yet one more reason to prefer open standards. Phil Thompson of mPhase will have some thoughts.
BriefsAmazing that staid old Auntie Beeb is perhaps the most progressive network on earth, with 5,000 Britishers already in a trial using Bit Torrent to download any of the week’s programs. Ken Pyle debunks the notion that the picture in picture of Microsoft’s IPTV is revolutionary. “One note of caution is that many pundits are underestimating the ability of cable and, even satellite, to provide the same interactive functionality as IPTV. Features like multiple camera angles, which I hear touted over and over like they are a new concept, were commercially proven in the early 1990s by Canadian cable pioneer Videotron over coaxial cable television plant. The MSOs will roll out these features as needed in order to stay competitive,” the editor of the Viodi View believes. It’s a free subscription, and more than value for the money. Japan Telecom, dissatisfied with $15M of Scientific-Atlanta set tops boxes, is shifting orders to an Asian maker who produced software more appropriate for what Japan needs.
Wall StreetEric Kainer of Needham has incorporated into his thinking what MediaFlo and TU are shortly to demonstrate. "Instead of a 5-play," he corrects us, "think of it as dual triple plays, one mobile and the other fixed. A 6-play, if you must." Merrill’s Jessica Reif Cohen confirms the Comcast optimism on free VOD, writing “In Philadelphia, where Comcast has offered VOD for over 2 years, over 85% of subscribers have used VOD over the past 3 months.” Nikos Theodosopoulos of UBS confirms the discrepancy we noted between the numbers of HD sets sold (high) and the numbers of people watching HD programming, so far. He notes “HD set top penetration in the US remains at under 33% of installed HD TVs, while demand for HD TVs continues to be robust.”
PeopleKen Ferree left the FCC broadcast bureau to be #2 at the Corporation for Public Broadcasting. The top job came open, he went for it, lost out to a political appointee, and now has decided to become a D.C. lawyer again. He will probably make more than twice what the guy who got the job will. Living well is the best revenge.
Editor Jennie Bourne has degrees from NYU Film School and Columbia Journalism. She has produced for television, edited network news and a fashion magazine, hosted the evening newscast on WBAI-FM in New York, taught at Rutgers University, and still has lots to learn. Jennie loves technology toys, hates their misuse, and takes pride in explaining the geek stuff to humans. Email jennie (the usual) futureoftv.net Publisher and Research Editor Dave Burstein is also editor of DSL Prime and Fiber News. Jennie and Dave collaborate on DSL: A Tech Brief (Wiley, 2002) and Jef, a forthcoming documentary about Jef Raskin, creator of the Macintosh and much more.
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