Lies, Damn Lies, Statistics and Mistruths in the Set Top Box Debate

            As expected, incumbent cable companies and their select group of new allies, such as Roku, (see http://www.wsj.com/articles/how-the-fccs-set-top-box-rule-hurts-consumers-1461279906) have launched a major disinformation campaign pushing back at the FCC’s initiative to promote set top box competition.  In a nutshell, the rebuttal has offered several remarkably bogus rationales for maintaining the status quo: it’s a Google-generated ploy to access video content without charge just as Google has done with Internet content; regulation is bad; the cable industry has an exemplary record of deploying cutting edge set top boxes; and there’s no problem requiring government intervention in light of the fast paced introduction of new video content access options.

            It comes across as particularly rich to read how Roku now supports the cable industry after years of struggle with it.  Might Roku’s new found support result from the exclusive deal the company cut with Comcast to provide a low cost alternative to monthly set top box rentals?  Isn’t it amazing that despite years of claims that there could never be any single, low cost alternative to the cable industry-supplied set top box, lo and behold the engineers have achieved the undoable!

            Here’s another inconvenient truth: consumers used to access cable without the need for set top boxes; then they couldn’t.  The cable industry dithered for decades on making television sets compatible for both downstream content delivery and upstream navigation commands.  Apparently it was technologically IMPOSSIBLE for true “two way” access via television sets and alternatives to the cable industry rented set top box, until now.

            The cable industry also disputes the revenue levels they have managed to squeeze out from subscribers.  It rejects FCC and other estimates of an average yearly cost of about $230, largely because of voodoo accounting that differentiates what consumers see on their monthly bills.

            The cable industry also congratulates itself on the set top box innovation on display.  Bear in mind that most consumers have used the same box for years.  Ask yourself: how many times has the cable company offered to replace your existing box for new one?  Conveniently Comcast has a new box available, but I’ve had the same box for over 15 years.

            The set top box debate is rife with disinformation and outright lies.  The vilification of Google mystifies me.  If you take the cable industry position, hook, line and sinker, Google amazingly will be able to capture all video content with no payment to copyright holders.  Worse yet, the company will be able to delete and replace advertising.  Google also will rob the cable industry of any incentive to create content and the cable industry will evaporate as Google expands its vacuum cleaner, market capture.

            Newsflash: Google has to comply with copyright, FCC and other requirements.  By law Google cannot meddle with video content it processes.  Google’s market entry has raised the likelihood that consumers will have access to a competitive set top box market as well as the long denied opportunity to access video content from a wire without a box, an option that used to exist before the cable industry came to its business senses.

Leo Google

           Of late it appears that the FCC must be running a sale on merger authorizations given the glut of questionable attempts.  With so much occurring in the incumbent world to retrench, buy market share and close ranks one can easily fail to see a major, forward looking initiative by Google.

            Folks the prospect of overlapping and globally ubiquitous wireless broadband is REALLY BIG! See http://spectrum.ieee.org/tech-talk/aerospace/satellites/google-aims-for-billion-dollar-satellite-fleet-to-spread-internet-access; https://gigaom.com/2013/06/24/googles-other-plan-to-connect-the-unconnected-satellites/.  Google has the deep pockets to follow through and many factors now favor non-terrestrial options rather than handicap them.

            Google can combine low earth orbiting satellites, blimps, drones and whatnot to cobble together a near complete footprint, not just one serving equatorial locations. Innovators, such as Iridium, Globalstar and Thuraya have proved the concept even if they led on a bleeding edge of innovation.  Motorola showed that it could manufacture satellites on an assembly line, “off the rack” basis instead of designer, one-off birds.  Inter-satellite linking works instead of each satellite having to make a downward transmission.  Handsets have shrunk as has the cost of low earth orbiting (“LEO”) satellite networks.

 

            More important perhaps we now have a better sense of how far terrestrial broadband can penetrate the hinterland, the cost of securing rural backhaul and challenges even for 4G and 5G networks to handle full motion video and peak demand.

            By way of full disclosure, before accepting a professorial position at Penn State I worked for Motorola on the Iridium project.  I preached the LEO gospel at the International Telecommunication Union and the FCC.  Ample spectrum now exists to support mobile satellites and the relative close proximity to earth makes LEOs a low latency inter-modal alternative to terrestrial options.

 

            If Leo Google enters the marketplace, it could disrupt many of the mergers aiming to buy out the competition and “stabilize” the marlketplace.

Google’s Broadband Projects

Chances are few U.S. readers have ever heard of something called a “test and demonstration project.” We don’t have a lot of public private partnerships here. Either the mighty marketplace stimulates private entrepreneurial juices, or the government provides subsidies often to the very carriers that did not see the payoff in using their own funds. Test and demonstration projects typically blend government and private venture participants in a project that can test the technological viability of a project and also measure the publics’ interest and willingness to pay for access to the technology.

Google’s broadband projects may provide a third model: a privately funded venture that has little expectation of profit, but which serves public and private goals. Perhaps Google’s ample retained earnings make it easier for the company to afford “lost leaders.” Likewise, Google surely gets ample free press and public relations dividends just by announcing its goodwill endeavor. Maybe Google sponsored projects will show other carriers the merits in enhancing the broadband value proposition by lowering monthly subscription rates, and/or raising delivery speeds. Surely Google does not have to prove that broadband networks can deliver 1 Gigabit per second. They exist, but not in the U.S. of course.

Google might not need to secure federal regulatory authority for any project, but the same cannot be said at the state level. In Pennsylvania, where I live, Verizon secured a right of first refusal by law. I don’t see Verizon objecting to any Google project in Pennsylvania, but I doubt whether Verizon would consider significant any “proof of concept” made by Google.

I believe incumbent carriers, such as Verizon and AT&T, do not yet consider it necessary and cost effective to enhance the value proposition in broadband. The margins are quite generous, but these carriers have more to gain and lose in wireless. Absent far greater competitive necessity --not something any Google project will generate—incumbent broadband providers can make do just fine with often duopolistic markets offering on a global comparative basis mediocre bitrates at relatively high cost.