Monday, January 16, 2006

Open TV Access on Open Platforms? -- A New Era at CES

This year's CES marks a turning point in the battle for open TV, with two major developments that will mutually reinforce one another.

  1. Open Access: One development is the high profile move of prime TV and movie content brands to work with major Internet services, like Google and Yahoo, to bypass the stranglehold of the cable distributors.
  2. Open Platforms: The other development is the introduction of the Intel Viiv platform, that promises to change the competitive landscape for the open PC platform as an alternative to proprietary set-top boxes.

The move toward open access has gotten most of the press. (See my posts on TV Meets the Internet as Manifest Destiny -- Soon? and The Distribution War to Come -- A Tale of Two Pipes for some reflections on this.)

Open platforms could be equally catalyzing. Aside from their exclusive access to prime content, the incumbent distributors rely on closed set-top boxes (from Motorola and Cisco/Scientific Atlanta). These boxes are albatrosses:

  1. They intentionaly limit what outsiders can do -- by being closed, and
  2. They unintentionally limit what the distributors, themselves, can do -- by being closed off from the dynamic ecology of the PC industry.

PC-based TV has been on the margins for years, but has not been ready for prime time. Media Center PC's (such as those from Microsoft) deliver TV service and TiVo-like DVR capabilities, but have been rightly criticized as big, noisy, and lacking the mass-market simplicity needed for plain old TV. They are the butt of jokes about boot-ups and crashes.

Viiv promises to remove those limitations. This new platform is compact and powerful, with full support for HDTV and surround sound, and with instant-on features. Cable card support will facilitate connections to cable systems. Microsoft Vista will enhance its user interface.

More importantly, this Viiv platform brings the dynamics of the open PC market ecology -- with its huge economies of scale and collaborative product development -- to the world of TV. Motorola, Cisco/SA, and the other specialized set-top box and TV middleware vendors have little hope of keeping pace with Intel on chips, or with its allies, including Microsoft, perhaps Apple, and the myriad innovative players in the PC and Internet hardware/software/service space.

The demo's of Viiv/MediaCenter HDTV user interfaces are already striking. Other software/service providers will layer on their own innovations -- adding an open ecology of rich Internet-based services, as well as rich integration of devices in the networked home. Once that happens, the comparison to cable, satellite, and telco offerings that don't exploit this open platform and ecology will become increasingly unequal. (See NetworkWorld on Debunking the set-top box safety net, and Forbes on Cisco's Misplaced Assumption.)

Smart consumer electronics companies will also join in this ecology (before HP, Dell, Gateway, Apple, and others eat their lunch). The Viiv brand need not dominate the market to the extent Intel may hope -- competing silicon such as AMD's Live can be expected to be significant as well. What matters is that these PC-world products may bring us to a tipping point in the competitive balance for entertainment devices. Some good background is in a recent Forrester report, Intel Viiv Tackles Digital Home Barriers With Silicon.

This kind of dynamic openness has been talked about for a long time, but has remained elusive. But maybe--with these serious steps toward open access and open platforms--"the stars are beginning to align" at last.


Wednesday, January 11, 2006

The Distribution War to Come -- A Tale of Two Pipes

The battle between the TV distributors and TV sourcing from the Internet is largely a battle over two pipes. One pipe is the TV distribution pipe controlled by the cable companies (or, similarly, by the Telcos). The distributors act as gatekeepers to prime content from TV program networks -- they limit our choices to the TV program networks they choose to carry and charge us a nice premium to see the content they choose to let us receive.

That is in contrast to the open Internet, which generally allows any consumer to connect to any content source (on whatever terms those two parties agree on). The Telco TV offerings could take the route of the open Internet, but, for now, they prefer the traditional TV model of closed access. These distributors thus have monopoly (or duopoly) control, for which they can charge a premium.

But they carry a second, parallel pipe. Both pipes are just logical or "virtual" pipes that share the same physical pipe of fiber, coax, and/or twisted pairs of wire to your home. One pipe is the TV "private virtual network" pipe. The other pipe is the "DOCSIS" Data Over Cable pipe that carries open Internet traffic to your cable modem (or for Telcos, the DSL pipe).

The war to come is over how these pipes are used-- whether the distributors can throttle the Internet pipe to protect their control of the separate TV pipe. There are technical issues of bandwidth and quality of service, and regulatory issues of common carriage, open access, network neutrality, and pricing. The distributors are old hands at playing discrimanatory and regulatory games to maintain control of "their" networks -- which limit "our" services.

But now the big Internet players are getting serious (see my previous post, TV Meets the Internet as Manifest Destiny -- Soon?), and they are finding the premium content owners eager to experiment with this alternate pipe. It is telling that some network executives have referred to this as "cable bypass." The content providers hate the cable distributors for their monopolistic stranglehold even more than we consumers do. They also learned the lesson of the music industry and are getting serious about learning new ways to survive in this new age.

The real value-add of a mediator between content provider and consumer is not in distribution, but in media concierge services. That is not what the incumbent distributors offer, and because of that, the game is changing. They will still bring us the content on their pipes, but it will increasingly shift to the open pipe, not the closed one. There may be walled gardens in the future, but they will be opt-in (like AOL's Web service), not the only game in your town (like Comcast or Time Warner Cable). We will spend some time in a transitional world of two pipes, as the old school players hold on as long as they can. But over time, the open pipe will dominate, and the owners of the pipes will largely revert to their natural role as common carriers.

The content producers and the consumers have common cause to agree: we don't need your stinking walled gardens. They are an artifact of an age of a limited number of channels and limited connectivity, and that age has passed.


Saturday, January 07, 2006

TV Meets the Internet as Manifest Destiny -- Soon?

"At one level it's clear that the dam has broken," says Paul Otellini of Intel, quoted in John Markoff's post-CES report in the Times. "There's an inevitable move to use the Internet as a distribution medium, and that's not going to stop." Markoff gives a strategic perspective on the walls cracking, and the flood of prime content to come, as major new powers weigh in on the open Web.

The owners of the distribution pipes may be able to keep their lucrative stranglehold on access to prime content for a number of years yet, but it is suddenly becoming clear that their power as gatekeepers between content providers and consumers has little value to anyone but them. Dams can resist gravity for a long time, but when the breaking point is reached, they can collapse very quickly.

As Markoff reminds us,

"At the onset of the dot-com era, large online service companies like AOL, Compuserve and MSN tried to lock customers into electronic walled gardens of digital information.

But it quickly became apparent that no single company could compete with the vast variety of information and entertainment sources provided on the Web.

The same phenomenon may well overtake traditional TV providers. Potentially, IPTV could replace the 100- or 500-channel world of the cable and satellite companies with millions of hybrid combinations that increasingly blend video, text from the Web, and even video-game-style interactivity."

Many have seen this manifest destiny. But the power of the entrenched cable and satellite companies, with their exclusive contracts for prime content, has made that destiny seem ever far from reach. Telco TV is going down the same road of proprietary walled gardens. These distributors control the TV pipes, but the Internet pipe they also carry is a Trojan horse. They will try to throttle this open pipe that passes through their walls, but can they?

Now the big guys of the Internet and the PC are getting serious about making that alternate pipe attractive to consumers by providing an array of prime content through it. The business models, rights management, and bandwidth still need a lot of work -- but maybe this vision of real Internet TV is no longer so far off.


Thursday, January 05, 2006

"Two-Screen" TV Goes Back To The Future All Over Again

The TV industry will think outside the box, but it can take time for the power of cross-platform services and multitasking to be appreciated. Recent comments by Joe Franzetta of GoldPocket, a provider of interactive services offered by TBS, FOX, CNN, A&E, and other networks, reflect on that.

Two-screen interactive TV is a partial form of CoTV, coactive TV + Web/PC viewing, that has been widely offered, but very slow to gain recognition and respect as anything more than an experimental toy. The TV industry has mostly viewed interactivity as something that should happen on one screen (the TV). It has viewed two-screen services as a stop-gap way to test interactivity -- one that would fade away once advanced one-screen TV systems are widely deployable.

In a 12/22/05 interview by the newsletter ITVT, Franzetta observes that even as advanced TV systems become more widely deployed, two-screen usage is by no means fading away.

[itvt]: What kinds of developments has GoldPocket been seeing in the interactive TV market in the past few months?

Franzetta: One thing we're seeing is that advertisers and television networks are very interested in broadband TV. A by-product of this interest in the Internet is that we have, you might say, gone "back to the future" a little bit with two-screen interactive TV. Now, obviously, there's a lot of interest on the part of broadcasters and advertisers in deployment of single-screen, set-top box-based applications with both cable and satellite, but we're also seeing a lot of interest in the old, two-screen model. Which I think is partly because our ongoing message of the importance of cross-platform content delivery capabilities is becoming more and more the mantra of the television networks we work with. They want to reach people however they can: whether by set-top box devices, wireless devices or broadband-connected devices.

[itvt]: I think a lot of people thought that two-screen interactive TV was just going to be a temporary solution, until more powerful set-top boxes were widely deployed.

Franzetta: The interest in PC-delivered two-screen ITV applications is tracking very nicely with the resurgence of investment in Internet-related properties that the increasing penetration of broadband has given rise to. With two-screen applications, you had an initial green field of opportunity, but what you could do was restricted by the lack of bandwidth. There wasn't a lot of broadband penetration, and there wasn't a lot of Wi-Fi--which, of course, makes it easier for people to use their computers while watching TV. But now, a lot of people have Wi-Fi in their homes, and certainly broadband penetration in general has gone way up. Because of the increasing availability of broadband, we're also seeing advertisers becoming more and more interested in reaching consumers on the PC and in cross-platform in general.

This back to the future note echoes the insights of a 2003 ITVT interview with Rick Mandler, head of ABC's Enhanced TV unit (which provides two screen services for many ABC programs, in case you hadn't noticed).

Mandler: ... I think if you and I had had this conversation a year ago, I would have said to you, "I think 2-screen is ultimately an interim technology and that everything will move into single-screen." I don't think that anymore. It seems like there are a lot of people who are very comfortable multitasking, who have TV's and PC's in the same room. With wireless networking and home networks and tablet PC's, it seems like there is an ongoing and persistent role for 2-screen interactive television...

There are many reasons people have been slow to notice the appeal of two-screen TV-related interaction. Reluctance to think outside the box is one, and the lack of a simple, ubiquitous way for viewers to get to coactive services is another. CoTV provides remedies to these. Consider the case for coactive TV, and think ahead to the increasingly networked multi-screen home.

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