HOW WILL THE INTERNET OPEN UP THE TV INDUSTRY ?

The viewing of TV programmes over the internet is accelerating, and is set to explode in the coming years as TV sets with internet access built in and the availability of superfast broadband become widespread.  Content is now routinely created, stored and distributed digitally, driving rapid changes in cost structures.  We have seen how dramatically telecoms, music and print have had their whole industry structures upturned by the internet  - how will the TV industry fare ?

The major effect to date has been the increase in “catch-up TV” services like iPlayer and 4OD.  Specialised services like Netflix, and Hulu are beginning to challenge traditional cable TV structures.  YouTube now offers TV programmes and films as well as user-generated content (much of which is itself increasing in quality and appeal).  Google, Microsoft, Apple and Amazon are all developing their plans – powerful forces are at work.

The traditional TV industry’s response has been to create closed, vertically integrated platforms to retain control. BBC, ITV and others with YouView; the SkyPlayer integrates with other Sky services; Virgin Media is launching similar products. But experience from the first wave of text content on the internet shows that walled gardens like Prestel and AOL or MSN collapse quickly when confronted with a wider range of openly available content.  Will we simply access the Poirot site rather than wait for a particular episode on ITV3 ?

Change will affect a wide range of players in the industry value chain: from software developers, through consumer electronics manufacturers to broadcasters and programme production houses, not to mention advertisers.  Key questions include:

·         How will the EPG develop when it is in effect just a browser which can access any content on the net (including your own videos) ?   Does a Google TV Search take over ?

·         Will multi-screen viewing become the norm, allowing parallel viewing, complementary advertising,  user-generated commentary ?

·         What happens to the “zapper” – why not use Wii-type or MS Kinect controls ?

·         How does rights management work ?  This could be the key aspect to control of the value chain.

·         How does the funding work ?  Micro-payments for PPV, subscription for live channels, interactive (hence more valuable) advertising, product placement and impulse purchasing (integrated online shopping baskets). Does the TV licence become a BBC subscription?

With all these forces and opportunities it seems that the current industry structure is the least likely outcome in 15 years time. But who will be the winners and losers ?

                               

 

Creating a Facebook eco-system

CREATING AN EFFICIENT FACEBOOK ECO-SYSTEM
This was the title of a very good, sensible and practical talk by Geoff Hughes of Social Clay at the Social Media World Forum on Tuesday. I’ve tried to pick out the key points below, but you can access the presentation on Slideshare at http://www.slideshare.net/hyuz/social-clay-creating-an-efficient-facebook-ecosystem-2012-0327 or contact Geoff on Twitter @hyuz.

His main point was that you can regard Facebook and other online sites as an overall system, and that you can plan for the various elements of it to be mutually reinforcing. The system as he described it is captured in the picture below.




Intelligently, Geoff began by stressing that you needed to define your objectives first – probably leads or revenue rather than “likes” – and decide how you are going to measure them. Only then do you develop your strategy – including in particular considerations of best practice and benchmarking. So the whole system becomes one big feedback loop, with reporting and monitoring being a critical element driving continuous improvement.

Looking at specific parts of the system: the Cover page should be a clear pictorial representation of who you are – you must reassure users that they are in the right place – combined with a definite call to action (possibly more than one, but that risks diluting the message). You need a content plan for your newsfeed and timeline that drives engagement – and content generation should come from across the whole company, not just a couple of specialists.

Then your website plays another important role. Each page should have a Like button so users can share good content – if it’s not good enough to share, why is it there at all? Use a recommendations box to point new users to the most popular content (rather than landing on your Timeline which be showing the latest user complaint.)

Other tricks include simple and easy registration with Facebook only used when relevant – “frictionless”. Recruitment and retention through ads and effective, personalised online campaigns.

All in all the talk was an impressive blueprint for developing your strategy – rightly praised by the moderator as being something many people would have been prepared to pay for. Thanks Geoff.

Not Neutrality

Is it bad for consumers if ISPs to make it easier for them to reach selected websites? Even if this means that the ISP can offer lower prices and reach consumers who would otherwise not be able to afford a connection? Well Professor Thomas W Hazlett of George Mason University in Arlington, Virginia, thinks not. In his article in today's FT he argues that MetroPCS, with a market share a tenth of that of Verizon, could not conceivably have any market power to abuse and that their offering is a benign outcome of competition on the internet, not a threat to it.

MetroPCS offer a $40/month "Unlimited" package over 2G and, more recently 4G (LTE), which is substantially cheaper than rival offerings in the US, where similar packages cost as much as $120. As part of the deal, they provide access to a compressed YouTube stream that enables subscribers to enjoy this popular website, even though the 2G service does not otherwise support video streaming or VoIP. According to Hazlett this is a co-operative (not paid-for) arrangement between the ISP and Google, who own YouTube, though he would argue that even if it were a financial one, consumers clearly benefit and the the internet needs no "protection" from the FCC from innovations of this kind.

Westminster eForum “Building 21st Century Broadband” – Robert Sullivan, Broadband Delivery UK

The opening talk at yesterday’s Westminster eForum meeting was given by Robert Sullivan, the relatively new head of Broadband Delivery UK, itself the quite new organisation charged by Government to facilitate the roll-out of superfast broadband in the UK.

He first addressed the objective as set out by Jeremy Hunt, Secretary of State for Culture, Media and Sport: “within this parliament we want Britain to have the best superfast broadband network in Europe.” This clearly begs the question what one means by “best” - Sullivan said BDUK was working on a definition and thought it would not be a single measure, such as headline speed. Instead it would be some sort of “scorecard” based on “outcomes”. They wanted a dialogue with stakeholders about this. If one were being sceptical one might think the target would be set in a way which pre-figured success.

Sullivan discussed the “Theoretical Exercises” that had examined the economics of providing superfast broadband in three challenging real-world areas – a paper is being written on this and will be out “soon”. But some particular points had already emerged:
• Delivering the USC is not a separate issue
• The cost of backhaul is a major factor in the economics
• Getting revenue to cover opex is difficult enough even if capex is 100% funded
• A mix of technology solutions is likely

The key obviously is getting a viable business case. Sullivan covered the three primary ways of doing this:

Reduce costs: duct and pole sharing as in Ofcom’s Wholesale Line Access review – BT reference offer due by January 2011; reuse of other utility infrastructure – electricity poles seems the most promising; reuse of public sector networks
Increase demand: through community engagement; demand registration (eg BT “Race to Infinity”); and increasing online activity by demonstrating benefits (Race Online 2010)
Public funding: £530m was secured through the Comprehensive Spending Review (ie taken from BBC); ERDF funding is available; other public sector bodies (eg councils, Devolved Administrations) might wish to contribute; and a variety of business models could be explored – gap funding, revenue share, public asset ownership.

The four Pilots announced – in North Yorkshire, Highlands & Islands, Cumbria and Herefordshire – will be funded to the tune of £5m to £10m each. These pilots will test the reuse of public sector networks and infrastructure sharing.
A BIS strategy paper is due in December.

In questioning, Sullivan explained that he thought the scorecard would be more about applications than headline speeds, and that performance requirements would follow from that. Tendering for pilots would be done locally through the usual open procedures – details are being worked out now, but they will not all be ready at the same time. Finally, we had the inevitable question about “fibre tax”, the rating system applied to fibre networks. To which we had the civil service answer of “ongoing round table discussions”, need for a level playing field etc etc.

So on the plus side there is some money available and pilots are soon to get under way. On the other hand. BDUK seem to be a classic civil service outfit, Sullivan has no telecoms experience and no real decisions have been made yet. It will still be for community groups to drive things forward.

Westminster eForum Building 21st century broadband

Sub-titled "paying,laying and simulating demand", this WeF meeting today went over much of the common ground on "superfast broadband"- things do move forward but not exactly in leaps and bounds.

I'll be writing more detailed reviews of each session over the next couple of days, but to give an overview, here is my summary

"Same old barriers" - Robert Sullivan, Broadband Delivery UK: a classic civil servant session: we're reviewing what "best broadband in Europe means" ("When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean); a strategy paper will be out "soon"; we must have a dialogue about all this. There were some real points too: eg backhaul is an issue.

"Delivering next generation infrastructure" - Liv Garfield, BT. Impressive roll-call of statistics, a sound grasp of reality, and no bullshit. But no solution to final third.

"Making rural broadband a reality": Charles Trotman, Country Land and Business Assocaition; "our members own half of Britain", "The Duke of Westminster's estate has not-spots in it" - perhaps the Duke could cough up a contribution to rural broadband himself !
Malcolm Corbett INCA; "patchwork quilt of initiatives" - INCA is stitching together (not stitching up, I trust)
Jonathan Freeman, Arqiva - surprise, a common radio network would be a good thing
Mark Falcon, Three - surprise,surprise, Three do a lot of mobile broadband.

"100Mbps Britain", Duncan Higgins, Virgin Media
Fast broadband is selling. VM broadband is fastest and most accurately advertised

NGA and 100Mbps demand
Martin Scottt, Analysys Mason: demand comes from multiple uses of known technology (eg HD, P2P), then from increased cloud computing and then who knows (Rumsfeld "unkhown unknowns")
Adrian Crook, Fibrecity: customers buying 100Mbps - offered on a "suck it and see" basis
Colin Browne, Consumer Panel: very anxious that the superfast broadband debate doesn't eclipse the 2Mbps Universal Service Commitment.
Antony Walker, BSG: customers view headline speeds as a proxy for quality of experience; industry needs to understand demand levels for business cases and network dinmensioning; public policy should not be driven just be headline speeds, but by opportunities for innovation and improved productivity

Delivering and laying the 21st century network: Ronan Dunne, Telefonica O2 UK.
Glossy presentation and corporate speak (eg "O2Learn") got in the way of a real message, but clearly there is an investment challenge, a need to revise business modela and a concern about inclusion.

"paying for the laying"
Tim Johnson, Point Topic: £530m not enough (no evidence though)
Andrew Riseley, Berwin Leighton Paisner: Australian Government is investing £26bn and structurally separating Telstra - but will it happen and will it work ?
Simon Loe, Alcatel-Lucent: understated presentation given all they are doing, but highlighted a key issue of how to capture benefits of eg TeleHealth within the business case.
Aidan Paul, Vtesse: usual complaint about ratings system and "fibre tax" - doesn't mean he's wrong though.

Watch this space for more over the coming days.

£530m for super-fast broadband

In yesterday's Comprehensive Spending Review, despite the huges cuts elewhere, the government announced that the £530m earmarked for rural broadband will be safeguarded. Super-fast broadband will be trialled in the Highlands, North Yorkshire, Cumbria and Herefordshire. The money is being recycled from the BBC:
- £230m is left over from the Digital Switchover budget;
- and the BBC will contribute a further £150m in each of 2013-14 and 2014-15.

The recently announced project in Cornwall cost £132m - so how far will the money go ?

Previously we analysed the Labout Government £6/year "broadband tax"

Then we suggested that this figure looked close to the amount needed,but probably fell a little short. So on that basis the current amounts won't do the job.

However, there may be other ways forward. The costs for local initiatives tend to be less than BT; the fund might be used only for initial capex rather than full funding; and local community services may generate extra revenues that telcos could not capture.

We wait with interest further details from BDUK

Broadband Delivery UK explain more of their plans

A new page has appeared on the BIS website, devoted to Broadband Delivery UK - http://www.bis.gov.uk/policies/business-sectors/telecommunications/broadband/bduk

Interesting snippets from this include:

- BDUK Chief Exec is Adrian Kamellard, reporting to Ed Vaizey (joint DCMS, BIS)
- 4 organisational goals for BDUK are defined, covering USC, "high speed connectivity", and use of public asssets
-BDUK is responsible for 3 "market testing" projects for superfast broadband
- BDUK are holding an "Industry Day" to make announcements about these projects on July 15th - if you want to go email martin.doyle@bis.gsi.gov.uk.

No news yet on how they will choose the trials.