Editor Analysis: A Year in Residential Broadband & Entertainment

Bob Wallace Executive Editor

In the turbulent, fast-changing, residential broadband services industry, the phrase “stay tuned” has taken on a new and different meaning this year.

With content owners, broadcasters, video sites, telcos, cablecos, satellite firms, Internet sites, consumer electronics companies and advertisers looking to team to cash in on new and expanded opportunities, it’s simply too early to assign many events a “best” or “worst” label.

For these seeming milestones and in cases where the jury still is out — literally and figuratively — I’m assigning a “to be determined” stamp. And if the jury is deadlocked, as to there being a best and worst element to an event, it’s duly discussed.

The video-driven triple-play bundle limped weakly into 2007, having missed its 2006 market deployment target, fueling speculation that AT&T Inc. was awash in problems with partner Microsoft Corp.’s IPTV software.

While AT&T has added many markets and lowered its initial availability forecast, it’s unclear if adding $1.4 billion above and beyond initial spending targets is a plus or a minus. Is the telco’s increased spending good news in that the financial commitment is being increased, especially for new builds? Or is it bad news because it’s above established spending projections? Stay tuned.

Microsoft’s announcement at the CES show to merge its IPTV software into its gaming console had many thinking “inside the Xbox.” The effort could change the way we think about set-top boxes, but it’s still to be determined.

Why? Because folks in multiple industries are waiting to see if Microsoft will hit its mark of making the offering available by the yearend holidays. Things have been eerily quiet on this front for well over six months. If silence is golden, the vendor is fine. If not, Microsoft will be grabbing as many headlines for bad news as they did hailing the announcement in January.

Either way, the grand plan got folks thinking beyond the set-top box to consider the gaming console as the hub of home entertainment, media sharing and more. This residual has to be seen as a benefit, especially for telcos who need to look also at themselves as being in the entertainment industry, not just the bandwidth biz.

As for the future of DVRs, TiVo isn’t just a company name, it’s also a noun for a product and all but officially a verb for recording content for viewing at a later date, with the ability to fast-forward and pause. But while the spread of DVRs continued this year, the DVR issue to watch is one that portends to expand and reshape the market for this technology and capabilities.

Cablevision Systems Corp. is pushing to reverse a ruling that has stopped it from offering a network-based or remote DVR service. Members of the content industry blocked the cable giant through a copyright protection lawsuit that has been gathering dust, and losing relevance.

Cablecos and telcos of all shapes and sizes are behind Cablevision on this, with many confirming they’ll roll out network-based DVR (N-DVR) services — where intelligence, software, storage and content resides in off-site servers — if the ruling is overturned. Industry experts see N-DVR as the future of the DVR industry as a way to deliver a potentially lower-cost alternative to set-top box-based DVRs. You may want to “TiVo” this court decision for historical purposes.

On the IPTV front, a growing number of industry pundits believe newer entrants to the market, such as AT&T and Verizon Communications Inc., as well as their cable competition, are making all the wrong moves in pushing the video service. I agree.

The make-or-break problem here is that providers are focusing almost entirely on pitching pricing, the number of HD channels and inclusion on a single bill as the top selling points of their offerings, almost to the exclusion of cool features like remote control of DVRs from the Web and wireless devices.

But when the top differentiator between products is price, that accelerates the devolution of the offering through price wars and the early onset of commodity status. IPTV-driven home entertainment should be about so much more. This situation normally would rank a “worst of” label from me, except for the fact that those pushing it in this manner have time to see the iceberg approaching and steer clear. If not, IPTV will be a slam-dunk “worst of” a year from now.

And while having something precious — such as coveted sports programming — that none of your competitors has seems a business no-brainer, content owners need to learn from this year’s Major League Baseball (MLB)/ DIRECTV debacle and start making all of the people happy all of the time.

Start with a completely level playing field for sports content and think of the volume of viewers. The huge public outcry when MLB awarded its out-of-market baseball telecasts to DIRECTV shows just how quickly you can enrage a large potential customer base with a single word: exclusivity.

With politicians applying pressure and an actual investigation possible, MLB relented and dropped the programming exclusivity, expanding the network list through additional carriage agreements.

Another content worst practice is to, for almost any reason, take away part or all of a channel’s content from those who care about it. Getting the NFL Network minus the late-season live-game telecasts didn’t just anger fans, it confused them — another no-no.

This would be a “worst of,” but actually could be a “best of” since it only involved two parties and was a super high-profile event that all others can learn from in an effort to move toward a common good. It’s a TBD as we need to see if this actually happens.

Stay tuned to see if these items move from TBD status to something better — or worse — in the year ahead.

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