[Random-bits] Cable proposals for "acceptable use" of Internet conectins, discriminatory downstream bandwidth

[James Love]

Pointer from Jeff.  See in particular the last paragraph.  Jamie


46 FALL 1999 CTAM QUARTERLY JOURNAL 
"The dilemma is that our customers will increasingly have the option to
use our networks to purchase and view video entertainment directly from
third parties." Is the Internet a Threat to Our Core Revenue 
Streams? 

by David Large, Principal and Co-Founder, Media Connections Group 

Sometimes it pays to look beyond our immediate opportunities and goals
and see the broader implications of new technology. Such is the case
with our new Internet access or cable modem service. If we aren't
careful here we could get bitten badly. 

   [Snip]

* AOL and Microsoft have included real-time video viewers in their most
recent software releases for PCs. CED Magazine reported that there were
38 million registered users of AOL's video viewer as of Jan. 1999.  

* An increasing number of Web sites offer real-time video either
advertising-supported or on a PPV 
basis. For instance, as reported in recent national  and trade press
articles: Digital Entertainment 
Network launched five channels in May; Warner Bros.  Online and Sony
Online Entertainment are planning 
multi-media entertainment "portals"; both Warner Bros. Online and Bravo
are planning PPV online 
channels; @Home launched in April a "netcasting" service of short films;
and pioneer broadcast.com 
delivers a wide range of video products. 

Taken together, these events mean simply that PC users can, and will,
routinely purchase and view 
video entertainment video through the Web, rather than from their
friendly neighborhood cable operator. 
There are problems, of course. For one thing, viewing on a PC is not
exactly the same as viewing on a 
large-screen television - or is it? WorldGate, WebTV and ICTV all
convert images from the Internet for 
display on television screens and they are also configuring their
software so that it can be run 
within one of the new OpenCable set-top boxes. Not only will it appear
on the TV, but it will be controlled  from the same box used to select
and view standard  cable programming. Thus, TV viewers and PC users, 
can view programs delivered through the Internet.  What about video
quality? Surely video delivered at  typical Internet data rates doesn't
look as good as our  own digital video product, does it? The answer is
that,  at "dial-up" telephone modem speeds, it doesn't and  that has
limited the appeal of Web-delivered video.  But wait - your local cable
engineer has solved that  problem with cable modems. In fact, cable
modems  are quite capable of receiving broadcast-quality video  if we
allow them to do so. Not only that, but one of  the options provided for
in the OpenCable set-top box  specification is the inclusion of an
on-board cable modem. Combine the included cable modem with 
Internet-on-TV software and the quality problem is solved. Or, as stated
by Mark Cuban, President of 
broadcast.com [CED, Jan.99], "As long as cable companies allow their
customers onto the Internet, 
I can deliver full-motion video to those users." Should we avoid
delivering boxes with all these 
features to our customers? Not an option. The FCC has ruled that by July
2000 customers will have the 
option to buy their set-top boxes at retail, from any vendor, with
whatever features they want. 

In short, the dilemma is that our customers will increasingly have the
option to use our networks to 
purchase and view video entertainment directly from third parties. To
the extent that they do,we will evolve from an entertainment retailer to
a passive carrier. What can we do? Among other options: We can 
restrict the maximum speed of modems to limit the quality of "streamed"
video; we can adopt 
"acceptable usage" policies that don't include downloading real-time
video; we can change to 
usage-based pricing, thus charging more when customers download movies;
we can bring a 
compelling list of video retailers into our own Internet "portal" and
compete directly; or we can 
ignore the whole thing and hope it goes away. I don't recommend the
latter. Marketers need to carefully 
study these new trends in video entertainment and work with engineers
and management to position 
their companies in this changing landscape.

  [snip]


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James Love, Director           | http://www.cptech.org
Consumer Project on Technology | mailto:love@cptech.org 
P.O. Box 19367                 | voice: 1.202.387.8030
Washington, DC 20036           | fax:   1.202.234.5176
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