Ofcom UK Communications Report

Ofcom issued a 334 page Communications Report that discusses TV, Radio, Telecommunications, and convergence.

It has a lot of interesting information. Three points that stuck out were:

• More than a quarter of consumers (27%) claimed to use a DVR at the end of Q1
  2009, equivalent to 7 million homes, according to Ofcom research. This rose to
  nearly a third of consumers (31%) in multichannel television homes. These figures
  are a little lower than those from operator and sales data, which suggest that nearly 9
  million DVRs had been sold in the UK at the end of Q1 2009.
• High-definition television gained traction over the past 12 months, as new HD
  channels launched and more platforms developed their HD propositions. By the end
  of the first quarter of 2009, 2.3 million homes (9%) had reception equipment capable
  of accessing linear or on-demand HD content. Thirty-three per cent of UK homes
  claimed to have HD-ready television sets at the end of 2008, according to its
  research.
• Online catch-up TV began to enter the mainstream in 2008, largely thanks to the
  growing popularity of the BBC iPlayer. Twenty-three per cent of households claim to
  watch programmes online, rising to 33% among 15-24s. But 10% of people aged 65+
  reported that someone in their household watched catch-up TV online.

We should all thank Ofcom for continuing to publish these comprehensive reports that shed light on important trends.

U.S. Analog Sunset

I got through the conversion to all digital over the air TV in the U.S. over the weekend. As of Saturday morning all analog TV had ceased. Actually, there was one station that I could pick up here that still broadcast an analog signal - a text screen saying that you need a digital converter or a digital TV to receive service. All of the rest of the analog signals here went blank.

I live in San Francisco and stopped my cable service more than five years ago. I did not have a cable connection in the room where we moved the TV and did not want Comcast to hack up our 80 year old house any more than it had already.

We were well prepared for the digital conversion. We now have the HD/digital sets with good Terk indoor antennas that were already receiving over the air digital signals. We have gotten rid of our analog sets over the last year. We are now only left with a couple of radios with analog TV audio receivers that no longer work.

Everything went as scheduled. We seemed to lose one channel Friday evening. I guess it made its changes earlier than midnight. Many stations were reassigning their digital signals to new frequencies as part of the conversion.

Saturday morning we rescanned two of the TVs. We had some trouble getting all of the channels we had before. We had to reorient the antennas to a position and were able to find all of the channels we had before. We scanned the third set that afternoon. One set is not able to find the NBC outlet, but this was nothing new. This set has a more compact and less powerful Terk antenna, which has not been able to pick up this channel. The more sensitive set picked up a channel that we have not been able to receive before.

The only frustration with all of this is that the channel scanning is an all or nothing operation. Every time we scan channels, it clears all channels and adds those that it finds. This means that the antenna has to be positioned carefully to get them all. I would like to see an "add channel" function that keeps the channels that have already been found and adds any new ones that it finds. This would let me point the antenna in another direction and pick up the channels that it can find in that direction. I think I would be able to pick up more channels this way.

The U.S. analog sunset is a much easier transition than will be experienced in other countries. Only 10 to 15 percent of U.S. homes use over the air broadcasting as their only source for TV programming. The rest have cable or satellite subscription. A prominent survey said last week that only 2 million households were not prepared for the change. This is less than 2 percent of the total households in the U.S. Countries with a higher dependence on analog TV broadcasting will have a more difficult transition.

Time Warner Backing Off Usage Caps

Light Reading has published an article that states that Time Warner has shelved plans to extend its trial of usage caps currently underway in Beaumont, Texas to Rochester, N.Y.; Greensboro, N.C.; and San Antonio and Austin, Texas. Take a look a my previous posting to get information on the Beaumont trial.

Apparently, Time Warner is bowing to public and political pressure. It continues to believe in usage caps and believes that it needs to better educate its users.

Personally, I think usage caps and usage charging will not be accepted and is a tool that Time Warner is using to quash competition from over the top Internet TV services.

FTC Report on Self Regulation of Interactive Advertising

I have posted an article on my Telco 2020 blog on a new Federal Trade Commission (FTC) report on the effectiveness of self regulation for interactive advertising. The report outlines significant issues with self regulation. I think that we will need regulation in this area before long.

IPTV Penetration in France Reaches 35%

The French telecom regulator ARCEP has posted a report (in French) that the penetration of IPTV services has reached 34.6% of the ADSL lines in the country. It stated that there were 5.643 million IPTV subscribers and 16.299 million ADSL subscribers at the end of the third quarter 2008.

The penetration of IPTV in France is one of the highest. Without rigorously checking, I think it is number two after Hong Kong.

FCC Questions Comcast VoIP

I have made a post on my Telecom 2020 blog that discusses a letter sent from the FCC to Comcast questioning its VoIP strategy. The FCC is questioning why Comcast's cable telephony service should be treated as an Internet VoIP service and be exempt from normal voice service fees. The FCC is concerned because Comcast's cable telephony service is not subject to Comcast's video traffic management system used on its cable modem service.

It will be interesting to see what happens with over the top Internet TV services, which will be subject to similar restrictions. If you read the FCC letter, you will see that watching a TV program at full resolution is likely to cause Comcast's traffic management to make the program unviewable after 15 minutes.

Comcast to Limit Internet TV

Light Reading published and article describing that Comcast will impose a limit of 250 gigabytes per month starting October 1. This threshold will apply to less than 1 percent of its high speed Internet subscribers, since the median residential usage is 2 to 3 Gbytes per month.

This limit seems reasonable for the web browser, even the person who uses a lot of Youtube. However, this limit will permit only about 2 hours a day of HD TV viewing. This means that Comcast is limiting the ability of its high speed data to access over the top TV services that compete with its cable service. This seems to me to be anti competitive. It will be interesting to see how the FCC reacts to this, especially as Internet TV becomes more popular.

FCC Orders Comcast to End Discriminatory Traffic Management

The U.S. FCC required Comcast to end its traffic management practices that discriminated against peer-to-peer traffic and BitTorrent in particular. The company has 30 days to:

• Disclose the details of its discriminatory traffic management practices to the Commission
• Submit a compliance plan describing how it intends to stop these discriminatory management practices by the end of the year
• Disclose to customers and the Commission the traffic management practices that will replace current practices

This is an important aspect of the Net Neutrality argument. I believe that the crux of this issue is that broadband operators must take an even handed approach to how they manage traffic. They should not use these techniques to play favorites or to improve their own market position.

Playing Field Leveled in India

The Indian government accepted the recommendation from TRAI that broadcast channels be provided to all video providers on a non-discriminatory basis. Up until now, the satellite video providers were able to acquire that broadcast content at a lower price than the IPTV providers. It will also permit a la carte pricing of broadcast channels on IPTV.

This should help the emerging IPTV services in India. There is a lot of activity there, but it is not clear how well the IPTV service is being accepted as yet.

BT's FTTH Plans

BT announced a $3B plan to deploy FTTH services to as many as 10 million homes by 2012. Ir plans to offer speeds up to 100 Mbps.

It stated that a supportive regulatory environment is essential for this program to take place. This would include removing current barriers to investment and making sure that any company investing in fiber can earn a fair rate of return.

BT also stated that it is committed to wholesaling its new services. It will press for any other next generation access network in the UK to be open to all companies as well.

This is a necessary move by BT. HD is becoming a major competitive issue for TV services in the UK. It will be interesting to see how much of a problem the regulatory issues become.

Ofcom Says 68% of UK TVs Are Connected to Digital Services

Ofcom, the UK regulator, published and article that stated that 68 percent of the 60 million TVs in teh UK are connected to digital services. The full study is also available on its website.

• There are over 10 million households with 23 million TVs using the Freeview digital terrestrial service.
• Sky has 8.3 million subscribers to its satellite service
• Virgin Media has 3.5 million subscribers to its cable services

The article and full study are worth reviewing. The study identified 50 thousand IPTV subscribers, which are likely to be Tiscali subscribers. The 214 thousand BT Vision customers are include in the Freeview numbers since they receive their broadcast content using Freeview.

Telco IPTV Barred in Argentina

An article in TV Telco Latam said that a ban has been upheld in Argentina that bans Telcos from offering cable services for the next 99 years. This was a ruling on the appeal of a ruling that banned Telcos from IPTV in Argentina in September 2007.

This kind of regulatory issue is common in Latin America and Asia, where there is a strong movement to protect the the cable companies from the Telcos. It could take years for these regulatory impediments to disappear.

JCom to Deploy DOCSIS 3.0 in Japan

A Light Reading article describes statements by J:COM, a leading cable provider in Japan, that it plans to fully deploy DOCSIS 3.0 across its network by the end of July 2008. The service provides downstream speeds of 160 Mbps and upstream speeds of 10 Mbps at $60 per month, which is $5 per month higher than its DOCSIS 2.0 service at 30 Mbps downstream. It already has about 30 thousand customers for this service.

J:COM has about 2.8 million subscribers and passes 10 million homes in Japan.

J:COM is taking a much more aggressive approach than the U.S. cable companies with DOCSIS 3.0. Comcast only offers DOCSIS 3.o in the Minneapolis area with a downstream speed of 50 Mbps at $145.99 per month.

The regulatory regimes in many Europe and many countries in Europe have been much more effective than the FCC's approach in the U.S. People in these countries get much higher speeds at lower prices than are available in the U.S.

The U.S. approach has been to pit the cable companies against the Telcos. The problem with this is that they are both entrenched monopolies whose first priority is to protect their own business rather than to compete aggressively with each other. This leads to a cautious rollout of new services. This is why I have been saying that DOCSIS 3.0 will roll out slowly in the U.S. as a high priced premium service.

Creating a Level Playing Field for Content in India.

The Telecom Regulatory Authority of India (TRAI) held meetings the May 14 through 16th with the broadcasters of pay channels to discuss the rates and packaging of channels they offer to facilitate faster growth of IPTV services in the country. TRAI had previously recommended that the broadcasters should be allowed provide signals to all distributors of TV channels including IPTV service providers.

Some of IPTV have had difficulty getting broadcast channels at prices as the DTH satellite service. providers are getting in line with TRAI’s determination of a-la-carte and bouquet prices on advisory basis. In the meetings there was a general consensus for non-discriminatory pricing as well as pricing channels on both an a la carte and a bundled basis for IPTV services.

This is a step forward for IPTV in India that will help the Telcos to compete with the existing satellite providers.

Cable Channels Object to a la Carte Programming

Light Reading published an article describing the reaction of the major U.S. cable networks to the FCC Chairman's proposal for a la carte programming that operators should be allowed to strip from expanded basic tier any network that required a monthly carriage fee of 75 cents per. The position of the cable networks is that this will raise the cost to the subscriber and, consequently, hurt consumers.

Both the FCC and the cable networks should take a good look at Manitoba Telecom's (MTS) IPTV content strategy. It breaks the premium channels down into small groups of three to five channels. Each subscriber decides which set of groups that they want to receive. MTS's has found that its customers really like its approach. They spend the same as they do with more structured offerings, but they get a much more useful set of channels for their money.

Verizon to Eliminate Analog Tier

Verizon will eliminate its analog tier by the time of the U.S. analog switch off on February 19, 2009. It will start by eliminating its analog tier in New York by April 21. Verizon received a waiver from FCC requirements to provide integrated security set-top boxes on the condition that it convert its offering to 100 percent digital by the analog switch off date.

Verizon has had a very low take up of its analog only offering, so this should not cause a big disruption to its FiOS TV customer base.

FCC Requires Open IPTV

In a recent ruling that gives waivers to smaller cable systems for rules that require open set-top boxes, there is a footnote that requires an open security system for U.S. Telco IPTV providers that permits interconnection by consumer electronic devices by July 1, 2008.

The U.S. IPTV providers stated to the FCC that their security systems were already open. The FCC has not yet decided that this is or is not the case.

This could be a real problem for the U.S. IPTV providers. Every IPTV content security system is proprietary and based on a single company's system. The IPTV industry has not developed an interoperable standard such as the Cable Lab's cable card that can be used across systems. It is clearly not feasible for consumer electronic companies to deploy all of the proprietary content security systems that the U.S. IPTV providers are using in their products. There has to be a single standard that they can implement.

Free's FTTH Plans in France

Free has given an update on its FTTH plans. It stated that there are three rationales for FTTH:

• Improved consumer experience based on higher data speeds, better HD support and improved ability to support multiple TVs, and the high satisfaction level of Free's existing FTTH subscribers.
• Technology improvements that provide higher quality and higher satisfaction with the service.
• Spending on CapEx for deploying fiber rather than OpEx unbundled loop rentals to France Telecom, lower churn and increased ARPU, and future proofing the network.

Free pointed out that it has spend 1.06 billion euros of CapEx on unbundling that includes equipping 1,500 COs with DSLAMs and creating a 33 thousand km back haul network in order to support 2.3 million unbundled subscribers.

The company plans to spend 1 billion euros between now and 2012 to pass 4 million homes with fiber services by 2012. This will significantly reduce its dependence on France Telecom's network.

Free is also hoping for favorable regulatory rulings in France that will provide access to France Telecom's ducts along with a new law in 2008 that will regulate vertical deployment and building access.

Free expects to pass 70 percent of the homes in Paris by the end of 2009 using point-to-point active Ethernet technology. It also expects to pass 300 thousand additional homes in the rest of France including rollouts in Montpelier, Valenciennes, and the Paris suburbs.

Free has an aggressive FTTH plan in France and seems to be leading the market at this time. I believe that this investment will pay great dividends for the company. It is quite interesting to see that its FTTH investment is quite in line with its ADSL investment.

Neuf Cegetel FTTH Plans

Neuf Cegetel joins France Telecom and Free in France with FTTH deployment plans. It ended 2007 with 130 thousand homes passed by fiber and 20 thousand subscribers. It plans to invest 300 million euros to pass 1 million homes by the end of 2009. It expects to have 250 thousand FTTH subscribers at that time.

Neuf Cegetel is targeting over 500 thousand homes in Paris and its suburbs based on successful cooperation with local authorities. It also has public/private partnerships in Rennes, Bordeaux, and Grand Nancy and agreements with municipalities in Toulouse and Strasbourg.

FTTH is moving forward based on partnerships that spread the risk. The competitive structure of the French market has facilitated fiber. The incumbent is not able to control the situation as is the case in the U.S.

EC Insisting on Fiber Unbundling

Light Reading published an article on the EC's position on FTTH unbundling. European Commissioner Viviane Reding has stated that regulatory holidays are not on the agenda. She does not support the unbundling exemptions that several European carriers have requested for their fiber build outs.

One issue with this is that the EC has not figured out how to unbundle PON, since PON permits a single fiber loop to be shared by multiple subscribers.

The EC has to face tough issues to follow through with fiber unbundling. The sharing of PON loops is only one of them. The more important issue is to what degree fiber unbundling will inhibit deployment. Telefonica in Spain, in particular, has taken the position that it will not deploy fiber if it has to provide competitive access.