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Viodi View Newsletter - December 7th, 2005

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By Ken Pyle, [email protected], Managing Editor, Viodi View

• Was Pac Bell Right?
• A Tale of Two Directories
• American Broadband Hunts for Telcos....
• DVRs, VOD Finally Going Mainstream?
• A Next Generation DVR
• OCAP Building Momentum
• WiMAX Related Sessions at Telecom 05
• Movers and Shakers
• Some Trade Shows and Upcoming Events
• The Korner - Questions of Balance

Turmoil and change has been a recurring theme in presentations I have given this year. All industries seem to be facing the challenges of change, as technology is breaking down the barriers that used to separate once disparate businesses. Every day kingdoms are crumbling and fortunes are shifting as the lines between industries blur. A case in point is the troubled outlook for Knight Ridder, the publisher of the San Jose Mercury News, my hometown newspaper. They are on the sales block and the most valuable piece of their business appears to be the investment made in the online property, Real Cities.

Was Pac Bell Right?

The big question for any business is the timing of their investments. If one invests too early, then the market may not ready and/or the technology does not provide the promised operational savings. If a business invests too late and milks too much out of its existing infrastructure, then it may find itself having to invest much more than it would had it made the investment earlier. I raise this question thanks to an article in the December 1st, 2005 Wall Street Journal that suggested that the larger carriers are struggling with what to do with their rural properties.

The article, which echoed comments I heard from Frank Gallagher of Legg Mason last summer, indicated that the larger carriers are having difficulty getting the price they want for their rural properties. If they drop the prices, then they are admitting that these assets are overvalued. The implication is that these rural properties owned by the big carriers will languish in terms of new investment. Sure, they may try to stop the bleeding through clever bundling techniques and the use of direct broadcast satellite, but these rural areas will not receive the same attention as will the core bread and butter urban areas.

So, the question is, did the large carriers wait too long to make the investments necessary to rebuild their networks? Was Pacific Bell on the right path with its Hybrid Fiber Coax approach a decade ago? If they had remained independent and continued their build-out, today, the majority of their urban customer base would be served by a network comparable or superior to anything the cable industry has. Of course the other argument is that by waiting, Internet Protocol will have matured, allowing the large carriers to leap frog their cable competition without over-investing. It will be interesting to see in a decade how these questions are answered.

A Tale of Two Directories:

AT&T, with its mostly copper-enriched rebuilds, and Verizon, with its fiber to the home approach, are clearly taking different paths when it comes to building out their networks to support video. It is interesting that their phone directory strategy may be diverging as well. Verizon is purportedly looking to sell its directory business to raise $17 billion, which will help them fund the build out of their Fiber to the Home project. Meanwhile, AT&T partnered with Bell South to launch Yellowpages.com. Jeff Weber of AT&T suggested at the IP Video @ Supercomm conference that the phone directory business could be an important element going forward as they begin to integrate advertising into the television experience. The phone directory advertising relationships will probably also be important to their wireless strategy, as evidenced by the Cingular link on the Yellowpages.com web page.

American Broadband Hunts for Telcos….

I don’t know how I missed this one when it came out a few weeks ago, but, last month, the Hunt family of sold their telephone, cable TV, and Internet divisions to American Broadband Communications, LLC based in Charlotte, NC. This is significant as the Hunts, with their 14k access lines, have been leaders in the independent telco space for a long time. Fortunately, their presence in the industry will still be felt with their continued ownership of other businesses, such as HunTel Engineering and Mid America Computer Corporation (MACC). The question is whether this is a sign of accelerated consolidation of independent telcos by holding companies.

DVRs, VOD Finally Going Mainstream?

My sister is a bellwether as to whether a particular technology is in the mainstream. Her comment last week about, “wanting a TIVO,” indicated to me that the concept of DVRs, or at least TIVOs, are pretty well understood by the general public. I asked her why she didn’t use on-demand, since she already had that at her fingertips. She said that didn’t want to have to pay for movies. So, it looks like the industry has to do some more education of their customers, if on-demand is going to reach its full potential.

One of the ways that TBS/Comcast did this is through a special sneak preview of the Daisy Does America television series. The series debuted yesterday, but an 11 minute version was available as a Video On Demand offering prior to the launch. I heard about this through a radio spot last week, so Comcast is using multiple media to spread their message. And to prove the point that multiple media are required, I never would have known about this show had I just paid attention to Comcast’s Interactive Program Guide. It makes me wonder why Comcast hasn’t started implementing the relatively simple IPG enhancements that Sean Henry of iNDemand discussed in his presentation at TELECOM 05, titled, The Case of the Missing Marque.

A Next Generation DVR - The Review

I am the reluctant early adopter. Too many times I have had high expectations for a product concept only to be disappointed by the difficulty in using a new product. I have been able to avoid getting a DVR for Pyle residence mainly by telling my wife that if we wait just a little while longer, we will be able to get a device that will serve up all of our media to both our televisions and PCs. It looks like this day is drawing near, as there are now a number of dedicated devices for this sort of thing from companies such as TIVO, LG and Video Without Boundaries (VWB). I recently had a chance to evaluate two of VWB’s units that, taken together, promise the converged nirvana I have been preaching to my spouse (not that she cares, as all she just wants is to watch Desperate Housewives on her terms).

With its ability to access content from the Internet, record television, video and audio to a hard-drive or DVD/CD as well as serve as a hub for all of the media files on all of my networked PCs, the Linux-based MediaREADY 5000 offers plenty of features. Complementing the MediaREADY 5000 is their portable video player, the $349 Video Flyboy. This 20 Gigabyte storage and display device offers a busy person a chance to view television anywhere, much like the new Video iPOD. VWB just announced lower cost unit, the Co-Pilot, which is similar in concept but which uses flash memory, instead of a hard-drive, yielding up to five hours of video. To read my review of the MediaREADY 5000 and the Video Flyboy, please click here [Must be a Club Viodi member].

OCAP - Building Momentum

Another significant announcement from VWB is their CableCARD™ Host Interface Licensing Agreement (CHILA) with CableLabs. The significance of this is this agreement is that it allows VWB to build a device that would essentially serve as the cable set-top. There has been a flurry of activity at CableLabs in terms of announcements regarding the integration of their Open Cable Application Platform. Microsoft recently signed an agreement with CableLabs which will allow them and their partners to provide digital-cable-ready Windows® Media Center-based PCs in the holiday 2006 time frame. As with Microsoft’s current Windows Media Center products, this one will be capable of feeding an X-Box 360.

Samsung’s announcement that they are going to support CableLabs Downloadable Conditional Access System is huge. This announcement, coupled with Samsung’s agreement last summer to integrate circuitry necessary to enable two-way communications, may signal that, finally, we may be nearing the day when a cable operator can deploy a set-top free, Interactive Program Guide, Video on Demand and other interactive television applications. The Independent Telcos need to work together to make sure their systems are not left out when these new consumer devices hit the market.

WiMAX Related Sessions at Telecom 05 - Part 2

In the last issue, Alan Weissberger reported on the WiMAX sessions at TELECOM 05. This issue contains the second part of his analysis of those sessions, as well as summaries of the presentations from speakers from service providers BT, Qwest and Sprint-Nextel. Click here to read his comments regarding this very important technology and why one panelist suggested that it could create new mass markets for broadband in developing countries.

Movers and Shakers:

In his most recent issue of DSL Prime, Dave Burstein suggested changes in the rules for auctioning spectrum to bring about a policy goal of ensuring that everyone in the U.S. has access to affordable wireless voice service. His approach is interesting as it seems to harness the power of the market to create a winning proposition for the consumer, while leaving opportunities for companies to innovate and profit.

In developing countries, unfortunately, there are still too many villages that don’t have access to even a single cell phone and the resulting economic friction caused by this poor communications infrastructure contributes to impoverished conditions. Kris Sowolla, a long-time fixture in the telecommunications industry (most recently at Occam Networks), is devoting the next stage of his career to finding solutions to the telecommunications challenges faced by the people in these third-world villages. In a nutshell, his and his colleagues’ work will be enabling third-world versions of independent carriers.

Speaking of big moves, the dormant entrepreneurial bug awoke in Bernie Arnason with his recent co-founding of market research firm, AskPivot. Arnason, formerly Vice President of Business and Technology for NTCA, always had that bug, as evidenced by the innovative programs, such as the TelcoTV conference, he developed while at NTCA. Bernie co-founded AskPivot with long-time industry consultant Dave Nieuwstraten. AskPivot’s concentration is on the independent telco space, where they will provide marketing research and strategy for independent telcos, their suppliers and other interested parties.

Some Trade Shows and Upcoming Events:

Two tradeshows under way this week that should be good include the DV West Expo in Los Angeles. This has become sort of my Western show replacement, as it in the warm climes of Southern California and it features the equipment that allows just about any organization to be their own studio.

CED’s Cable Television and Broadband Expo starts tomorrow. This Western show replacement is a testament to Roger Brown’s vision and I hope I can listen in, as they have a great mix of operators and suppliers slated to speak.

Next week, Harry Wang and John Barrett of Parks Associates will be giving the low-down on things such as, the number of networked homes, adoption of PVRs and the penetration of high speed Internet access.

The Korner - Questions of Balance

Life is about balance and answering questions like; when to make an investment versus when to enjoy the awards of an investment; how much to practice versus how much to play; how much do you push your kids versus letting them decide things for themselves? To this last question, it is always a challenge for a parent to know how much to push kids into sports and other activities. A little nudge or encouragement is needed to help kids past their lack of confidence. Too much of a push, however, and it may take the fun out of and destroy a kid’s desire to play the game.

Click here to watch their public service announcement video that features NBA coach Phil Jackson. The PCA is looking for outlets to distribute this PSA. This could be a good spot for an independent telco to run in conjunction with their local sporting event productions. Please contact David Jacobson at [email protected] or 650 354 0903.

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The TELECOM 05 CDs arrived and will be shipping this week.

Great Holiday Gift Idea

Hear and See What You Missed

The TELECOM 05 CD is a great gift for that hard to buy for telecom person. Call Sean Sullivan at 202 326 7260 to purchase or send an email to
[email protected].

IP Video Tracks at TELECOM 05

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CD-ROM Contents

Sunday, October 23rd

• On Demand Success Stories
• The Consumer as Producer

Monday, October 24th

• Standardize This! Can’t we work it out?
• Interactive TV: Is it IPTV’s Edge?
• Look Ma, No Headend

Tuesday, October 25th

• Next Generation Peer to Peer – Where do Telco’s fit?
• High Definition – A Must Have or a Must-Carry?

Wednesday, Oct. 26th

• Content Differentiation – What’s an operator to do?