Boom, there goes your local monopoly

Monopolies are great, but only if you happen to own one. Monopolies used to be granted, by the powers that be. But sometimes, monopolies just come by almost naturally. Take traditional telecommunications, be it switched telephony or cable television. The capital expense for building the infrastructure is immense, the payback stretches over decades – if ever. But if you owned the infrastructure and you reached the nirvana of positive cash flow, you were as undefeatable as Superman in an universe without any Kryptonite. Unfortunately, monopolies mostly lack the ethic strength of the man of steel and started to behave like Lex Luthorized bar room bullies.

Gone too wild: monopoly power corrupts.

Gone too wild: monopoly power corrupts.

In a wired economy, overbuilts were only feasible, if your new layer of technology adds a new value, which cannot be reasonably replicated with the incumbent technology: analog TV over PSTN. Very funny.

Satellite TV was probably the only really massive working overbuilt, but mostly built for consumers outside of cable’s reach.

With the Internet, so many things have changed. For one thing, the telcos are back, offering multicast IPTV services over their networks. Nice try, but in most cases not a real game changer, more like learning by doing.

Even when acknowledging the technical superiority of their telco competitor’s hardware, the cable guys had not too much to fear. They could switch to an IP-based model as well. And still own the much bigger pipe. Just by refining their services they should do well for the next foreseeable future.

Turns out, that sometimes some refinements have some interesting side effects. As consumers more and more used tablets and laptops for watching video content (hello, YouTube), some cable guys jumped over their own shadows.

Instead of selling the extra settop-boxes with additional smart card and on top subscriptions, they opted for using those new devices as new outlets for their services. Nice side effect: telcos, mostly a bit bandwidth challenged, had to be a bit moire cautious in adding additional streams. So over the last years, a couple of solutions emerged, with different technical setups. Providers like Comcast, Time Warner Cable and Verizon Wireless even joined forces to develop a mutual solution.

But, no more joint developments. At the very moment you switch to a non-multicast IP delivery, an OTT model, something very unsettling happens: you have a virtual overbuilt. Meaning: you can start competing outside the area of your cable footprint.

All larger US providers are trying to compete here. Cox is  working on a commercial pay TV solution that would stream live TV over the internet, writes LightReading. In somewhat related news, international cable heavy weight Liberty is said to be in talks to acquire a solution developed by Intel. Which makes sense, as their leading platform Horizon, is a bit hardware centric to be of use as a competitive threat.

In Europe, you’ll even find some somewhat unlikely new contenders. Magine* out of Sweden has raised sizable funds to build a service based upon excellence of user experience – for most cable companies a concept they cannot really relate to (and probably not a real strength of most consumer electronics companies as well). Zattoo, founded 2006 from Switzerland, is almost the grand daddy of cable-like OTT-service. After some stumbles, they seem to be coming back to their feet again.

 

Both companies not just act like “real” cable operators, by dealing out carriage licenses with TV networks. For their catch up services, they even have to secure some rights directly from the producers. Main reason: TV networks still work and live in pre-Internet time. Being broadcasters, they need just the broadcasting rights, right?

Another unlikely player, with global ambitions: Siemens Convergence Creators and their OTT Swipe is offering just plain technologies as a white label service, with live service in India and the Middle East, as so far.

If you’re eager to switch to OTT-based TV: depending on your place of residence, you still might have to wait. The web may be global – content licenses and carriage contracts are not. So you will need a strong player to get the ball rolling. Equally important: if the principle of net neutrality is not upheld, this kind of competition is doomed. Bandwidth caps or prioritization of other traffic will kill OTT-cable before it can get a foothold.

 

 

* disclaimer: I know one of their co-founders from one of my former lives, and sometimes run some errands for them.

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