Broadband Cable Association of Pennsylvania


July 17, 2013

Google Inc. is joining several other technology companies in the race to launch an online version of pay television. Google has recently approached media companies about licensing their content for an Internet TV service that would stream traditional TV programming, people familiar with the matter say. If the Web giant goes ahead with the idea, it would join several other companies planning to offer services that deliver cable TV-style packages of channels over broadband connections. Intel Corp. and Sony Corp. are both working on similar offerings, while Apple Inc. has pitched various TV licensing ideas to media companies in the past couple of years.

Google has made overtures to some programmers in recent months about the initiative, people familiar with the situation said. In at least one case, Google has provided a demonstration of the product, according to a person who saw the demonstration. Google didn't immediately have a comment. If launched, the Internet-TV services could have major implications for the traditional TV ecosystem, creating new competition for pay-TV operators that are already struggling to retain video subscribers. Existing online-video players like Netflix Inc., Hulu and Inc. offer on-demand TV, but the latest efforts are aimed at offering conventional channels, allowing consumers to flip through channels just as they would on cable, as well as on-demand programming.

There is no guarantee Google, or any of the technology companies, will be able to strike licensing deals. Media companies are nervous about undermining their lucrative arrangements with existing distributors by licensing to new online pay services. The media companies are more focused on expanding online and on-demand availability of their programming through current distributors, say media executives. While they are open to licensing their content, they generally give the best prices to the biggest distributors. To get decent rates for so-called over-the-top TV services, Google and other companies will almost certainly have to accept the standard programming bundles that cable and satellite operators pay for—packages that include highly popular and less popular channels.

This is the second time Google has gone down this path. About two years ago Google had conversations with media companies about a similar service, the people said. But those discussions didn't get very far, one of the people said. Still, the environment has changed since then: not only are several other technology companies actively working on similar services but pay-TV providers are also asking entertainment companies for nation-wide streaming rights. While none of those other discussions has yet resulted in any new services, that could soon change. Intel, which plans to launch its service by year-end, has had discussions with several media companies to acquire broadband-service rights for more than a year.

It is unclear whether the company has yet struck any major programming deals. But it may at least have a name. Documents disclosed last week indicate that the company may call the service OnCue. An Intel spokesman declined to comment Tuesday. The status of Sony's plans aren't clear, although one media executive said Tuesday Sony could launch its service before Intel. As previously reported, Sony plans to beam its service over broadband connections to Sony-made devices, which include PlayStation gaming consoles, TV sets and Blu-ray players. A Sony spokesman declined to comment. Apple has met with resistance from media companies throughout negotiations to license content, said people familiar with the situation.

All tech companies looking to launch a video service face a fundamental challenge: If they can't beat cable or satellite TV on pricing and offer the same lineup of channels, it isn't clear why consumers would switch. One answer, backers say, is that the technology companies can develop far better interfaces to watch television than the clunky programming guides pay-TV operators offer now. Indeed, many media executives said they are impressed at the slickness of slick Intel's set-top box and guide. Google has taken several other steps to expand in television and online video in recent years, including financing original programming for its online video site YouTube, launching regular cable service on its Google Fiber network in Kansas City, and developing a Google TV software to be installed on cable TV set top boxes. Wall Street Journal

Comcast Corp. struck a deal with long-distance Internet carrier Level 3 Communications Inc. to share the cost of data flowing into the cable company's network, resolving a three-year dispute that offered a rare window into how telecommunications companies manage traffic across the Web. The two companies said Tuesday they had "resolved their prior interconnect dispute on mutually satisfactory terms." The agreement changes how Level 3 routes traffic across Comcast's network, sharply cutting the fees the backbone provider must pay when traffic overwhelms certain connections, a person familiar with the matter said. The arrangement could help both companies avoid the kind of standoffs that can occur as Internet traffic soars thanks to the rise of streaming video services like Netflix Inc.

Traffic has grown so fast that it has outpaced arrangements that governed cost sharing on the Web in the past, leading to sometimes contentious disputes. The dispute at issue arose in 2010 after Level 3 struck a deal to carry online movies and television shows for Netflix Inc. Level 3 complained that Comcast, the country's largest provider of Internet broadband service, had begun charging a new fee to deliver Level 3 traffic to its own subscribers. Level 3 called the fees unreasonable. Comcast argued that Level 3 was trying to send heavy traffic across its network without bearing its fair share of the cost. Internet companies typically hammer out such disagreements behind closed doors, but a 2010 dispute between Comcast and Level 3 burst into the open after both parties took their arguments to the Federal Communications Commission.

Level 3 has spent several months pushing other Internet companies to adopt a cost-sharing model that values traffic crossing connection points based on the distance it travels as well as the amount of data that passes over those links. That model benefits Level 3, which operates the fiber-optic cables that carry information across long distances. Under that arrangement, Level 3 only pays fees in the rare cases that traffic is "out of balance" based on those criteria, said Mark Taylor, vice president for media and IP services at the company. "That pricing mechanism is just a backstop," he said. Level 3 has reached agreements over the past two years governing connections to Time Warner Cable Inc. and Cox Communications. Terms of those deals weren't disclosed, though the settlement with Cox included an agreement to buy a service Level 3 offers that directs data more efficiently. Wall Street Journal

Fate may be conspiring to bring Dish Network and T-Mobile US together. AT&T's $1.2 billion offer to buy Leap Wireless, made late last week, takes a strategic option off the table for both Dish and T-Mobile. That makes it more likely that the two will ultimately join hands. Dish seeks to use the wireless spectrum it has amassed through a partnership with an established national phone carrier. Dish lost the chance at one potential partner last month, when it abandoned efforts to buy Sprint Nextel. In light of that, another possibility was for AT&T, which needs more spectrum, to buy Dish. But the Leap offer and a January agreement to buy $1.9 billion in spectrum from Verizon Wireless mean AT&T has two deals in front of the Federal Communications Commission, making it unlikely to add a third, according to UBS.

For T-Mobile, Leap's spectrum was considered highly complementary. And buying it would have helped the carrier expand its MetroPCS brand to more markets. With Leap now all but locked up by AT&T, T-Mobile may look more favorably at Dish's spectrum stash. Dish's need for a deal may be more pressing than T-Mobile's. The satellite-TV operator has a mandate from the FCC to cover at least 70% of its new network within seven years, having been granted approval earlier this year to use its spectrum for a cellphone network. And while T-Mobile would have benefited from Leap's spectrum, it doesn't have a pressing need for it after buying MetroPCS, UBS says. If things get serious, that could put T-Mobile, whose new pricing plans appear to be getting traction, in a position to demand a more sizable dowry. Wall Street Journal

The state Republican Party is highlighting statements made by Democratic Attorney General Kathleen Kane during last year's campaign that it says conflicts with her refusal to defend a court challenge to a Pennsylvania law banning same-sex marriage. In the March 2012 interview, Kane suggests it's a "dangerous proposition" for an attorney general to refuse to enforce a state law. Her answer was in response to a Pennsylvania Cable Network interviewer's question. It was based on another Democratic candidate's assertion that he would not enforce any law that requires women seeking an abortion to undergo an ultrasound. In her answer, she said an attorney general doesn't have the right to choose which laws he or she enforces, and that not enforcing a law is tantamount to "playing politics." Associated Press