Broadband Cable Association of Pennsylvania


September 26, 2012

Apple had snafus under Steve Jobs-antenna-gate, MobileMe, the frequently obtuse Siri. Its latest snafu, a faulty maps application installed on the new version of the iPhone, isn't a testament to the inferiority of Apple's current management. The snafu will be easily rectified by, if nothing else, Google releasing and Apple approving a version of the Google Maps app for the iPhone 5.

For entirely different reasons, though, the map mess demonstrates why circumstances are turning against Apple's current business model. Simply, content is king again. However much it might benefit Apple's business model to force users to patronize its own maps app, the company won't get far in trying to deny them Google's far superior app. Apple for a while managed to tame the power of content and make it subservient, but that day is coming to an end. Forget the maps farrago. Look at Apple's agony over the TV puzzle. Apple is frustrated because there is no solution to TV that will let Apple keep doing what it has been doing.

Like schnauzers overreacting to the postman's arrival, the tech press was in a tizzy a month ago on reports that Apple was talking to the cable industry about bringing cable's linear channel lineups to a future Apple device. But the technical feat is no technical feat. Time Warner and Cablevision managed to roll out iPad apps within days of the device's debut 2 1/2 years ago. These TV apps proved unsatisfactory not because of any lack of Apple magic, but because only certain channels were available, and because consumers were allowed only to watch in the home (the whole point of an iPad is its portability). Even so, the Hollywood studios that actually own the shows sued saying the apps violated their contract rights. Apple's fans imagine the company can do for TV what it did for music: breaking up the existing distribution model. Forget about it. Television is about to demonstrate the inadequacy of Apple's own business model.

Video-content owners, including everyone from the TV networks and Hollywood and the NFL and Major League Baseball, aren't the music industry or even the book industry. Video-content owners aren't looking for a savior and ultimately won't be satisfied with anything less than an open ecosystem accessible by any device. They'll have no choice: Content owners already see their business being upended by Netflix and Amazon Instant Video, with an approach adapted to digital ubiquity from the get-go. They also know, if they sit still, their current partners, the cable industry and its analogues, will simply take advantage, as satellite operator DISH is doing with its ad-skipping function that so infuriates the TV networks.

In such a world, Apple will have to change too. To maintain its position, the company will have to focus more on giving its devices superb access to content it doesn't control and hasn't approved. Can Apple CEO Tim Cook and company make the turn? Two years ago, in a column on the Microsofting of Apple, we noted that a company preoccupied with products was in danger of becoming a company preoccupied with "strategy"-which we defined as zero-sum maneuvering versus hated rivals.

Yep. Apple's rejection of Google's superior maps is an obvious example, but it goes with the turf. Apple's spectacular success with devices naturally led to the temptation of a network-effects empire. To such empires, maps are just too important as a way to gather information about users and hit them with ads and e-commerce opportunities. A similar miscalculation led Microsoft to treat Netscape as a mortal threat and into a self-defeating tussle with a reciprocally purblind Justice Department. The Web did indeed create enormous opportunities that were seized by companies other than Microsoft, but Microsoft is still around and doing fine.

Let it be said that some techies see evidence of a more rational impulse within Apple. They say Apple's browser and HTML5 support are conspicuously superior to Android's. Within Apple apparently there are teams committed to making sure Apple devices are competitive in the open-ecosystem world that is coming. The real test will be for senior management. The time to worry will be if Apple's quixotic quest for TV leads it to block more realistic solutions that emerge on the open Internet. When Apple admits defeat about TV, that may be the best sign for the company's future.

On a final note, lagging investment in fixed broadband, rather than the failure of Steve Jobs to "solve" TV, is the real thing propping up the existing TV model. Notice that virtually every effort to bring Americans superfast broadband so far has been married with TV: cable's bundled offers; AT&T's U-verse product; Verizon's FiOS fiber product. Even Google at the last minute discovered that it needs a TV offering to assure adequate take-up of the fiber it is rolling out in its Kansas City demonstration project. As Google's late conversion mutely testifies, the uncertain economics of TV is why competitive fervor to bring us faster Internet has slowly leached out of the broadband sector. How TV content owners in the future will get paid is but the flip side of the question of how pipe providers will get paid. These are our old friends, chicken and egg, but sooner or later the dilemma will work itself out. And when it does, expect the TV and broadband businesses both to reorganize themselves almost overnight. Wall Street Journal

DirecTV, the largest U.S. satellite-television provider, reached an intraday record in New York trading after Hudson Square Research advised buying the shares to take advantage of growth in Latin America. The shares climbed 0.6 percent to $53.01 at the close in New York, pushing its gains for the year to 24 percent. DirecTV rose as much as 4.7 percent to $55.17 earlier in the session, reaching the highest intraday level since 1985, when its predecessor company was controlled by General Motors Corp. The stock failed to reach its Sept. 13 record close of $54.19.

While U.S. subscribers fell last quarter for the first time in company history, Latin American quarterly gains have set six straight records, capped by last quarter's 645,000 new customers. Hudson Square raised its estimate for third-quarter Latin American subscriber additions to 650,000 from 500,000 and increased its 2013 estimate to 2.5 million. "I don't see any reason why the numbers they've put up the last few quarters are going to change," Todd Rethemeier, an analyst at Hudson Square in New York, said in an interview. Only about 30 percent of Latin American households have cable or satellite subscriptions, leaving room for growth, Rethemeier wrote in a note to clients. He previously had a neutral rating on the shares.

DirecTV hasn't seen a slowdown in subscriber additions in Brazil, its biggest Latin American market, Chief Executive Officer Mike White said Sept. 21 at an investor conference. He said he doesn't expect Brazil state government officials to approve a tax increase on video service when they meet Sept. 28. The measure would force DirecTV to either increase prices or absorb the cost of the tax, hurting profit margins. DirecTV will "do fine" in the third quarter in terms of U.S. subscriber additions, White said. Bloomberg

As hard as it is to imagine, C-SPAN has not been around since the advent of television. The cable public affairs network debuted in 1979, throwing open the doors of government to curious Americans. Thanks to its cameras covering the well of the U.S. House and the Senate each day and tracking congressional hearings and political events every week, Americans started getting the chance to follow their leaders in an upclose and personal way. The nightly news, then mostly confined to the three major networks, no longer was the only way voters could see elected leaders in action.

C-SPAN took Americans into the inner workings of Washington and state capitals, and exposed them to more than just the best-known leaders. Today the network still allows the rest of the country in on government and politics in action. C-SPAN is a mainstay for many who wonder how Washington works and spends their money. None of those advances would have been possible without Brian Lamb, the quiet, unassuming founder of the cable network. Lamb, who stepped down earlier this year from the network he launched 33 years ago, talked about transparency and the legacy of C-SPAN in a September interview with National Journal: "We have choice now. I think you're better off as a person if you listen to all different sides."

As the election unfolds, we see more of C-SPAN's significance, not only at the recent conventions but on the stump and in its broadcasts of Senate candidate debates. While Lamb never achieved his worthy goal of getting the Supreme Court on C-SPAN, he did create a network that reaches more than 100 million households. And he's been a familiar presence for those who watched his two interview shows, Book Notes and Q&A. Week after week, Lamb has engaged authors, politicos and experts about their ideas, themes and interests. His signature is that he interviews guests without any of the monstrous ego that other cable hosts use to dwarf their subjects. Lamb's interviewees actually got to - get this - talk.

To be sure, there has been a flip side to the C-SPAN revolution. More ambitious politicians have realized the network provides them a way to get into our living rooms every day. Newt Gingrich and others pioneered this art in the 1980s, taking to the lecterns to give speeches after the chambers closed for official business. Those addresses often took on a partisan edge that floor debates lacked. The politicians taking their causes to the cameras knew no one else was in the chamber, especially any of the folks they might be attacking. But they did have an audience with whom they could score points. But the larger good was served by the openness that C-SPAN spawned. And Lamb's civility is a marker that other television hosts should hope to achieve. It's easy to yell and scream your way to fame. It's an entirely different game to take ideas seriously and bring them to the public.

Lamb's retirement won't diminish C-SPAN, nor will it mean he is going away. For now, he continues as a C-SPAN host. May we all continue to learn about how our government works and how our leaders think. Dallas Morning News editorial