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News summary for 11/12/07

Mon, 11/12/2007 - 8:51am
CED staff

FCC preparing to regulate cable industry 
By Brian Santo

The FCC is laying the groundwork for regulating the cable industry. The Commission plans to find that the cable industry has achieved a specific measure of dominance in the industry, which would trigger the implementation of a provision in the 1984 Cable Act.

The relevant clause in the Act is the so-called 70/70 rule. Once the FCC concludes that cable television is available to at least 70 percent of American households, and at least 70 percent of those households actually subscribe to a cable service, the FCC would automatically be given broad authority to regulate the industry.

NCTA CEO Kyle McSlarrow said, “Every independent analysis of the marketplace shows that cable serves less than 70 percent of the nation's households and even the FCC staff concluded last year that cable was well short of this threshold. The provision itself is a relic of decades old regulation and there is no basis for reviving it now; twisting statistics in order to breathe life into this rule is simply another attempt to justify unnecessary government intrusion into a marketplace where competition is thriving and new technology is providing consumers more choices, better programming and exciting new interactive services.”

The FCC is apparently using a calculation of penetration rates from Warren Communications News that does not include any cable system with fewer than 36 channels – a provision dictated by the 1984 Cable Act. By calculating the penetration of only those companies with 36 or more channels, cable’s penetration rate is close to the 70 percent target, according to 2005 statistics reported in 2006.

The NCTA quotes statistics compiled by SNL Kagan that cable penetration – including all cable systems – as of June 2007 is only 58.3 percent.

The FCC itself in published documents (including the Commission’s most recent annual report in 2006) acknowledges that there is broad disagreement whether both qualifiers (“prongs” in FCC parlance) of the trigger – penetration of all households and penetration of cable subscribers – have been met. Tables published in the FCC’s 2006 annual report contain statistics showing neither prong has been met, and that penetration of all households is not even close.

Nonetheless, FCC Chairman Kevin Martin is readying to make the case that the provision giving him power to regulate the industry has indeed been triggered.

Martin has consistently berated the cable industry for rising cable rates, and has repeatedly championed the so-called a la carte approach to cable programming, which would allow subscribers to choose and pay for only those channels they desire. Invoking the 70/70 rule would give him the authority he needs to force the cable industry to adopt any measures he deems necessary.

EchoStar reports 63 percent drop in sub adds in Q3
By Traci Patterson

EchoStar Communications Corp. reported a 62.7 percent decrease in net subscriber additions in the third quarter - the company added 110,000 new subscribers, compared with the 295,000 gained in the year-ago quarter.

The satellite provider ended the quarter with 13.7 million subscribers - an increase of 7.4 percent compared with the 12.8 million subscribers the company counted a year ago.

EchoStar said its subscriber additions continue to be affected by increased competition, adverse economic conditions and operational inefficiencies. The decrease primarily resulted from an increase in subscriber churn rate and churn on a larger subscriber base, EchoStar said in its Form 10-Q. The percentage of monthly subscriber churn for the quarter was 1.94 percent, compared with 1.76 percent for the same period last year.

“Our gross new subscribers, our net new subscriber additions and our entire subscriber base are negatively impacted when existing and new competitors offer attractive alternatives, including, among other things, video services bundled with broadband and other telecommunications services, better-priced or more-attractive programming packages, and more compelling consumer electronic products and services, including DVRs, video-on-demand services, receivers with multiple tuners, HD programming, and HD and standard-definition local channels,” EchoStar’s 10-Q stated.

The company added, “We also expect to face increasing competition from content and other providers who distribute video services directly to consumers over the Internet.”

AT&T and other telcos offer Dish Network programming bundled with broadband, telephony and other services. In May, AT&T stated that it intends to select a single satellite TV provider for its entire territory by the end of the year.

“Our net new subscriber additions and certain of our other key operating metrics could be adversely affected if AT&T or other telecommunication providers de-emphasize or discontinue selling our services and we are not able to develop comparable alternative distribution channels,” the company’s 10-Q said.

EchoStar’s net income for the quarter was $199.7 million, up from $139.6 million in the year-ago quarter.

Total revenues for the quarter were $2.8 billion, a 12.9 percent increase year-over-year.

Top cable providers have 54 percent share of broadband market 
By Mike Robuck

According to recent research by Leichtman Research Group (LRG), the top cable broadband providers have a 54 percent share of the broadband market and roughly a 5.1 million subscriber advantage over the competing telcos.

LRG found that the 19 largest cable and telco providers in the United States have about 94 percent of the broadband market. In this year’s third quarter, there were 2.1 million net new high-speed Internet subscribers compared to 2.6 million in the same quarter last year.

The top broadband providers now account for over 60 million subscribers – with cable companies having 32.6 million broadband subscribers, and telephone companies having over 27.5 million subscribers. The largest cable and telephone providers essentially split the total net broadband additions in the quarter, which LRG said marked the first time in three years that cable has attained as many net additions as the telephone providers.
   
“Through the first three quarters of the year, net broadband additions are down 15 percent from last year’s record setting pace,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, in a statement. “However, the top broadband providers are still on-track to add over nine million subscribers in 2007 – a total that is very respectable given the maturing state of the broadband market.”

Comcast and Time Warner Cable added 450,000 and 224,000 new broadband subscribers, respectively, in the third quarter, while Cox was third with 114,000.

On the telco side, AT&T brought in 398,000 new high-speed Internet customers while Verizon added 288,000 and Qwest added 100,000.

A&E and Ascent hook up to manage digital assets 
By Mike Robuck

A&E Television Networks (AETN) has partnered with Ascent Media to manage its digital assets.

The two companies’ strategic relationship calls for Ascent to provide AETN with a centrally-managed digital repository for its media assets while also laying a foundation for the distribution of assets to multiple new media platforms and worldwide distribution. The file-based system provides playout capabilities for existing SD and HD linear channels, and enables the full library of A&E’s content to be efficiently digitized, catalogued, and managed.

“As we explore the vast array of options now available for distribution of our media, we needed alternatives to ‘silo’ approaches to content management,” said Bill Harris, senior vice president, production and broadcast operations for AETN.  “Through our partnership with Ascent Media, we have access to a new, cutting-edge facility that ensures service quality for our SD channels, supports rapid launch of HD services, and will allow us to optimize our digitized content across multiple distribution platforms in domestic and international markets.”

Broadband Briefs for 11/12/07

* UTStarcom reports jump in sales
By Brian Santo

UTStarcom reported $646 million in net sales in its third quarter, a leap of $108 million from the immediately preceding second quarter of 2007.

The increased sales narrowed the loss on a sequential basis, from $62 million in Q2 to $55 million in Q3; the company’s loss a year ago in Q3 2006 was $43 million.

"Our third quarter results do not yet reflect the benefits of changes we are in the process of implementing in UTStarcom,” however, said UTStarcom COO Peter Blackmore. “We have strong technology in IP communications and are building momentum in IPTV, NGN and optical infrastructure and access devices."

* Softbank BB turns to CommuniGate for unified communications
By Brian Santo

Softbank BB (SBB) has launched BB Communicator, a unified communications service that allows subscribers to use IP phone, mail, calendar, and phone book regardless of their Internet service provider (ISP), as long as they are connected through a broadband environment.

BB Communicator is based on CommuniGate’s  Pro Unified Communications platform. The platform provides integration with Microsoft’s Outlook tools. SBB has over 4.8 million subscribers of IP Phone in Japan, making this one of the world’s largest IP phone services.

* Comcast On Demand channel helps fight crime
By CED staff

Comcast published a testimonial from the FBI attesting to the usefulness of Comcast’s Police Blotter On Demand channel, which was launched in Philadelphia last December. The free channel features video profiles of bank robbers, missing persons and individuals from the Philadelphia Police Department's "Most Wanted" list.

According to Comcast, one of its customers recently contacted the FBI with a tip involving a bank robber after seeing his profile On Demand.

"This Comcast offering gives us a new and effective way to take advantage of technology to reach the public," said FBI Special Agent in Charge Jody Weis. "Police Blotter allows the public to study the surveillance photos and learn important details about the criminals and crimes. We believe the ability to pause and rewind for closer review could help viewers make important connections and associations they might otherwise miss."

* Microsoft signals intent to buy Musiwave
By Brian Santo

Microsoft has called first dibs on Musiwave SA, a company that helps operators and media companies provide music services to mobile devices. Microsoft has negotiated only for the right to be the sole suitor for Musiwave; the two now negotiate any possible buyout.

If acquired, Musiwave’s service would be combined with Microsoft's Connected Entertainment technologies and services, including Windows Mobile, Zune, MSN and Windows Live.

* Adva Optical Networking hires marketing exec 
By Mike Robuck

Adva Optical Networking announced today that Ron Martin has been hired as the company’s chief marketing and strategy officer, and president of all Adva North American subsidiaries effective Nov. 15. Martin is taking over those positions from Brian McCann, who will remain with the company and serve in the newly created position of senior vice president of corporate marketing and strategy. Prior to Adva, Martin spent five years with Cisco Systems in various roles.

* Conexant hires VP/GM for broadband group 
By Mike Robuck

Conexant Systems Inc. announced that Craig J. Garen has joined the company as senior vice president and general manager of broadband access. Garen replaces Akram Atallah, who is leaving the company. Garen joined Conexant from LSI Corp., where he spent the past two years as senior vice president of the mobility division.

Conexant’s broadband access unit provides a range of products for ADSL, VDSL, and PON applications.

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