Cable & The Internet P2& The FCC – What many are missing

Just a brief update to try to explain what some commenters dont seem to understand.

1. the only thing that cable companies, and satellite for that matter have to sell is bandwidth and the applications they can run on that bandwith. More bandwidth means more digital everything.

2. For Basic Cable subscribers that get say, 40 analog channels, they are consuming 40 x 38.6mbs or 1.54 Gbs. Let that sink in. 1.54 Gbs of bandwidth. Compare that to how fast your internet access is. That more bandwidth than your entire neighborhood consumes online , by a lot.

Thats also the equivalent of 500 standard def digital channels.  If you convert that to revenue per bit for cable companies, or cost per bit for basic cable consumers,  the basic cable customers are getting the best deal in town. By a long shot.

Digital cable customers, not so much. Digital customers are paying multiples of analog customers for bandwidth.

In reality, analog customers are getting an amazing deal, and the cable companies have been hesitant to convert them only because of the potential FCC backlash.

I’m as cynical as the next guy when it comes to cable rates and motivations, but the reality is that the longer analog remains, the fewer opportunities to leverage the freed up bandwidth to create next generation bandwidth hog applications.

Will the cable companies charge us an a lot for that bandwidth, probably. But when we start to see applications built on top of 250mbs per second and more, it will have far more value to society than watching USA Network on your old analog TV

And Net Neutrality ? Well if everyone had that 1.54gbs available to them, net neutrality would be a non issue. We wouldnt be arguing about access or pre emption, we would be arguing about quality of service

16 thoughts on “Cable & The Internet P2& The FCC – What many are missing

  1. The bandwidth issues are interesting and founded, but I think that, for the consumer at least, the real issue is content delivery. The “channel” model of traditional television is outdated and fast being replaced by the more flexible, more specific delivery system that the internet provides.

    5 years from now, will we care how “tv” is delivered? We’ll all be watching www-delivered content that we have far more control over. Specificity is good for everyone:
    -Consumers get more of what they want
    -Advertisers reach better consumer groups
    -Content Producers charge more to advertisers

    The old addage “Content is King” is never truer than when you have the most choice.

    @Allesandro, your fear that “more graphics” will lead to sensory overload is unfounded. The content still has to be delivered to humans. If the graphics are too bright and the content is too fast, we’ll simply change content and they will learn very quickly that they’ve overstepped their delivery bounds.

    Comment by jessebushkar -

  2. If it means that much to the cable co’s why don’t they offer mutiple coverter boxes to customers for free or much cheaper. I don’t think anyone on basic cable would complain if they can still watch the channels but need a convert box IF each converter box doesn’t cost and extra $5 or $10 a month – the cable companies do that to themselves. If they moved all to digital and required a converter box at each TV the it looses more customers to satellite. If they offered cheap or free convert boxes, no problem. But they like to gouge for those converter boxes.

    Comment by daherbie -

  3. Restricting broadband is like restricting the automobile in favor of the horse drawn carriage. Eventually, you have to let the horse drawn carriage fade into the museums. I am an American living in Australia. The Australian government basically does whatever it can to restrict and retard decent broadband in this country. The result is Australia is behind in just about every information driven category you can think of. This should not be allowed to happen in the USA. Analog was great, but compared to high bandwidth digital broadband, it is the horse drawn carriage. It is now time to let the horseless carriage have its day.

    Comment by Marc Breault -

  4. Here’s an idea… since analog service takes up more bandwidth, why not charge more for it? Then see how quickly people decide to upgrade their TVs.

    Comment by Kris -

  5. Equating basic cable customers receiving 1.5G bandwidth with 1.5G of internet access is inaccurate and not comparing apples with oranges. Quite obviously an internet user can choose the content to fill his 1.5G – whereas the basic cable customer is stuck with whatever the cable companies choose to send.

    A more meaningful number might be to assert that the 1.5G of basic cable bandwidth is shared by the entire neighbour of say 5000 homes. So each home is really only paying for 0.3MB.

    Comment by Tim Adler -

  6. Mark:

    Do you think that Moore’s Law or something similar will be applicable to bandwidth pricing? Can you give me an idea of how YOU see this being priced moving forward. Last year I was paying $10K/month for a 1 gig internet connection with unlimited usage. This year I am paying $4K per month for each gig. Where do you see this being priced at each year in the next five years. Please explain.



    Comment by Chris Caffee -

  7. a 1080i CRT, you might just have the best of all worlds there! One can probably make an analogy between stifled automobile fuel efficiency and what is going on with digital transmission. As the pipeline gets bigger, more “stuff” gets added that doesn’t necessarilyimprove the show content. This is not necessarily a good thing.

    Comment by Alessandro Machi -

  8. I’m paying for basic, but I have a tv with a QAM tuner (and I get upper-tier digital networks). I can switch between analog and digital! By the way, they sell QAM Boxes online; just Google it. I live close to the headend, so I get tons of digital channels! I also use a Magicjack for my phone service, which I am very happy with. The TV I have was purchased through Philips Outlet Store online, and it’s not a plasma or LCD…that’s right, it’s a 1080i CRT and the picture is f**king phenomenal; delivery alone for something like that big tv is over $100. I paid $288 for everything. So let’s see…I’ve avoided paying for digital cable and I don’t have a phone bill anymore. I just pay for basic cable and “high-speed” internet (what a joke…9mb/s). I think I’m still paying too much. F-U cable companies 🙂

    Comment by Gabe S -

  9. Mark is correct on many levels. Everyone, even the folks griping, will benefit from getting rid of analog as fast as possible. It’s not the cable cos ripping people off, it’s the angry basic analog folks that are the problem.

    For the record I work for a cable co and am senior middle mgmt. I’d like to set some perceptions straight.

    First off, the digital transition in Feb does not effect cable subs. We do the conversion for you in the headend. Nothing will change for you if you have cable or satellite. Also, nothing will improve for you either.

    If you think we’re a monopoly, we’re not. We’re franchised utilities. We actually are your business partners. When the industry started your local government made an offer to anyone that could provide TV service to the community. Probably similar to the way your get electricity and waste services (I don’t see anyone complaining about “monopolies” like Edison, Waste Management or BFI). Thousands of cable cos, run by entrepreneurs, went into business thru the 70’s and 80’s. They figured out how to start the business and poured their own hard earned dollars into creating an industry. Creating millions of jobs, increasing local tax bases and providing service to the community. In exchange for the private investment, and to avoid confusion in the marketplace, your local gov’t provided exclusive territory for each cable co. That’s why you can only get service from one provider…who also happens to be in business with you and giving back to your community.

    The franchise agreements are mostly one way, in your favor. We work in conjunction with local and state governments but the cable co has to pay for everything. In order to roll out in a community we agree to provide a variety of services in exchange for the right to string wires. The services range from CSPAN to local gov’t channels in may communities. We also provide low cost packages, high value packages, cable modem and VOIP. We create local jobs and pour marketing dollars into the local media. We also pay lots of money to your local tax coffers for the franchise fee. Essentially, when you consider we had to pay for everything and have a continuing franchise fee, we give much better than we get.

    You may think that you’re getting reamed for service. Here’s some perspective…your cable company doesn’t own the programs you’re watching. We have to license them from third parties like Viacom (MTV, VH1, Nick, Spike) and Disney (ABC, Disney, ESPN). The license fees are quite expensive and are paid to the third party for each subscriber. The numbers are approx…ESPN gets $1 for every subscriber, Discovery gets $0.65 and MTV gets $0.45. The cable co pays that fee for every subscriber, whether they watch the individual network or not. Now multiply that across 200+ digital channels and you realize that the $50 basic digital package loses money for the cable co. Now add in all the maintenance and customer support. Are you starting to get the picture?

    That’s right, we don’t make money on TV service. In fact, if it weren’t for higher end package subscribers we wouldn’t be able to subsidize, that’s right subsidize, all you folks bitterly complaining about raising your $15/mos bill or $3/mos box fee. Every one of you should actually be THANKING the cable company, and the people with HD, for making it possible to provide you with service. Without their ponying up extra revenue the cable cos would most likely be out of business.

    Now, you shouldn’t cry for us either. We have figured out how to free up some cash. How does a cable co make up the difference? We have to develop new revenue streams. Cable modems, advertising and VOIP are the three main products. All you analog whiners should also be thanking those subscribers as well.

    Now here is the real kicker, not only do the digital subscribers subsidize the analog subscribers, but they also have higher rates as a result. Whenever we want to add service and services we need to purchase equipment. Due to the delicate and complicated nature of our physical plants we have fairly hefty technical requirements. The Analog subscribers add an entire dimension to any product launch. We have to work around them, and their antiquated technology, and that ends up costing substantially more money. If everyone switched to digital it would not only free up bandwidth, making it easier for the cable cos to earn revenue on IP services but it would make upgrading the overall service much easier. By lowering our capital expenditures we don’t have to charge as much.

    SO, in short, every one that is complaining should take a long hard look in the mirror. You may find that you are actually the problem. Please consider biting the bullet and upgrading. It’s for the common good.

    Comment by Cable Guy -

  10. I’d like to give MSNBC as an example. They pretty much were in the tank for one democratic candidate over the other one. Why do I want to encourage more and more channels when the FCC can’t even properly regulate the ones that exist. I have never seen such an obvious corruption of news being replaced by spews. Spews is when a station puts an agenda above and beyond news reporting, but they don’t bother to tell the viewing audience that they are commentating, instead they pretend to make it look like news.

    MSNBC did this virtually every day during the democratic nomination race. and then they kicked it up several more notches for the presidential race. Now more bandwidth will mean even more graphics and overlays and faster content that cannot even be properly assimilated, let alone questioned for it’s validity.


    Comment by Alessandro Machi -

  11. The key here is simple. Without advancement, opportunities are lost.

    If you look at what has been offered over the cable company, or any
    other company providing ‘viewing services’, there has been little to
    no advancement as far as what should be provided within the household.

    The long-haul bandwidth providers of the internet are doubling their
    bandwidth about every 6-9 months with the advancement of data
    compression and increased circuits. Unfortunately most of that is
    being used for other than progressive means for the economy as a whole
    or the individual who wants to advance. Individual applications need
    to be generated that would run over cable, into 90% of households,
    that would allow for training on trades that the nation requires, on
    education for individuals that cannot leave their current job to get
    those informational and advancement skills they may not be able to
    obtain otherwise. When someone realizes that cable is the best means
    into a household, and with the cooperation of the cable company, we
    can progress where we should be progressing – and progress those that
    do not have the ability to progress.

    Comment by Michael Patterson -

  12. What about the inevitable bloating of websites? Before broadband,
    developers tried to keep websites lean so that they’d load faster. Now
    that broadband is prevalent in most cities, every website is bloated with
    Flash and video. Dial-up users (many of whom have no alternative – broadband
    is not a rural phenomenon) will be unable to load most future sites if
    bandwidth is seen to be so cheap.

    Aldo, how does freeing up all this bandwidth affect your opinion of Comcast
    and Time Warner putting limits on users? Those caps would probably need
    to be increased to account for the bloat that is to come.

    I’m all for increased bandwidth. I see potential for the consumer to get

    Comment by John -

    yes , sure wish my sentences would not disappear off the right margin when I am writing them.

    Comment by -

  14. Last time I checked, I had one set of eyes and ears. Making the pipestream bigger and faster just produces more ADD addled kids, at the end of the day, we are talking about consumption, and not creation, are we not? (I sure wish my sentences would not disappear off the right margin when I am writing them.

    Comment by Alessandro Machi -

  15. Thanks for putting this into terms that so many of us can easily understand.

    Comment by Brian Kirk -

  16. Who gets the left over bandwidth after the conversion? Does the
    military or an intelligence agency desire more space?

    Comment by Justin -

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