At this point, nobody can doubt Comcast’s determination to become the big ecosystemic player in content. The company already owns NBCU and now it’s bought out Microsoft’s stake in MSNBC.com. Microsoft had already dropped out of the cable network venture and now it’s apparently ready to get out of the whole deal. That may be the biggest news in the deal, in fact.
Microsoft wasn’t influencing policies in any negative way from what I hear, but according to the rumors the software giant doesn’t want its future position with network operators complicated by participation in a venture that might be competitive to some. And the story is that Microsoft is going to push big time to be a provider of cloud and content strategies to operators. Which they need to do if they want their tablets and phones to have even a slight chance of success in the consumer space.
Top EC regulator Neelie Kroes has decided that cutting wholesale rates for copper loop access by CLECs would impair rather than promote FTTH deployment, and so has decided for the moment to keep things as they are. I’ve long been of the view that wholesale requirements don’t really create competition and there is no evidence they promote anything other than operators running offshore to look for better ROI. However, I don’t think that holding the line on copper wholesaling will help either.
If you look at operators globally, those in developed countries tend to be able to deploy FTTH for one of two reasons. First, their demand density (roughly, GDP per square mile) is high enough to make return on infrastructure easy to achieve. Second, they can offer some form of channelized television service. In the US we see that one operator, Verizon, has a combination of TV and high demand density and the other (AT&T) has TV-over-copper because they have lower demand density. We believe that even Verizon could not deploy FTTH here without TV, which suggests that most of Europe falls below the density floor. If the EC wants FTTH they will likely need aggressive promotion of fiber-delivered TV.
The issue with the EC fiber policy and similar issues with US policy on broadband stimulus show how difficult it is for regulators to induce a change in telecom in a market that was largely privatized nearly two decades ago. The deregulation craze of the ‘90s made it much harder to directly set operator policies because you can’t order a corporation to act against the interest of its shareholders. But there’s a deeper point here too. As I’ve noted in the past, all of the indicators on Internet use show that buyers need perhaps 6-12 Mbps and are willing to pay somewhat fairly for that capability. You can offer them more and many will find that the cost exceeds the benefits, proved by the fact that customers cluster at the low end of the service pricing spectrum for a given operator.
Remember, though, that you need channelized TV to work in order to make wireline profitable in any form. Cable companies like Comcast recognize this and have developed a two-barreled approach—make your own in-home VoD as good as possible and support TV Everywhere. I think this is an area where Verizon has gotten a bit behind, and users tell me that telcos in general are a bit too conservative in offering VoD, hoping perhaps to keep users hooked on channelized viewing. Instead they’re creating a market for Hulu and Netflix and even Amazon’s “Instant Videos”. The summer, according to my casual survey, is when most people build up their commitment to streaming video because “nothing’s on” the regular channels. Many of these exiles from channelized viewing never fully return to their old habits in the fall.