Carriers as spectators in a digital media showdown

Media companies and technology suppliers are embroiled in a showdown regarding control of the media--not “the news media,” but the distribution and consumption of digital media content. Now that broadband digital delivery is pervasive, it’s more likely that carriers will have to respond to the outcome and less likely that they will be in a position to influence it. 

The showdown is characterized by a question: “How can multiple, high-quality streams of rich, interactive, digital media content be delivered to consumers and distributed in a way that protects the rights of the content owner while respecting the right to Fair Use by the consumer?” The significant drivers for this showdown are effective distribution, the format of the content and the protection of the content.

Because distribution is closest to a carrier’s heart, let’s look at that first. Carriers distributing video (broadcast/multicast TV and unicast video-on-demand) are increasingly in a quandary about bandwidth. DSL is currently the broadband access technology of choice for digital media content. VDSL can carry multiple MPEG-2 standard video streams at speeds of about 6 megabits per second each. But MPEG-2 at that data rate doesn’t cut it for ADSL, hence the push for faster ADSL. That’s also what motivates the acquisition of headend equipment that compresses MPEG-2 to 3 mbps or less. As a result, the 10 to 12 megabits afforded by the latest incarnations of ADSL can carry two to three TVs worth of programming.

Unfortunately for telecoms, the cable and satellite companies are aggressively rolling out high-definition television. HDTV requires more than 19 megabits per second. What’s a carrier to do?  The purely network-oriented approach is to push for hundred-megabit fiber or for ever-faster DSL, or try to ignore the threat altogether. Yes, HDTV programming to date has been scarce, but the cable and satellite competitors now offer popular live sports programming in major markets.

A second driver, the advancement of video codecs, has been welcomed by all carriers with bandwidth constraints in the network and not just telcos. There’s a bewildering choice of formats; each with its own advantages. MPEG-4 Part 10 allows distribution at about half the data rate of MPEG-2. Microsoft Windows Media 9--which I’ve seen demonstrated at speeds of less than one megabit for standard definition TV and at less than 6 for HDTV--has acceptable image quality even at those rates. Then there are implementations of MPEG-4 encoding that embed the TV program guide, program metadata and client middleware framework right into the video stream. In the face of these developments, carriers may rationalize that ADSL was the right investment after all.

Third and possibly least understood is the concerted effort underway to standardize on ways to distribute content digitally but at the same time protect it. Efforts among the movie studios, TV programmers, consumer electronics companies and other technology suppliers have resulted in stringent technology guidelines that would offer a high-quality viewer experience while protecting the content from piracy. It is a huge initiative, affecting everything from the production process all the way to the consumer’s screen: "generational" in scope, looking ahead 10, 20 or 30 years to a time when content is all digital and the analog domain is as relevant as 78 rpm records are today. (For more on content protection, see my November 2003 column for The Analyst’s Corner, “Protecting Digital Content.”)

Let’s bring these forces together. Given that the network is not a variable many carriers can change overnight, the carrier is left to work with the video codec and the content. The easiest answer is to trans-code or re-encode today’s MPEG-2 into MPEG-4 or Windows Media before distributing it to viewers. But what if the codec is of a format that hasn’t been fully embraced by the content owner? Some are still reluctant to embrace these new formats.

The showdown comes home to roost in the device that constitutes the hub of the digital home. Media companies want an environment that is an extension of what is familiar to them: a residential gateway; an evolution of today’s digital set-top box such as the devices from Moxi and UCentric (or the latest from Motorola and Scientific Atlanta). On the other hand, the PC industry sees the personal computer as the hub of the digital home. Nowhere was this battle more evident than at the annual National Association of Broadcasters convention in April, where it all was on display.

I think the showdown will be won by the players with the greatest vertical integration: the media companies, which own the content, have a stake in CableLabs and call the shots with respect to content protection. “Outside” technology companies would adapt their own products to accommodate not only the media companies’ content but also the technologies and infrastructure platforms that are among the media companies’ own holdings.

This may sound extreme, but telcos, being neither the content owner, developer of a vertically-integrated digital delivery platform nor owner of the desktop, should anticipate their supporting role. There is some evidence that this is already happening: Some programming is not available to carriers unless they have a content protection plan in place, and the content owner has a lot to say about licensing terms.

As any carrier knows, the cost of customer premises equipment is huge, and CPE that can accommodate MPEG-4 and IP is just becoming mainstream this year. Many will say that this transitional period is a risky time to make the CPE decision. Certainly, it behooves carriers to watch this showdown very carefully and not to assume that the PC will be tomorrow’s set-top box.

Steve Hawley is principal consulting analyst of Advanced Media Strategies.  He may be reached via his Web site, http://www.tvstrategies.com