Telco video content delivery heats up

Last time, this column asserted that a showdown was underway between content owners and technology suppliers, with carriers watching from the sidelines; I argued that when it comes to controlling the distribution of media content, the content owners would call many of the shots. Of course, there are two other perspectives. One of those perspectives is that the telcos “own” the subscriber, so “how dare” the content owner tell them that they have little say. The other is that seen by technology suppliers and wholesale TV service providers offering one-stop integrated multi-vendor content acquisition and delivery solutions, which is what we look at this time.

Several types of content aggregators have emerged in the past year or two. Some of them concentrate on movies and TV shows for delivery on-demand. Others focus on broadcast television. Some do both. Let’s look at the options, starting with the basics and progressing to the more sophisticated.

For broadcast TV, a telco can approach and negotiate contracts with each of the TV program suppliers one at a time. But with the proverbial “five hundred channels,” that’s a real hands-on proposition. A less daunting alternative is to source network TV programming from a wholesale aggregator that delivers it directly to subscribers. Here, the telco bundles service that’s delivered separately (i.e., not via the telco’s own facilities, such as Direct Broadcast Satellite), a well-publicized route being taken, at least for now, by major carriers in the U.S., Canada and elsewhere. Broadband video-on-demand alternatives include MovieLink and CinemaNOW. But these routes don’t particularly involve any technology decisions; they involve business and business model decisions.

Readers of my column are very familiar with the next rung up the content acquisition ladder, which does involve significant capital and operating expenditures for technology and infrastructure. This is the option in which programming is delivered to the telco’s facilities, for distribution to retail subscribers (over IP or ATM access networks; I favor IP). One content acquisition option is the NCTC (National Cable Television Cooperative), which has the advantage of providing a single source for television programming bundles. But some bundles include programming that the telco may not want; raising the overall cost of programming and forcing the telco to charge higher prices to cover the higher cost.  

A natural evolution of this is where a telco cooperative or a stand-alone wholesaler obtains programming centrally to deliver locally, as is now being done by a dozen or so IOCs, telco groups and independent companies across the U.S. Examples include Project Mutual Telephone of Idaho, MBO Video of Oklahoma, Iowa Network Services and Midwest TEL NET of Wisconsin. These entities establish a single centralized head-end, run all the programming through it and pour it into a broadband backbone or fiber ring that spans an entire region or state. Then, local telcos--many of them too small to afford, build or maintain a head-end independently--simply tap into the backbone and pay the cooperative for what they use. Some locals will build a small head-end facility of their own in order to add in their own locally-produced programming; others rely completely upon the wholesaler. 

By the way, this cooperative/wholesale approach is used not only to deliver network television programming to local telcos, but also for TV programming and movies used in video on demand services. One of the main advantages of this alternative is their ability to negotiate more favorable costs due to their larger size. Another is that the local telco retailer can outsource its TV operations to the wholesaler.

The local telco receives other advantages as well. In addition to the fact that the content acquisition process is greatly simplified and operational concerns are reduced (and costs for both are lower), many of the infrastructure decisions that a go-it-alone telco bears suddenly become less (or un-) necessary.  Yes, the local telco participant still has its own responsibilities, including a distribution and access network that must be up to speed for TV, capable of routing and delivering program streams and two-way communications; to new CPE. But the local telco doesn’t need to go through the complicated process of specifying and evaluating interactive TV middleware, video encoders or video servers, nor does it necessarily have to put new management systems in place for these systems elements. That’s done by the wholesaler, which selects what it considers to be the “best of breed” technologies and brings them to the party.

OK, all of this is well and good. But now (meaning “this year”), things have gotten even more interesting. Two companies in particular, Kasenna and Broadstream, have emerged to provide not only the content but also the technology, grown in-house, giving them the capability to truly turnkey significant portions of the TV infrastructure along with the programming. I’ve mentioned Broadstream Communications in past columns: Their innovative approach is to bring TV programming, build the head-end locally and rent it to the telco. Its recent acquisition of StellarTV adds a Microsoft-based middleware and streaming media platform to deliver a brandable TV service that, because it uses Windows Media, can be delivered where access bandwidth is a challenge. 

The other is Kasenna, which this spring announced the acquisition of ViewNow, a VOD content supplier that distributes the works of the major motion picture studios. This allows the combined company to offer an integrated content storage, delivery and management system along with the video content that’s encoded with metadata and ready for distribution. This solution can be branded by the service provider, using Kasenna’s own middleware and service definition software. Not only does Kasenna offer this to telcos but it also offers the package to cable operators, in partnership with N2 Broadband. The company has come a long way from being simply a streaming server supplier, which wasn’t very long ago.

This is not to mention the efforts of the stand-alone middleware suppliers, which also bring content into a brand-able TV subscriber experience.

But let’s go back to the original question. Who’s in control of the content equation? If integrated delivery platforms such as those from Kasenna and Broadstream ultimately rely upon the content, then can’t it be argued that they are equally vulnerable to the whims and vagaries of the content owners as are the telcos? Or will their buying power and the opportunity that they present as channels to market prove to be powerful enough? We shall see. Certainly the solutions are becoming more sophisticated. No debate there.

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