Powerful forces at work between big media, telecom and technology

The decades-long transformation of the media to digital has been a high-stakes war with many battles. Steadily advancing technologies have been a strategic weapon used by media companies and device suppliers, and broadband service providers are often caught in the middle. Regulators (with consumer interests in mind, sometimes) are nipping from the sidelines, but mostly have been a few steps behind while trying to sort it all out. The root of the argument usually involves money, and consumer interests are often an unintendended casualty.

For example, Hulu, the joint venture of NBC Universal, News Corporation (Fox), and now, the Walt Disney Company, brings programming directly to consumers via the Web. Boxee, a freeware TV media center which adds a social networking component, has been blocked by Hulu from carrying its programming. Every time Boxee breaks the lock, Hulu figures out another way to shut out Boxee. Consumers lose.

Cable operators have been talking about bringing TV to consumers over broadband, but only through their online portals.  Such a move would reduce the disintermediation threat to operators, but consumers could lose choice.  Content owners eager to directly monetize content over multiple screens are probably not amused.

Real Networks has been defending its right to distribute a product that copies DVDs for personal use, to transfer the contents to a PC.  The movie industry is operating as a bloc against Real Networks.  Real counters that it is trying to help support Fair Use, which consumers won long ago in the Betamax case.  Consumers lose if the movie industry wins.

"Catch-up TV" (network PVR/DVR) is becoming common outside the US, but a lawsuit from major media companies, operating as a group, has until now kept TV service providers from deploying it. At the end of May, the U.S. Supreme Court turned the case away, and Cablevision is likely to begin offering it this summer. In this case, consumers win, as do IPTV and other operators, since nPVR represents a revenue stream.

Technology companies are becoming as powerful as nation-states, and can transcend international boundaries to win markets. One, but certainly not the only, example is Microsoft. The European Union is again after Microsoft for bundling Internet Explorer with Windows, redux to the famous 2004 case in which the Europeans forced Microsoft to sell Windows without it. But this time, the solution may be to force Microsoft to distribute multiple browsers.   In another multinational situation involving Microsoft, Deutsche Telekom runs its T-Home IPTV service on Microsoft Mediaroom software, not only in Germany, but also in Macedonia, Hungary, Slovakia and elsewhere. 

These are all sensational stories, but let's look more closely at the dynamics of one set of alliances in particular, and how they can shift quickly if they involve market share or bottom line considerations. 

AT&T uses Microsoft technologies to help it provide cross-service access to content, and presumably, also to help it reduce expenses by making one technology platform common to multiple services.  In March, AT&T announced that it would support Microsoft's ReadyPlay security technology across its IPTV and mobile service lineups, and that Microsoft will add support for it within its Mediaroom system. In May, Nokia announced its new Ovi store, to attract consumers to its smartphone line. Later in 2009, AT&T will begin to offer Ovi, in support of several new Nokia models. PlayReady also secures Nokia's store. Pretty slick for AT&T, you may say.  

But now, look at AT&T's PlayReady move through a different lens. Many consumers have frowned on Apple's exclusive two-year iPhone deal with AT&T, and stories are legion about subscribers trying to figure out ways to "jailbreak" the phones so they could operate on alternate carrier networks like T-Mobile's. Now come rumors that Apple is in talks with Verizon. The iPhone has been a cash cow for AT&T, and the fact that AT&T is lining up Nokia's Ovi store can be seen as a smart defensive move on the part of AT&T.

So, "just like that" AT&T will have a new revenue stream, and any change in their Apple relationship will have less impact. At the same time, Apple will have positioned itself to offset the loss of AT&T exclusivity by rolling out deals with competing operators. Both Apple and AT&T win. 

These changes, as well as the aforementioned battles around nPVR, Fair Use, and Internet-delivered TV remind me of Plate Tectonics theory and the alignment of the stars.  The complex, intertwined nature of these alliances means that operators must to do nothing short of moving mountains to keep the content flowing while keeping consumers happy.

Steve Hawley focuses on the evolving world of IPTV as principal analyst and consultant for tvstrategies (Advanced Media Strategies LLC), http://www.tvstrategies.com