Cable Operators

Fears Are ‘Over the Top’

12/13/2010 12:01 AM Eastern

New York — The threat of
over-the-top video services
is overblown, cable operators
said, but they’ll still rest
with one eye open.

Over-the-top interlopers
— online video programmers
who use the Web to circumvent
traditional pay TV
distributors — were a recurring
theme at last week’s UBS Global Media & Entertainment
conference. Executives agreed that while online video hasn’t
made a deep cut into their business yet, they’re cautious.

Charter Communications CEO Mike Lovett seemed to take
the most proactive stance regarding OTT at the conference,
calling for operators to embrace the technology, not fear it.

While Lovett said Charter’s first priorities center around
rolling out DOCSIS 3.0 service and deploying switcheddigital
technology, OTT is a long-term concern.

EMBRACING THE NEW

Lovett said Charter is working on how it could embrace
the new services and providers that will emerge in the
over-the-top space, adding that the St. Louis-based MSO is
uniquely positioned because it already has a relationship
with the customer and a robust broadband infrastructure.

“It’s really about migrating to a new platform that brings
simplicity to the consumer,” Lovett said.

Lovett pointed to Charter’s home-networking service,
which has a penetration rate of about 19%. About onethird
of new customers opt for that product.

“The fact that consumers are taking that service ... that
tells me that the consumer is looking for a solutions provider,”
Lovett said. “Our focus strategically is, ‘How do we
put ourselves in a position to have a product portfolio that
is innovative and brings the wants and desires to the consumer
in a very simple and easy-to-use fashion?’ ”

Charter executive vice president and chief marketing officer Ted Schremp, speaking at the same conference, said
new products centered around viewing content on multiple
devices could come as early as next year.

“We’re putting the finishing touches on the strategy and
partner selection,” Schremp said. Comcast Cable president
Neil Smit, in a later presentation, said Comcast hasn’t seen
any evidence that over-the-top video is making a dent in its
subscriber base, but added that the nation’s largest MSO is
well aware of the potential threat.

“We can and will compete there if need be,” Smit said,
adding that its Xfinity.com online portal was relaunched
earlier this year and has about 150,000 video choices.
“We’re not ignoring the possibility.”

Smit said Comcast views online video as complementary,
a convenient way for customers to get information. But
if Internet video does become a threat, he said, Comcast
has “about 1,000 engineers” ready to devise a way for the
MSO to take advantage of the situation.

MARGIN CALL

On the satellite side, DirecTV chief financial officer Patrick
Doyle said his company isn’t necessarily going after the
customers that would be attracted to over-the-top video.

“We view it [OTT] as more for the marginal customers,
which is not our target market,” Doyle said, adding that the
company continues to monitor the phenomenon.

Programmers offered their perspective on online video,
with Liberty Media CEO Greg Maffei calling OTT
just another in what has been a long line of potential
threats to pay television service.

Liberty owns interests in several cable networks, including
QVC, GSN and premium programmer Starz. And just
as cable and satellite business models managed to survive
as new entrants emerged, so shall they weather this
latest storm.

“This is just one more transition,” Maffei said, adding
that the cable, satellite and telco video business models
still have a “lot of life.”

September