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Cable Operators

Google Going Over the Top?

2/27/2012 12:01 AM Eastern

Washington — Google continues to prep its broadbandservice
test bed in Kansas City, Kan., for what appears to be
an over-the-top video delivery service, with one top analyst
predicting a filing for a cable-TV license there “very soon.”

Two weeks ago, the Internet-search giant’s Google Fiber
amended its application related to Ku-band fixed-earth
stations in Council Bluffs, Iowa, with its stated goal to provide
“analog and digital audio, data and video services.”

Pointing to a series of regulatory filings over the past
12 weeks, Sanford Bernstein cable and satellite analyst
Craig Moffett suggested it was a near certainty that Google
would be getting into the pay TV business in Kansas City.

Moffett pointed out that Google has a data center in
Council Bluffs. “There is no real reason for Google to locate
the station next to one of its data centers, and so far from
Kansas City, except one: Once received, the video and
audio signals will be processed, stored and distributed
in ways that require large amounts of, well, processing and
storage capacity,” he said.

There has been speculation since Google picked Kansas
City as the first of several proposed high-speed broadband
network test beds that Google would need to deliver
something other than standard broadband connectivity
to turn the test into a business model.

Google has been ramping up its Google TV ad business,
which Moffett points out it could use to sell ads on the new
service.

But Moffett is not warning cable operators — neither
Time Warner Cable in Kansas City nor the industry at large
— to circle the wagons just yet.

The effect should be “small,” he told his clients in an advisory.
“Investors should bear in mind that AT&T’s U-Verse
already operates in the area. With Telco TV already present
in the area, on a net basis, Google’s move amounts to
a negligible change in the portion of TWC’s footprint facing
facilities-based competition.”

The FCC signaled in the conditions it placed on the 2011
Comcast-NBCUniversal deal that it expected, and even encouraged,
over-the-top video delivery to be a competitor
to cable.

Nonetheless, it has yet to weigh in on how that service
would be treated industry-wide in terms of access to programming
and regulatory issues, vis a vis the must-carry
obligations currently imposed on cable operators.

September