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Questions (and Answers) For 2008

1/04/2008 7:00 PM Eastern

As the history books turn the page that was 2007, Multichannel News asked prognosticators at large — our readers — to make the call on some of the top issues that cable and telecommunications will face in 2008.

The editors drew up 11 questions that may be resolved conclusively in the months ahead — from what the outcome of the upcoming presidential election might bode for the overall industry to what the future holds for such individual players as Cablevision Systems, Time Warner Cable and DirecTV.

MCN newsletter subscribers were polled for this survey over several days in December, and the results below were calculated based on more than 700 respondents.

Now you can cast your own vote and check your predictions against the verdicts of those who took our online survey.

And you can look back to see how last year’s 10 predictions measured up against the actual turn of events in 2007.

1. WILL MALONE’S DIRECTV LAUNCH PROGRAMMING NETS?

WHY?

Liberty Media chairman John Malone has always looked to maximize the value of his acquisitions, and what better way to build DirecTV than to acquire or launch new content for the satellite provider.

Malone will launch new services — particularly within the sports arena — that he would seek to offer exclusively on DirecTV. He will also acquire existing brands and will look to drive up licensing fees, making them difficult for operators to afford.

DirecTV has already succeeded with the exclusive “NFL Sunday Ticket” out-of-market football package in the U.S., and Malone thinks sports can drive global expansion.

YES

WHY NOT?

Malone knows his programming decisions will be scrutinized by the Federal Communications Commission and other regulators fearful of his potential programming clout with DirecTV. Already, several groups, including the National Association of Broadcasters and the National Cable Television Cooperative, are seeking restrictions on Malone’s DirecTV purchase that would limit his ability to secure exclusive programming rights.

Without the clear ability to create additional value for DirecTV through exclusive content, Malone will play it safe and not aggressively pursue network acquisitions or launch new services.

NO

2. WILL GERRY LAYBOURNE AND RICH CRONIN GET NEW JOBS?

WHY?

Gerry Laybourne and Rich Cronin have previously enjoyed hiatuses after abruptly leaving cable posts. It happened when Laybourne exited Disney/ABC Cable Networks and when Cronin departed from Fox Family Channel. But they roared back into the business fairly quickly, with Laybourne launching Oxygen and Cronin landing at Game Show Network.

Even now, Laybourne and Cronin are both too creative and energetic to stay on the sidelines for long.

YES

WHY NOT?

There’s no reason why Laybourne or Cronin need to rush back to full-time positions in 2008. After seven hard years building Oxygen, Laybourne is busy pitching in on Hillary Clinton’s campaign for the Democratic presidential nomination, hosting parties and doing grassroots door-knocking. And former GSN chief Cronin is consulting and developing shows for networks. He’ll only come back to a regular gig in the corporate world if a stellar opportunity presents itself.

NO

3. WILL AT&T ANNOUNCE IT IS DROPPING ITS U-VERSE APPROACH TO VIDEO DELIVERY?

WHY

After spending more than $6.5 billion over four years building a fiber-to-the-node network for IPTV, AT&T decides to fall on its sword and admit that the video-over-copper-wiring approach cannot provide the scale or bandwidth it needs. So it either decides to expend even more capital, following Verizon’s lead of stringing fiber all the way to the home; or consummates the widely rumored deal for Dish Network — instantly, but expensively, allowing it to sell TV service nationwide.

YES

WHY NOT?

AT&T has strongly indicated it will stay the course. In mid-December, the nation’s largest phone company effectively renewed its vows to U-verse TV, shooting to have 30 million homes and businesses passed by 2010 (up from 5.5 million in 2007). Still, that will give AT&T coverage of 50% of residences in 22 states, meaning it will continue to resell EchoStar’s Dish Network to fill in the gaps. The telco is now marketing both services under the umbrella moniker of “AT&T Advanced TV.”

NO

4. WILL THERE BE A PRICE WAR IN DELIVERING INTERNET, PHONE AND TV “TRIPLE PLAYS”?

WHY?

In an economy where experts are arguing whether the country will settle into a recession in 2008, a vendor offering deeply discounted utility-like services could gain PR buzz offering price relief. The strategy may allow operators to “buy” customers in cases where they can’t compete on service quality. Lowered prices may be the only way to convince the consumer to agree to endure the inconvenience of a new e-mail address and channel lineup.

YES

WHY NOT?

For true long-term growth, providers should irk Wall Street by accepting lower profit margins to invest heavily in customer-service personnel. Focusing on the triple play ignores a potentially profitable segment of the market that will buy two products, but can’t or won’t justify buying three from one company. Low-cost offers can lead to heavy roll-off when the offer ends, or anger from current customers who can’t qualify for the deal.

NO

5. WILL CABLE SYSTEMS OFFER MORE HD CHANNELS THAN SATELLITE COMPETITORS?

WHY?

Operators will pull out all the stops to match the number of HDTV channels touted by DirecTV and Dish Network, because maintaining a competitive core video offering is crucial to reversing subscriber losses. The battle is especially important for retaining higher-spending customers, who are more likely to have HD sets. Switched digital video will allow programming to expand past 100 channels, since the more you add to the switched group, the more efficient it gets.

YES

WHY NOT?

DirecTV’s 100-channel HD count is a high bar most cable systems won’t be able to approach, because they don’t have any space immediately at hand. There’s no silver bullet for cable to blast through “channel lock.” Making room for HD will be an incremental process, and technologies like switched digital video can’t be flipped on overnight. Moreover, retiring spectrum-hungry analog channels will involve renegotiating carriage with programmers.

NO

6. WILL ANY LARGE CABLE OPERATOR LAUNCH 100 MBPS INTERNET SERVICE?

WHY?

The next-generation cable-modem technology allows for download speeds of up to 160 Mbps — and even more, if operators can free up enough room on their networks. Comcast and others will use “wideband” to grab the broadband-marketing crown off Verizon Communications’ fiber-optic head, rolling out the first consumer-focused 100-Mbps Internet service in the U.S. That will also prove to investors that cable doesn’t need fiber-to-the-home anytime soon.

YES

WHY NOT?

First, cable’s highest-bandwidth tiers probably would be 50 Mbps, not 100, to match the ceiling set by Verizon’s FiOS Internet. But that assumes the gear required for wideband services will be ready for the field before the end of the year: CableLabs qualified the first Data Over Cable Service Interface Specification 3.0 headend systems just last month, but no cable modems passed this initial certification. Additional testing will end up pushing the first “wideband” services to 2009.

NO

7. WILL CONGRESS POSTPONE THE FEB. 17, 2009, DEADLINE FOR CUTTING OFF ANALOG TV?

WHY?

Fearing backlash on the eve of “March Madness,” the NCAA Men’s Basketball Tournament, Congress will heed warnings from the National Association of Broadcasters that millions of consumers still won’t have the means to view digital signals in February 2009. An emergency law will require the station with the highest local-news ratings to remain on the air in analog for an additional 90 days, while letting all other analog stations go dark.

YES

WHY NOT?

Despite fear-mongering by the TV-station lobby, Congress will stand tall and let the analog TV system shut down in early 2009. Wireless broadband providers that paid billions of dollars to use the analog spectrum are powerful enough to stop a broadcaster-backed bill that would stall the transition. Cable will provide access to local-TV signals for 90 days.

NO

8. WILL THE NEXT PRESIDENT BE GOOD FOR THE INDUSTRY?

WHY?

The new president will know that the absence of perfect competition is never a justification for government intervention. Armed with court rulings hostile to content controls and burdensome ownership limits, media and telecom companies will prevail even if the Federal Communications Commission chairman is a doctrinaire leftist like FCC Democrat Michael Copps. Policymakers will engage in company-specific harassment to make a point, but not a policy.

YES

WHY NOT?

Washington policymakers are good at two things: Doing nothing and overreacting. After a decade of inaction, the White House and Congress in Democratic hands will advance a number of hyper-regulatory proposals aimed at cable. Chief among them: a new universal-service requirement that cable companies provide at no cost a reasonable number of curbside broadband kiosks as an Internet-age replacement for the rapidly disappearing telephone booth.

NO

9. WILL THE DOLAN FAMILY ATTEMPT AGAIN TO TAKE CABLEVISION SYSTEMS PRIVATE?

WHY?

The Dolan family is a tenacious lot. And as Cablevision’s stock has plunged more than 25% ($7.91 each) since the Dolans’ third swipe at taking the company private was rebuffed, the family has been somewhat vindicated. With cable stocks in a swoon and competition heating up, the time may be right for public shareholders to listen to yet another Dolan proposal.

YES

WHY NOT?

The Dolans have also shown they can hold a grudge. So a deal that would be in excess of the previous offer and include a vehicle for shareholders to participate in a future sale is unlikely. And the Dolans have another option — selling out to Time Warner Cable, Comcast or Verizon Communications.

NO

10. WILL CABLE OPERATORS FORMALLY SCRAP THEIR JOINT VENTURE WITH SPRINT?

WHY?

So far Pivot is available in about 33 cable markets, short of the 40 originally expected by year-end. In November, Sprint said that it would not expand the product beyond those 33 areas. That, and the fact that cable operators own their own wireless spectrum, appears to signal the dismantling of the JV is just a formality.

YES

WHY NOT?

Despite their lukewarm support of Pivot, cable operators realize mobile services will be crucial to their continued success. And building out their own wireless network will cost buckets of cash that Wall Street doesn’t want them to spend. Cable operators may have no choice but to stick it out at least for another year.

NO

Bonus Question: WILL TIME WARNER INC. SPIN OFF TIME WARNER CABLE?

WHY?

New Time Warner Inc. CEO Jeff Bewkes may want to shake up the media giant and a TWC spinoff could be just the ticket. Bewkes has said in the past that TWI does not need to own 84% of TWC, its current interest, and would drop that stake to below 50% if the right deal came along.

YES

WHY NOT?

Valuations for cable companies are horrendous — TWC stock dipped from the mid-$40 per share range earlier in 2007 to the mid-$20 range now. So if TWI is really bent on returning value to shareholders, a TWC spin may not be the way to go in the short term. Bewkes could split off AOL instead.

NO

The Results
How more than 700 online respondents voted:
1 Yes: 79% No: 21%
2 Yes: 51% No: 49%
3 Yes: 41% No: 59%
4 Yes: 74% No: 26%
5 Yes: 35% No: 65%
6 Yes: 51% No: 49%
7 Yes: 46% No: 54%
8 Yes: 51% No: 49%
9 Yes: 62% No: 38%
10 Yes: 66% No: 34%
11 Yes: 74% No: 26%

 

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April