With cable and satellite subs flat and the telcos struggling to grow a pay TV business, online video is thriving - even the pay subscription kind. The cable guys and telcos can blame the recession, but there’s still business to be had if you give people what they want: a movie anywhere there is an internet connection for $9 a month. The combination of online viewing with a DVD in the mail, Netflix managed to grow its customer base by more than 1 million in the last quarter. If the movie studios would allow, the DVD could be done away with all together.

The results reflect the growing popularity of Netflix plans that bundle DVD rentals with unlimited video streaming over the Internet for as little as $9 per month. Netflix’s success contrasts sharply with more traditional home video options such as Blockbuster Inc. and Movie Gallery, which are closing hundreds of their stores and struggling to attract traffic to the locations still open.

Netflix added more than 1.1 million customers during the quarter — the most in any three-month period in its history. It took Netflix four years to attract its first 1 million subscribers after launching its rental service in 1999. (Yahoo)

There’s a mind set in the cable side of the broadband duopoly that refuses to sell us what we want and demands the we buy what they are selling. It’s the conventional wisdom among the management in the world of coax as demonstrated by Comcast COO Steve Burke:

Speaking at the CTAM cable marketing convention in Denver, Colorado on October 25, Burke described his fears if the industry does not move ahead to form new business models. The industry-wide TV Everywhere authentication project is a way to try to “take the cable industry and put it ahead of the internet and try to not let it roll ahead of our industry,” he said.  Burke also illustrated some frustration with those in the business who were not lending a hand.

“Some people’s business models are going in the wrong direction,” he said, a likely reference to News Corp, Disney and NBC Universal who are partners in free online video site, Hulu that is considering putting some content behind a pay-wall.  “I’ve yet to meet a content provider who doesn’t worry about cord cutting and doesn’t see the wisdom of trying to get ahead of that. Stop talking about how hard it is and start figuring it out,” he said. (Broadcast and Cable)

Let’s see, cable needs to get ahead of the internet with a more limited, restrictive, and expensive product? It’s amazing Comcast’s shareholders tolerate this kind of leadership. Video on demand has become as common as email on the internet. Both free and paid models are succeeding growing and delivering profits. Instead of burning a pile of money building a whole new technology like TV Everywhere that consumers don’t want, why not offer more of what they are actually buying. Netflix, Amazon and iTunes are having no problem finding people who are willing to pay for content. If Comcast would simply discover the big dumb pipe, and deliver content via the internet to anyone with a broadband connection, it really would be ahead of the trend. But that would require some profoundly arrogant folks like the cable industry  to start their customers what they really want. Cable isn’t accustomed to doing that.

Taking aim at a broader global audience, the BBC may be joining forces with Google to stream outside of the UK. The spoils will be ad revenue. With the BBC desparately looking outside of the box for new revenues, and Google determined to do something that matters in the full length programming space, the partnership makes sense. If the deal flys, the biggest losers could be US interests PBS and cable who hav traditionally controlled the rights to Beeb content here. Big winners will be  Brit TV fans and angliphiles as well as advertisers who will gain another targeted, lower cost venue.

Mark Thompson, the BBC director general, is leading talks with Eric Schmidt, Google’s chief executive and chairman about rolling out an international version of the BBC iPlayer, supported in some way by Google-owned video sharing site YouTube.

However the process has been mired by the need for international rights clearance for the BBC programmes currently shown on the iPlayer in the UK. The BBC iPlayer allows viewers to watch popular BBC programmes for up to seven days after they were first broadcast. (Telegraph)

Hulu is emerging as front runner in the online video space. With the addition of Disney programming the megaportal may be unstoppable. The carefully indexed site’s diverse offerings, good video quality and tolerable level of advertising are making it the site of choice for online viewers.

This means that TV shows from Disney-owned channels like ABC, SoapNet, and ABC Family will be coming to Hulu. Among them are “Lost,” “Grey’s Anatomy,” “Ugly Betty,” and “Scrubs.” There will also be Disney movies available on the ad-supported streaming video site, but a press release did not name any of them. Content will be available “soon,” the press release explained.

Reports started to surface about a month ago that Disney was in talks to join Hulu.

Robert Iger, president and CEO of the Walt Disney Company, will take a seat on Hulu’s board of directors, along with Anne Sweeney, co-chair of Disney Media Networks and president of the Disney/ABC Television Group, and Kevin Mayer, executive vice president of corporate strategy, business development, and technology at Disney. (Cnet)

Hulu is something any of the larger cable and telco operators could have easily done. I think the telcos will have the most explaining to do if shareholders ever grasp that. For a fraction of what thay have spent on closed IPTV systems, the telcos could have been riding the wave into the future instead of sinking  into the past.

While Time Warner pushes draconian usage caps onto its broadband customers, a simple $20 upgrade to the same DOCSIS infrastructure is pushing cable ahead of all competitors in Japan.

Pretty much the fastest consumer broadband in the world is the 160-megabit-per-second service offered by J:Com, the largest cable company in Japan. Here’s how much the company had to invest to upgrade its network to provide that speed: $20 per home passed.

The cable modem needed for that speed costs about $60, compared with about $30 for the current generation.

By contrast, Verizon is spending an average of $817 per home passed to wire neighborhoods for its FiOS fiber optic network and another $716 for equipment and labor in each home that subscribes, according to Sanford C. Bernstein & Company.

Those numbers from Japan came from Michael T. Fries, the chief executive of Liberty Global, the American company that operates J:Com.

His larger point: “To me, this just isn’t an expensive capital investment,” he said.

The experience in Japan suggests that the major cable systems in the United States might be able to increase the speed of their broadband service by five to 10 times right away. They might not need to charge much more for it than they do now and they’d still make as much money. New York Times

The reality is, my fellow Americans, that we’re being conned by the telco / cable duopoly and the federal government that it has paid to keep any real competition at bay.

New survey results aren’t only bad news for cable and DBS satellite companies, there’s also bad news for the telcos.

In fact, according to consumer research firm GfK Roper Consulting, about 40% of those surveyed during mid-2008 and early 2009 said they’d be willing to do without cable or satellite TV. Instead, they’d just as soon watch programming on free sites like Google’s (GOOG) YouTube or buy videos à la carte from Netflix (NFLX). Of those surveyed, only 37% said they were getting good value for the price they pay for cable or satellite subscriptions. (Business Week)

While the cable and satellite companies have a lot to do like offering IP based subscriptions and a la carte channels, the telcos have totally blown it. Instead of building the big dumb pipe, they have promised so many times, Verizon and AT&T have invested heavily in package based pay TV in a closed system. Had they built the big dumb pipe and invested in IP based content distribution, their content business would be booming. Instead they’ve saddled themselves with obsolete technology working in a regulated environment just like the cable guy. Their shareholders must be outraged.

In the Third Pipe world, content is king, but only if it moves freely in a big dumb pipe. When it was possible to distribute a la carte content to customers located anywhere, the duopoly has continue to invest in geographically limited walled gardens. Competitors have already figured out the new model is the open one and they will continue cannibalizing the closed content business until the doupoly chages its ways.

Once again, another prediction by the Third Pipe visionaries becomes reality. While the trend has been accelerated by tight finances in many households,  the trend is permanent and will grow. Most consumers who are cutting costs have chosen to cut pay TV more than broadband.  A great deal of  programing has already moved to the internet, and the exodus of eyeballs will necessitate content makers to offer more there or risk losing audience. This is not good news for those who have chosen to commit capital to pay TV instead of the big dumb pipe.

In a “difficult economic environment,’’ smart people in this downturn are more likely to cut out a subscription to TV service, than Internet service, Tom Rutledge, the chief operating officer of Long Island-based Cablevision Systems Corporation said at the UBS Global Media and Communications Conference in New York. There, he said:

“If you think about the Internet and its utility today, in terms of looking for a job even, it’s really something you have to have. If you ask most sophisticated people, would they rather live their life without television or without the Internet, they’d probably give up television, before they’d give up the Internet.”

The logic is clear. Since the dotcom bust in 2000 and 2001, the Internet has greatly increased its utility to users in everything from text communications (instant messaging, Twitter) to voice communications (voice over Internet protocols, Skype) to job searching (Monster, CareerBuilder, HotJobs) to stuff searching (CraigsList, eBay) to opinion-making (Huffington Post, Politico) to video (YouTube, Hulu, NetFix streaming). (zdnet)

If you’re planning to buy a home now may be a good time as the market may be at its bottom. Before you sign a contract, consider this: The broadband in your new neighborhood will be just as important as good schools, shopping and other amenities. My advice is shop where there is fiber to the home if at all possible. Next best bet is in a municipality planning fiber to home. Forget promises for the duopoly about future availability. The Telcos and the cable guys promised we’d all have fiber in place eight years ago.  Fiber will maximize the value of the home in the future.

In less than a decade, broadband has gone from a luxury to a must for many people, and for some of them, it’s started to influence their real-estate decisions. Homes that have broadband are winning out over more remote ones that don’t. Areas with better and faster broadband are becoming more desirable than ones with slower access.

Edward Redpath, a real estate broker in Hanover, N.H., said he has seen deals fall through once the buyer realizes a home doesn’t get broadband. Across the Connecticut River in Norwich, Vt., only the center of the village has cable.

“We have a lot of people that don’t go into the rural neighborhoods or consider the rural neighborhoods because they need the broadband,” Redpath said. “Our lifestyle demands speed.” (StarTribune.com)