Latest industry news and insights

700 MHz spectrum auction sets off open access fireworks

The Open Internet Coalition (OIC) is urging members of Congress to implement a national broadband policy that would lead to universal, affordable high-speed Internet access for all Americans.

The outcry comes in advance of the FCC’s upcoming auction of the 700 MHz band of spectrum. Congress has set a January 2008 deadline for the spectrum auction, with use of the auctioned bands to begin within a year.

In its letter to Congress, the OIC stated that the U.S. is falling behind other countries in the performance and adoption of broadband Internet networks. The letter was signed by 54 Internet companies – including Amazon, EarthLink and Google – and grassroots and advocacy organizations. (The companies and organizations have a lot of overlap with the group of companies agitating for net neutrality.)

“America has seen nearly a decade of decline in its world standing in broadband services, largely because of an uncompetitive marketplace – with monopolies and barriers to entry written into the law,” the letter reads. “In part, this is because we lack a comprehensive policy to address the digital divide, ensure the free flow of content and promote the development of ubiquitous, high-speed Internet access at affordable prices . . . We are reaching a tipping point where legislation is no longer simply welcome – it is imperative.”

The OIC is proposing three key elements: 1) universal, affordable Internet access; 2) an open Internet, or network neutrality; and 3) quality through competition. The connection that items 1) and 3) have with item 2) is a bit tenuous, even in the OIC’s own argument, but many members of the OIC have long conflated those issues, and they’re obviously not about to stop now.

The Public Interest Spectrum Coalition (PISC), an ad hoc collection of consumer groups, advocated that other countries have much higher levels of market competition, “which in turn has resulted in lower prices, better service and higher overall adoption rates.” Many of them, PISC observed, have achieved this through open access policies.

Competition has been FCC Chairman Kevin Martin’s mantra since he assumed the role, and he has found an ally in the telecom industry with his focus on fostering investment and competition in broadband networks.

Members of the Savethe-Internet.com Coalition – including Consumers Union, Media Access Project, Public Knowledge, Free Press and MoveOn.org – are urging Martin to set aside a “valuable slice” of the available spectrum for open and nondiscriminatory Internet access, which they claim will foster more competition. Democratic presidential candidate John Edwards sent a letter to the FCC agreeing with the plea.

It is likely that only the largest telecommunications providers will be able to afford the spectrum, which is worth billions of dollars. So, if the FCC adopts SavetheInternet.com’s plan, the question is whether or not the government will enforce fair, effective open access, even in the name of competition. The question for the FCC, then, becomes: Is competition really the goal, or is the goal making the most money possible?

A whirlwind month for Qwest

A lot has been going on in the world of Qwest. The company’s CEO and EVP of operations are retiring, Comcast Corp. is suing the company and is threatening to do so a second time, and Qwest’s broadband service has changed.

Chairman and CEO Richard Notebaert will retire from both positions upon the selection of a successor, for which a formal search is underway.

Notebaert succeeded Joe Nacchio, who in April was convicted of illegally selling $52 million in stock during a massive financial fraud between 1999 and 2002. Notebaert steered Qwest to stability, both operationally and financially, in his tenure.

Qwest’s former EVP of operations, Barry Allen, retired on June 29, and Robert Tregemba, previously the VP of network operations and engineering, assumed the new role of EVP of network operations.

In early June, Comcast brought suit against the company for an advertisement in which Qwest claimed that 72 percent of users in a “Broadband Challenge” (with a sample size of only 100 people) found Qwest’s premium service to be as fast, or faster than, Comcast’s.

Also, when Comcast’s customers in Oregon and Washington were unable to reach Qwest’s customer service line last month, Qwest claimed this was a deliberate effort to keep Comcast’s phone customers from switching to Qwest. Comcast responded, attributing the trouble to a technical issue with Qwest’s toll-free lines, and the company threatened legal action if Qwest did not halt the accusations.

Qwest has also expanded its relationship with Microsoft to offer Windows Live, has renamed its DSL service to “Qwest Broadband” and has introduced a new domain name for its e-mail customers: q.com.

Proposed bill would require opt-out a la carte option

On June 14, Rep. Dan Lipinski (D-IL) introduced The Family and Consumer Choice Act of 2007, a bipartisan bill that would require cable and satellite providers to apply broadcast indecency standards to their programming, and which would also offer an opt-out a la carte programming option.

The latter would require providers to block any channels a subscriber does not want and then credit the subscribers for the blocked channels on their bills.

At a press conference at the U.S. Capitol on June 14, FCC Chairman Kevin Martin said, “No consumer should have to pay for content they do not wish to receive. Period.”

In a released statement, Brian Dietz, VP of Communications for the NCTA, said that a mandated a la carte regime would result in higher prices and less diversity in programming. The proposed mandate is unnecessary, he said, because consumers “have a wide variety of parental controls through cable set-top boxes and the V-chip, which allow them to control content by time, show, network and rating.”

On June 22, NCTA President and CEO Kyle McSlarrow testified before the House Energy and Commerce Subcommittee, stating, “Continued technological improvements and the increasing pace of consumers’ shift to digital will ensure that all viewers have the ability to control the programming their families see.”

A plethora of state franchise bills

• Passed (to date)
  California, Florida, Georgia, Indiana, Iowa, Kansas, Michigan, Missouri, Nevada, New Jersey, North Carolina, South Carolina, Texas, Virginia
• Pending (at the end of the 2007 state legislature session)
  Connecticut, Illinois, Massachusetts, New York, Ohio, Pennsylvania, Wisconsin
• Died or were defeated (to date)
  Colorado, Idaho, Minnesota, Tennessee, Utah, Washington

Cablevision fights the court, ups its services

While in the midst of its remote-storage DVR (RS-DVR) appeal, Cablevision Systems Corp. has added new service offerings.

In May, the MSO’s Optimum Lightpath (OL) launched a carrier-class voice service delivered over Metro Ethernet, and claimed to be the first MSO to do so.

The company had been providing TDM-based services largely on its HFC network. OL voice services are now entirely IP-based.

“Traditional telcos stop at the wall of the building,” said David Strauss, OL’s VP of marketing. “We’re going right into the premises. Customers will have one provider to call, and it’s us.”

And on June 26, Cablevision added 15 new HD channels to its lineup, from Voom HD Networks. The company’s iO digital cable customers now have 40 HD programming services. By the end of the year, Cablevision said its fiber optic network will be able to support more than 500 HD channels.

Cablevision, having lost a lower court ruling that undermines its attempts to provide networked DVR service, has lined up industry support to back its appeal.

The fellowship is unusual in its breadth. Supporters include the Consumer Electronics Association, the Electronic Frontier Foundation (EFF) and USTelecom, which represents the major phone companies. In June, the three organizations jointly filed an amicus brief in support of Cablevision’s appeal.

The proposed RS-DVR was designed to provide customers with network-based storage. A group of copyright holders, however – including the Cartoon Network, Disney Enterprises, NBC, CBS and Turner Network Television – sued Cablevision, arguing that the RS-DVR violated copyright law. The U.S. District Court for the Southern District of New York agreed with them in March, preventing Cablevision from rolling it out.

Avaya enters $8.2B merger agreement

Avaya Inc. has entered into a definitive merger agreement with investment firms Silver Lake and TPG Capital for approximately $8.2 billion ($17.50 per common share).

A sale had been anticipated when Avaya abruptly canceled an investors’ briefing scheduled for May 31.

Avaya specializes in IP telephony and competes with Cisco, a vastly larger company, in the enterprise market.

Avaya’s shareholders will receive $17.50 in cash for each share of Avaya common stock they hold, representing a premium of approximately 28 percent over Avaya’s closing share price of $13.67 on May 25, the company said. It also represents a premium of approximately 33 percent over Avaya’s average closing share price of $13.17 during the 30 trading days that ended May 25.

Yahoo! needs more Joost

On June 5, Mike Volpi was named CEO of Joost. Volpi joined the company from Cisco, where it was rumored that he was next in line to lead the company.
Yahoo! Inc. lost CEO Terry Semel on June 18, and the company’s board appointed Jerry Yang, co-founder of Yahoo!, to the position.

Yahoo!’s rival, Google Inc., has dominated the Internet advertising space as of late. Semel’s resignation was a relief to some board members and investors who were upset with Yahoo!’s lack of acquisitions in the space – or at the lack of Yahoo!’s acquisition – and concerned about the company’s sagging stock. But there is skepticism about whether Yang is the freshest choice.

Three days after being named CEO, Yang led Yahoo!’s acquisition of Rivals.com. And, according to The Times in London, News Corp. has discussed swapping MySpace with Yahoo! in return for a 30 percent stake in the enlarged group.

BigBand sues Imagine for infringement

BigBand Networks has brought suit against Imagine Communications, charging the latter with infringing three patents that cover advanced video processing and bandwidth management techniques.

The suit, filed in the U.S. District Court for the District of Delaware, alleges that Imagine products willfully infringe claims of BigBand’s U.S. Patents Nos. 6,937,619; 6,999,477; and 7,058,087. The lawsuit seeks injunctive relief, along with damages for willful infringement.

Five of Imagine’s top executives – including the company’s founders and CEO – are former BigBand employees.

Imagine’s initial product is the Quality On-Demand Gateway, which incorporates a new method of statistical multiplexing for the MPEG-2 VOD market. The company claims that the QOD Gateway provides up to 15 variable bit rate (VBR) VOD streams that can share the same 256 QAM channel that today’s maximum of 10 constant bit rate (CBR) VOD streams can.