Thursday, August 28, 2014

Massive Disruption To The Cable Industry Coming

Things that are often obvious in hindsight don't seem so clear at the time. For instance I didn't understand why anyone would want to send around a PDF file when you had Microsoft Word. And it wasn't obvious to me that mobile phones would completely displace land lines.

We are about to see something similar happen to the cable industry, which is at its oligopolist apex right now.  I don't know when or how long it will take to have an effect, but in the end I believe that the outcome will be significant.

MICROWAVE FIXED WIRELESS

For large condominium buildings in Chicago, it is now the norm, not the exception, to go with Microwave Fixed Wireless for internet in the building, rather than fiber. Here is one company (I just found them on the internet, don't know anything about them) that attempts to describe the benefits:
Telephone and cable companies have been positioning fiber optics as the ultimate internet technology for some time, but the truth is that fiber has some inherent disadvantages that have been addressed by wireless microwave-based internet solutions. Experts across the globe are starting to acknowledge what the engineers at JAB Broadband have long been touting: microwave is a faster, lower latency, lower cost alternative to fiber and you don’t have to wait until someone decides to light up your building.

Not to be confused with the appliance you use for heating your leftovers, microwave wireless networks transmit and receive radio signals through the air enabling high-speed data transmission with very limited latency. Benefits include:

Limited infrastructure required on site
Faster speeds because data travels over a direct path (point-to-point)
Low logistical and operation costs
Expanded availability
Low latency
There are many companies in Chicago that provide this service for condominium buildings and businesses. You need to have a rooftop with line of sight access to a provider and you put a dish on the roof. This dish connects to the main network of the building and is distributed just like internet service that you'd receive from a standard fiber optics provider (such as a cable company). The traditional downside of microwave transmission was unreliability - if the line of sight was obscured by heavy rain, for instance, then you don't receive any signal. This happens today with DirectTV if the weather is bad - you receive the "all or part of this program did not record" message when you pull it up on your DVR (or it is jumpy and impossible to watch if you are looking at "live" programming). Note that DirectTV has a much more complex problem to fix with its satellites than a condo building does in Chicago because their satellites are in orbit rather than nearby with simple line of sight needs, so these problems are conceptually similar but actually very different in terms of difficulty to solve.

The reliability issue has mostly been solved and barring catastrophic weather, your point to point wireless internet is as reliable as fiber brought into your building. Don't forget that fiber, too, can be cut by local construction crews and other means and is also susceptible to failures of various sorts.

Once you cut over to Fixed Wireless (microwave transmission), you have effectively moved out of the cable orbit as far as internet service.  Many facilities offer 10 meg, 50 meg, and even 100 meg connections for each condo unit, which means that the provider needs to bring that speed times the number of units with some overall reduction since everyone won't be using the full internet all the time.

IMPACT ON CABLE... AND 4K

Once you have a super high speed connection, you need programming, and most people still get that through cable or satellite.  However, there are many online services available, and they are getting stronger in terms of content.  There is Hulu, Netflix, Chromecast, Roku, and myriad others.  Some leagues, like baseball, will sell you a package available through the internet or Roku as well.  This will only grow in the future since many other entities like Netflix and Amazon have a strong desire to battle the cable providers, as well.

The set top box, provided by your cable or satellite provider, is another anachronism of the past.  The box allows you to store shows and connects cable to your TV.  However, this can all be accomplished virtually, such as via this cloud-based set-top box called Nimble TV.  Note that Nimble TV today works WITH the cable providers, but it wouldn't be hard for someone else to use a similar concept without going to the cable providers at all.

What is a DVR doing, anyways?  It is recording programming locally for you.  So what?  If there is one copy of every program that ever existed out there on the internet anyways, and if you have a 100MB connection, why store it locally?  Just go out and bring me that program?  This is why my DVD player is gathering dust and I probably will throw it in the trash - anything I want is probably out there on demand or on the internet so why bother with physical media.

Another thing your set top box and cable provider does is stand between you and higher resolution content.  Cable has a myriad of customers - some on standard definition - and doesn't want to lose them when they upgrade.  Thus they upgrade slowly, and look closely at what it costs them to upgrade and what they can pass on to subscribers.

The internet, on the other hand, can agree on a new standard like 4K, and then it just needs to be recorded in 4k and it is streamed out on the internet to anyone with a high enough bandwidth connection (and a device to play it on).  To the cable companies this is a double problem - they need to upgrade the internet service to allow them to play ultra HD (or 4k) and then they need to upcode the content as well, and they have to do ALL of this for a region before they can effectively roll it out.  Thus you are waiting behind grandma who doesn't care about 4k and is just fine with standard TV.

I was reading articles about 4k TV (now Netflix streams "House of Cards" in 4k) and the expert said it ruined him to go back to his HD TV, the same way that you'd cry if you had to go back to standard definition TV.  The TV's are here, but it is the content and the distribution that is in the way.  Netflix and other internet streaming providers are already on this.

DirectTV does this too - my DVR is hooked up to my high speed internet and this is how they are delivering on demand shows to me.  They are now the gateway and they are bypassing some of their own infrastructure to do this.

To get 4k you need a machine that can play it and a device to play it on - some of the new monitors are 4k (and reasonably cheap, under $1000) and you could hook up your MAC or other computer to it by Thunderbolt or HDMI cable and you can bypass the huge costs of the most modern TV's.  But none of this is going to be an option even in the relatively near future from your cable or satellite provider - you need to go around them via your high bandwidth connection and then use a device like a computer (or some TV's build it in) to utilize the 4k content.

CHERRY PICKING

As major buildings and more sophisticated business users detach from cable and go to fixed wireless, which can be set up and upgraded in a fraction of the time as cable, then you will start to see other effects.  The "network model" means that everyone pays in and then they spread the costs across a huge base of users.

The other model is when the bigger and more sophisticated customers defect and leave behind the slow adopters and less wealthy customers.  Whole buildings can offer 4k TV as a service perhaps and maybe buy a bundled series of programs (or enable on demand or custom packages) and then as the internet gets faster, go to even greater levels of resolution or capabilities.  Meanwhile, the pokey cable company is for those that don't or can't upgrade, and their costs will go up while their best customers leave.

CONCLUSION

There are a lot of complicated threads being linked together here.  Key points:

  1. Microwave Fixed Wireless will steal many major cable customers
  2. Microwave Fixed Wireless will offer substantially higher bandwidth which will enable additional services such as 4k TV
  3. Third party services are growing to enable users to get content w/out going through a set top box.  They can use dongles or features built into the TV
  4. You may not even need a TV in the future depending on how monitors evolve and the capabilities of laptops / chromebooks / tablets / MACS.  May be easier just to go through your device
  5. In all of these cable is stuck with a huge infrastructure, many older customers who do not want to upgrade, and they won't be able to compete with high bandwidth solutions on features
Cross posted at Chicago Boyz


3 comments:

Anonymous said...
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Gerry from Valpo said...

It's comforting to know I can use my dongle.

What's a dongle?

Carl from Chicago said...

The dongle is something that sticks out the side of your TV. If you look at a chrome cast or something it is a stick like a USB thumb drive that you plug into your HDMI port on your TV. This is what ROKU does as well.

All the logic doesn't have to be in your TV it is in your add on dongle device.