Midco, which offer high-speed internet to 480,0000 homes, said it is introducing Midco Wi-Fi, using Plume’s HomePass technology.

The cloud-based, open-source technology delivers faster, smarter and more reliable Wi-Fi service throughout the home, the companies said.

“Our goal has been to bring the industry’s best-managed Wi-Fi solution to our customers,” said Tom McAdaragh, Midco president & COO. “As customers continue to demand higher speeds and the number of connected devices grows, home networks demand a flexible, adaptive Wi-Fi solution. Midco Wi-Fi is just that. It’s your home Wi-Fi network, designed to keep you connected and put the power in your hands.”

Midco services customers in Kansas, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin.

Midco Wi-Fi leverages an advanced Saas Experience Platform that includes OpenSync smart home framework in conjunction with Plume’s recently updated HomePass mobile app.

“Plume is extremely proud to help Midco deliver an unparalleled internet experience by laying the foundation of fast, reliable, secure, and adaptive whole-home Wi-Fi, and layering highly personalized user and guest controls, AI-driven cybersecurity, and more on top,” said Erdem Mustafa, VP, sales, at Plume. “In partnership with Plume, Midco has introduced a market-leading solution that, through the trifecta of cloud, AI, and open-source, will keep pace with the ever-changing needs of the modern consumer.”

By 2025, Midco expects to deploy 10G broadband while expanding its fiber network to rural areas. The company also delivers TV services including the Midco Sports regional sports network, phone, data center and advertising services, plus wholesale networking solutions. ■

 With 2020 mercifully winding down and a virtualized version of CES about to ramp up, it’s a good time to look at the gadgets and software platforms that will matter most in the year ahead.

At this time last year, Multichannel News predicted relevance for 5G-capable smartphones and WiFi 6-compatible home network gateways, and of course, the obvious ramped-up competition for subscription streaming, all of which became manifest over the past 12 months. 

If we were truly prescient, we might have devoted a paragraph or two to remote conferencing software. But hindsight is 20/20.

So what will the big technology topics be this year? Here are five we think we’ll be covering quite a bit. 

The ‘Platform Wars’ will only intensify: We heard a lot about the so-called streaming wars in 2020, and how the inclusion of Disney Plus, Apple TV Plus, Peacock and HBO Max were going to put competitive pressure on Netflix. 

It soon became apparent that the race for platform supremacy was just as intense, with all of the relevant subscription VOD, AVOD and vMVPD combatants relying on Roku, Amazon, Google, Apple and other over-the-top gatekeepers to reach their consumers. 

ALSO READ: Discovery Plus to Explore Challenging SVOD Biz with Lofty 70 Million Subscriber Goal

The competition among the streaming gatekeepers will only heat up in 2021. Roku has seen its market capitalization double in recent months to surpass $40 billion, and it’s now making more money selling advertising than hardware, Roku can now afford to turn its OTT gadgets into loss leaders at retail, selling them on the ultra-cheap (below $20) and further proliferating its leadership position in the connected-TV device world.

Hot on Roku’s heels, touting a similarly robust 40 million active users worldwide, Amazon will continue to integrate its Fire TV OS into almost every home control and automation device it sells, while also peddling inexpensive OTT gadgets such as HDMI streaming sticks.

The wild card will be the emergence of Google and its Android TV/Google TV OS. Google plans on investing heavily in 2021 to join Roku and Amazon at the table of serious global OTT device platform operators. 

“What makes Google such a dangerous entrant into the TV OS/device space is that they do not need to make money (at least today) on taking a cut of connected TV ad inventory or a share of new SVOD subscriptions,” LightShed Ventures general partner Rich Greenfield said in a recent analyst note. 

More OTT ‘carriage’ disputes:  With their growing clout, and decreased neutrality in terms of what gets streamed on their platforms, Roku and Amazon will certainly be involved in more distribution skirmishes in 2021.

Roku added HBO Max just last week, while Amazon Fire TV still doesn’t offer NBCU’s Peacock. Roku also just made the Spectrum TV app unavailable to its users, as it is still negotiating a new distribution deal with Charter Communications. 

Notably, Discovery didn’t specifically say it had deals with Roku, the No. 1 OTT platform, or No. 2 Amazon when it announced its new Discovery Plus SVOD Platform.  And with CBS All Access just as entrenched in the channels business of Roku and Amazon as HBO ever was, what are the chances that ViacomCBS will launch the broadened Paramount Plus with ubiquitous app support?

Expect big, surprising new smart TV partnerships: If you think gateway operators like Roku and Google wield a lot of power now, just wait until one of them reaches what Liberty Media chairman John Malone recently said is the magic number of subscribers to truly control the market — around 100 million active users. 

The key to achieving that benchmark is tie-ups with smart-TV makers. Roku, for example, emerged as the No. 1 OTT ecosystem in the U.S. thanks mainly to its highly successful marriage to China’s TCL, whose cheap 4KTVs have sold like gangbusters in the U.S. since 2017. Roku is now working with TCL to establish similar smart TV beachheads in Europe, but TCL is seeing other tech companies, evidence by a recent U.S. Android TV deal.

And there will be plenty of big smart-TV announcements in 2021. 

Comcast, for example, is looking to get its X1 platform into the smart-TV game with a potential collaboration with Walmart. And TiVo plans to leverage the established smart TV OEM business of its new parent company, Xperi, to put its Stream TV platform into sets starting in the latter half of 2021. 

4K/UHD will become ubiquitous:  Amid all the movement among platforms and service providers, emerging next-generation playback formats, such as 4K/UHD, HDR, Dolby Vision and Dolby Atmos will become more standard. 

ALSO READ: HBO Max Gets WarnerMedia’s Entire 2021 Film Slate Day and Date

Lost in all the hubbub about WarnerMedia releasing its entire 2021 theatrical slate day-and-date on HBO Max: All 17 of those movies will include each of the aforementioned technology features. 

To keep up, ops will invest in broadband: Controlling around 70% of the U.S. wireline internet service provider business entering 2020, cable operators were largely ready when the pandemic suddenly spiked broadband usage, with the amount of digital video sent over the internet — vocational and recreational — vastly increasing. 

Operators, who’d spent billions on DOCIS 3.1 upgrades, largely implemented tweaks and node splits that were part of the technology they already owned, and they kept up with demand. 

Analysts expect these companies to circle back to earlier planned broadband infrastructure upgrades in 2021, transitioning networks to software virtualization and distributed access architecture (DAA). Dell’Oro Group predicts that global spending on broadband access equipment will rebound by around 5% in 2021. 

Sony Pictures Television is launching three free ad-supported streaming television channels on Roku’s free streaming service, The Roku Channel, starting Tuesday, SPT said.

The new Sony Canal Novelas, which will air telenovelas, joins Sony Canal Comedias, which airs comedies, and Sony Canal Competencias, which airs reality competition shows. The Roku Channel reaches more than 40 million viewers and is available on Roku-enabled smart TVs and devices. Potential viewers can also access the programming via the Plex app, and it’s also available via Vizio SmartCast. 

Related: SPT Launching Free Ad-Supported Streaming Channels

The three channels are packed with programming produced by Sony Pictures Television International Production and target the U.S. Hispanic market, which offers a potential audience of more than 60 million viewers. 

Related: Plex Launches Spanish-Language Channels

“Sony Pictures Television has a compelling portfolio of Spanish-language entertainment that appeals to The Roku Channel’s engaged audience,” said Ashley Hovey, director of AVOD growth, Roku, in a statement. “At Roku, we’re laser-focused on delivering the best streaming experience to our customers. We know that the US Hispanic audience is rapidly growing and we’re very excited to partner with SPT to bring their vast library to The Roku Channel.”

TiVo’s announcement at CES in early January about entering the at least somewhat established over-the-top device market was a surprise to some. But the company, pivoting away from its DVR pioneer roots into the video streaming age, has an angle.

With its digital video recorders and video systems already well-infiltrated into the Tier 2 and 3 cable markets for more than a decade, TiVo believes there is “tremendous opportunity” to also provide small and midsize cable operators with its new Android TV-powered TiVo Stream 4K OTT device, president and CEO Dave Shull said.

Speaking during TiVo’s fourth-quarter earnings call on Feb. 18, Shull called the company’s cable partners “the heart of our 21 million users.” Many of these operator clients are now looking to exit or marginalize the decreasingly profitable pay TV business, but they don’t want to jeopardize their core broadband offerings in the process. That’s why these cable companies are looking to set up their growing ranks of broadband-only customers with inexpensive OTT solutions.

For example, virtual multichannel video programming distributors fuboTV and Philo have carved out distribution deals with groups like the National Cable Television Cooperative, which represents more than 750 independent MSOs. These operators market vMVPD services to broadband customers in lieu of bundling their own pricey TV services. Meanwhile, technology companies like MobiTV offer this operator constituency turnkey pay TV solutions.

“We will continue to approach these relationships as strategic growth partnerships, whether it's around accelerating the deployment of our IPTV solution for their video subscribers or giving them the best-in-the-world streaming solution with TiVo Stream,” Shull said. “We believe our product strategy has the potential to drive significant revenue for TiVo over the long term.”

TiVo is not alone in recognizing the potential of this cable operator market. Earlier last week, Amazon, which touts a global leading 40 million users for its Fire TV device ecosystem, announced that NCTC member operators will now be able to distribute its Fire TV OTT devices at a discount to their customers.

“As more of our members deploy app-based pay TV offerings, having the option to purchase Amazon Fire TV streaming devices at a discount will help our broadband and cable operator members retain video customers by creating affordable options that do not rely on a traditional set-top box,” NCTC president and CEO Rich Fickle said in a statement. “These devices are a great compliment to services like MobiTV or for broadband only offerings by our members.”

TiVo, though, has long-established relationships with hundreds of U.S. and foreign operators, which use its software products, such as the Android TV-powered TiVo Experience 4, to form the foundation of their video user experience. When it announced the debut of the TiVo Stream 4K at CES, TiVo said it already had an agreement with cable operator Schurz Communications, which is marketing the device to its broadband-only subscribers.

The TiVo Stream 4K, introduced with a suggested $49.99 retail price, supports most major OTT apps — Netflix, Amazon Prime Video, Sling TV, HBO, Vudu and YouTube, among them — as well as TiVo’s own recently launched OTT programming service, TiVo Plus.

Pivoting to OTT

TiVo is making a pivot into the OTT market as it merges with technology company Xperi, a maker of embedded technologies found in smart TVs, among other devices. That’s another infiltration angle for TiVo Stream 4K.

Shull said before the Feb. 20 call that he’ll step down from TiVo’s top role when the merger closes, ceding to Xperi CEO Jon Kirchner. Until then, he’s spearheading TiVo’s effort to, in his words, “get away from its DVR roots” and join the streaming age.

With OTT entertainment choices containing to expand, he said there is “no Moore’s Law to consumer attention spans.”

Given this paradigm, TiVo’s development of search and discovery technology will also be a key benefit as it looks to pry open Roku and Amazon’s dominance of the OTT device market.

“Attention to content and the time any one person can devote to it have limits on how they scale,” Shull said. "But I knew TiVo had a unique advantage here. Rather than trying to optimize the consumer for the entertainment market, we're trying to optimize the market for the consumer.”

Sixteen months after private equity purchased the assets under Cisco’s Video Services umbrella for $1 billion, rebranding the collective unit as Synamedia, the U.K.-based video technology vendor has emerged with a multipronged plan to serve the fast-changing video industry.

As its client base expands beyond satellite and cable pay TV providers to media companies and others involved in direct-to-consumer over-the-top distribution, Synamedia has expanded beyond traditional linear set-top provisioning and watermarking into areas including piracy disruption, search and discovery and advertising.

At CES in Las Vegas, Multichannel News talked with CEO Yves Padrines, who shared his perspective on the global video marketplace and how Synamedia — which counts Comcast’s Sky as an investor — fits into it. Here’s an edited transcript.

MCN: Synamedia has evolved from privacy prevention to what you call 'piracy disruption.' What is the market opportunity here?
Yves Padrines: If you look at the challenges we see in the market, there is this multibillion-dollar race on the content side. You have all of these giant media companies and large service providers spending billions of dollars in content production. Netflix spent $15 billion last year; Comcast spent $20 billion; Disney/Fox spent $23 billion. At the end of the day, all of this investment is sitting on the balance sheets of all these media giants, and they have to monetize it.

The problem with all of that is you have streaming piracy, which is becoming an increasingly big problem for the industry. All of this content is available everywhere and a lot of it is hacked. An end user can now buy a device for $100 and be able to watch 3,000 to 5,000 channels for the next 12 to 18 months. And a lot of these illegal services offer very nice solutions. They aggregate all this content in a very nice way. Of course, they can spend money on the technology because they don’t have to pay anything on the content side. The experience is so good, even a lot of users don’t know it’s illegal.

MCN: So how do you slow that down?
YP: We’ve invested a lot over the last year to disrupt the streaming piracy ecosystem. One of the adjacent parts on the piracy side is credential sharing. So we launched at CES last year a product called Credentials Sharing and Fraud Insight. It’s an AI solution where we can identify when people are doing casual sharing in a way they’re not allowed to. It’s a way to keep honest people honest. If you have, for example, a family that’s supposed to be based in one household, and you see that this family has 25 people using your service — or maybe it’s four or five people and they’re never in the same location — maybe they’re not a family at all. So we’re offering this AI solution to media companies, direct-to-consumer operators and pay TV operators as a way to be able to monitor this problem and decide what they want to do. They can stop the service, or they can upsell new services like family packages.

You also have a lot of people hacking credentials. There are over 4.5 billion credentials and passwords you can buy on the dark web for $4 or $5. Disney+, as soon as they launched, there were millions of hacked accounts after just a few weeks. And it’s not just a problem for video, it’s a problem for providers of WiFi and broadband.

MCN: With products like Infinite, Synamedia is also getting involved in search and recommendation, yes?
YP: Because you have this explosion of content, you also have this explosion of choice with all these direct-to-consumer and OTT platforms available. We strongly believe there is a need to help the end user to find this content, to help with unified search. We also believe that the long-term winners in the business of video aggregation will be the ones who own the broadband, or they will have access in a cost-effective way to broadband. They are going to have this new bundle of solutions where they are providing broadband, mobile and TV. And they’re going to have a way to aggregate all of the content to high-end broadband subscribers.

MCN: As others are moving towards developing the OTT advertising market with advanced solutions, Synamedia is investing in linear. Why?
YP: TV advertising is still the most cost-effective way to promote services and products to the mass market. The linear side is still worth $120 billion in revenue per year. And for streaming and VOD, it’s still less than $20 million. The problem with linear advertising is that you don’t have very good measurement, and you don’t have very good targeting solutions available. So we co-developed with Sky a solution called AdSmart, which has been very well-deployed and successful in the U.K. and has launched in Italy as well. This lets you push targeted advertising on pay TV set-top boxes. We’re now working on the next generation of targeted advertising solutions that will bring better measurements and targeted solutions for linear.

Last year at this time, the top U.S. wireless companies were loudly trumpeting what Verizon Communications chairman and CEO Hans Vestberg hyperbolically called “the fourth industrial revolution”: the debut of 5G wireless network technology.

Cable operators were warned to be afraid — very afraid — of a revolutionary new wireless technology that would end their dominance in wireline broadband. But as the wireless titans pressed to declare themselves first in the U.S. market with a 5G service, they ended up with mud on their faces.

Verizon rolled out a fixed 5G service based on speedy “millimeter wave” technology in Los Angeles, Houston, Sacramento, California, and Indianapolis. Verizon openly targeted cable broadband. But analysts largely declared the gambit to be vaporware, with hardly anyone able to access the service, which requires a fairly dense infrastructural buildout to work.

AT&T, meanwhile, got itself accused of false advertising — and was even sued by Sprint — when it started branding its 4G LTE signal as “5G Evolution.” Indeed, AT&T subscribers in select markets saw a display on their phone indicating they were connecting to “5G E,” when really they were only connecting to upgraded portions of AT&T’s 4G LTE network.

A year later, both wireless giants appear to have the goods, at least to some extent. But neither offering comes close to the massive hype put forth by the U.S. mobile industry about the so-called fifth-generation network technology, an ultra-fast, super-low-latency proposition that’s supposed to revolutionize everything from autonomous cars to remote medicine.

Over the next few weeks, AT&T is rolling out real 5G — not the 5G E fake stuff — in Indianapolis, Pittsburgh and San Diego, as well as Providence, Rhode Island, and Rochester, New York. In February, additional launches will include 10 more cities: New York City and Buffalo, New York; San Francisco and San Jose, California; Boston; Las Vegas; Milwaukee; Birmingham, Alabama; and Bridgeport, Connecticut.

To benefit from AT&T’s new 5G service, customers must live in one of the 15 cities and must also subscribe to one of two AT&T unlimited data plans. They must also pay around $1,300 for a new Samsung Galaxy Note Plus 5G smartphone. Customers will not see their wireless bills bumped up by 5G, at least not at first.

T-Mobile also has plans to roll out a nationwide 5G service this week, one that will also use the Samsung Galaxy Note 10 Plus 5G and the less-expensive OnePlus 7T Pro 5G McLaren. Outgoing T-Mobile CEO John Legere has promised to deliver low-band 5G coverage to 5,000 cities covering 200 million wireless customers by the end of the year, a pledge dependent on T-Mobile’s ability to close its merger with Sprint.

More Limited Than LTE

As for that coverage, it will be far more limited than the carriers’ fully baked and ubiquitous 4G LTE service, as the AT&T coverage map of New York shows. Belying the hype, the 5G performance will actually be roughly the same as LTE Advanced technology, a speedy version of 4G, since both T-Mobile and AT&T are using regular low-band spectrum and not millimeter wave.

Millimeter-wave spectrum is made up of ultra-high frequency radio waves in the 24 Gigahertz to 100 GHz range, which can hold and deliver gobs more data. Early 5G networks using millimeter-wave technology promise speeds as high as 6 Gigabits per second, evolving one day to as high as 20 Gbps. Latency is also vastly improved, too, going from 20-70 milliseconds with 4G to as low as the ultra-responsive sub-1 millisecond range.

Spotty at Best

Millimeter wave actually seems capable of delivering on all of that 5G hype, but as Verizon is finding out, establishing ubiquitous 5G coverage is no small engineering feat. The ultra-high frequencies require signals to broadcast at very short range — around 600 to 800 feet — meaning Verizon must festoon every street in each city where it deploys 5G with gobs of “small cell” devices. These short-throw, ultra-high frequencies are also prone to all sorts of interference, falling leaves included. And they don’t penetrate walls or buildings.

In April, six months after its dud-like premiere of fixed 5G service, Verizon declared itself first to market again when it rolled into Chicago and Minneapolis with a smartphone-targeted 5G service, also based on millimeter-wave tech.

That service is now in 18 cities, but access is typically limited to select, heavily populated urban centers. When Multichannel News sister publication Tom’s Guide road-tested Verizon’s 5G service back in April, finding a connection was challenging. When Tom’s Guide testers did find a connection, it would be lost simply by crossing the street. Often, when they would come back to the same location 12 hours later, that connection would no longer be available.

Verizon — which just released coverage maps of its 5G markets — said it has now doubled the number of small cell devices in Chicago and other markets, significantly improving coverage.

Meanwhile, as Verizon’s millimeter wave coverage improves, it’s delivering on promises of improved network speeds. Using the Samsung Galaxy S10 5G smartphone, Tom’s Guide said it experienced download speeds as high as 1 Gbps in the Windy City. For context, similar tests in the area for LTE yielded speeds in the 85 Mbps range.

In recent months, cable industry analysts have gushed at the wireless convergence possibilities potentially wrought for operators using the Citizens Broadband Radio Service (CBRS) spectrum.

For Charter Communications, that future isn’t necessarily here. But the check is certainly in the mail, with the No. 2 U.S. operator now openly discussing its plans to use CBRS technology to offload mobile data traffic from its mobile virtual network operator (MVNO) arrangement with Verizon, as well as for establishing fixed wireless services in rural areas its hybrid fiber coaxial network can’t reach.

In fact, Charter’s ongoing tests seem to be going so well that chairman and CEO Tom Rutledge told equity analysts during the company’s third-quarter earnings call that the operator might bid on private CBRS spectrum at auction next year to augment the free spectrum it’s been conducting tests with.

“We haven’t determined that, but we’re looking at it closely,” Rutledge said. “We’re uniquely positioned to take advantage of wireline and wireless network convergence over time with our fully distributed wireline network.”

Fixed Wireless Play

Speaking at last month’s SCTE-ISBE Cable-Tec Expo in New Orleans, Craig Cowden, Charter senior vice president of wireless, said the operator could deploy triple-play fixed wireless services based on CBRS in rural areas, possibly as soon as the end of 2020.

Charter is currently conducting tests in rural North Carolina in which CBRS is being used to set up private LTE fixed-wireless networks in areas out of the reach of the operator’s HFC network.

The technology could come in handy for Charter in states like New York, with which it has made merger-based agreements with regulators to extend broadband access.

With the Federal Communications Commission having just approved initial commercial deployment of CBRS, Charter is looking to deliver the minimum broadband speed specifications in rural areas — 25 Megabits per second downstream and 3 Mbps upstream — while also offering customers in the newly claimed fixed wireless terrain triple-play services.

Simultaneously, Charter is testing the use of CBRS spectrum in New York and Los Angeles as a means of making its mobile service more profitable. Both Charter and Comcast have mobile virtual network operator (MVNO) deals with Verizon Communications to lease use of the No. 1 U.S. wireless operator’s LTE cellular network.

Charter added 294,000 mobile lines in the third quarter, while narrowing its losses in the quarter on the Spectrum Mobile service to $145 million. Still, given the usage costs of the Verizon network, analysts have been bearish on both Spectrum Mobile and Comcast’s Xfinity Mobile.

“It should be clear by this point that the current [MVNO] deal is a money loser for the cable operators; it’s not profitable and it likely never will be,” MoffettNathanson analyst Craig Moffett wrote in a note to investors over the summer.

Comcast, which is also testing CBRS usage, at least has the ability to offload some of that expensive MVNO usage via its 19,000 WiFi hotspots. But Charter only has around 500,000 WiFi hotspots.

Charter, however, envisions a future in which it toggles customers, equipped with dual-SIM handsets, seamlessly between the leased Verizon LTE network to its own CBRS-based wireless network, which in turn would use Charter’s DOCSIS 3.1 network for backhaul.

“We see targeted opportunities for mobile offload,” Cowden said. “Our data shows that something like 85% of outdoor mobile traffic takes place in 15% of geographic locations.”

‘Infrastructure-Based’ Agreement

Under the scenarios being tested, Charter could deploy strand-mounted small cells and create its own wireless networks that would use CBRS spectrum. Charter would create an “infrastructure-based” MVNO, similar to what Altice USA is establishing with its Sprint MVNO deal.

“We’ve talked about dual SIM technology opportunities and the testing that we’ve done, and we’re quite optimistic about the capability of that strategy,” Rutledge said. “We’re quite optimistic about the ability to make select investments in areas where traffic dictates in such a way as to move services that we pay rent for on to our own platform and that opportunity already exists with WiFi and a significant number of our customers.”

Under this scenario, analysts find the Comcast and Charter MVNO deals far more compelling “If they can offload anything close to half the cost of monthly service onto their own network, it would be a game-changer,” Moffett said in a note to investors. “In essence, they would be bifurcating the network into two buckets.”

While there’s been ample discussion of “5G,” “10G” and the overall evolution of broadband networks to bring next-generation speed and latency into the home, how this data will be distributed once it actually gets inside has been a sometimes overlooked piece of the puzzle.

The fast-emerging WiFi 6 standard, a fancy name given to the sixth iteration of 802.11 WiFi, seems to have this covered. From new routers and gateways already on the market to new enabled smartphones and video-streaming devices that will be ubiquitous at CES in January, we’re about to finally see what some are calling the biggest advancement in WiFi in two decades.

Developed by the Institute of Electrical and Electronics Engineers (IEEE), the new 802.11ax standard, what we call WiFi 6, is an improvement on the fifth-generation 802.11ac standard. WiFi 6 backers say the technology doesn’t just improve speed and latency, enabling users to fully realize the multi-Gigabit speeds of their future network connections. WiFi 6 is also a major advancement in how data is distributed in the home, enabling routers to handle more devices at once, more efficiently.

“WiFi 6 is the first redesign of WiFi since it was conceived 20 years ago,” said Charles Cheevers, chief technology officer of CommScope’s consumer premises equipment division, which has already rolled out WiFi 6-compatible mesh WiFi systems, as well as WiFi 6-compatible devices.

“It was designed to get higher data rates and capacity (Gbps speeds), work better in environments with lots of devices and also improve battery efficiency for IoT [internet of things] devices and connected smartphones/ tablets/laptops using WiFi,” Cheevers added. “At the same time, it is backward-compatible to WiFi 5 older clients — and makes them more efficient.”

The rise of video streaming can be directly tied to the emergence of WiFi 5 back in 2013. With routers supporting modulation of 256 QAM (quadrature amplitude modulation), and data transmission speeds up to 960 Megabits per second, WiFi 5 greatly reduced OTT buffering.

WiFi 6, which supports 1024 QAM modulation and is theoretically capable of 10 Gbps, arrives as consumers begin streaming denser 4K video to more rooms in the house while linking things like door locks, lights and thermostats to the home network.

While WiFi 6 is backward-compatible, devices such as smartphones and Roku boxes must have the right chips and software to fully realize its potential. We’re starting to see a few of those. Top-selling smartphones including the Samsung Galaxy Note 10 and the iPhone 11 already support WiFi 6. Even a world still populated by WiFi 5 devices will see improvement working with a WiFi 6 router, though, Cheevers said.

“At its simplest description, WiFi 6 is designed to [deliver] four times better performance in an all-WiFi 6 client environment,” he said. “But even today, with mixed WiFi 5 and WiFi 6 devices, it is typically 25%-plus more efficient than a WiFi 5 AP solution.

The Major Innovation: OFDMA

WiFi 6’s secret sauce, according to Cheevers, is the introduction of OFDMA (orthagonal frequency division multiple access), a modulation scheme similar to what is used in DOCSIS and LTE.

Not only are WiFi 6 channels wider — 160 Megahertz versus the current norm of 80 MHz — but OFDMA lets each channel be used more efficiently. The scheme allows the router to serve more devices at once by efficiently splitting a single frequency channel.

A WiFi 6 router divides data it is transmitting on a specific frequency into dedicated “resource units” (RU). Say you’re messing with your fantasy league on your smartphone while streaming a football game on your Amazon Fire TV box via a virtual vMVPD. The WiFi 6 router would assign one RU to your smartphone and another to the Fire TV, allocating more data to the video streaming.

Finally, in an IoT world, WiFi 6 promises battery-saving advantages through a feature called Target Wake Time. With this technology, the WiFi 6 router “checks in” with connected devices at preassigned times, letting them stay asleep longer.

Meanwhile, WiFi 6 could get a massive boost down the road if American and European regulators approve use of 6 GHz band for home WiFi. This would give WiFi 6 another 1,200 MHz of midband unlicensed spectrum all to itself, starting as soon as 2021, a major boon should it come to fruition.

“When put together, WiFi 6 is as transformational for wireless home networking as the Bugatti Chiron is to the Model T Ford,” Cheevers said.

NEW ORLEANS — The trend in the video set-top device world has been boxes that have shrunk smaller and smaller, as bulky, energy-hungry DVR set-tops have given way to hockey-puck-like thin-client devices.

However, chatting with Multichannel News at CommScope’s SCTE/ISBE Cable-Tec Expo booth, Charles Cheevers, the longtime customer premises equipment CTO for recent acquisition Arris, said the video set-top is growing anew, pointing to a modular, cube-like piece of hardware that CommScope has labeled the Smart Media Device (SMD).

CommScope’s SMD 7852 features connectivity based on the new WiFi 6 standard and a software stack built on the Reference Design Kit (RDK). This not only enables operators to provide video features like 4K and HDR, but also the ability to integrate popular OTT experiences through the Metrological App Store. The SMD 7852 and its associated IP client device, the VIP7802, were jointly developed in an accelerator program put together by CommScope and RDK Management.

The connected devices are also enabled with far-field voice command technology, enabling operators to pair it with popular voice control software, like Amazon’s Alexa, and turn the SMD into a whole-home controller, or at least one that can handle the television. And notably, the device features a connected speaker to deliver an enhanced audio that operates across entertainment, smart assistant and control scenarios.

For CommScope, RDK and their partners, the device is an important multi-tool to offer operators as rival Google establishes a beachhead in markets like Europe and the U.S. with its Android TV ecosystem.

Telecom CPE watchers will note that the CommScope’s SMD device is already deployed in Europe, with Altice France last month announcing the debut of the SFR Box 8 Smart Media Device. The little box is compatible with both Alexa and SFR’s voice control application.

“Through our combined partnership in connected home technologies, the Smart Media Device will bring voice and media together for an unprecedented user experience,” said said Grégory Rabuel, executive president for general public and companies at SFR, in a statement.

As Cheevers noted, CommScope isn’t alone in marketing an SMD. Roku recently debuted a device that combines a smart speaker with a voice-enabled Roku connected device. And Altice USA started over the summer offering its customers Altice Amplify, an Alexa-infused smart speaker that includes audio technology from Devialet.

NEW ORLEANS — Charter Communications, the second-largest U.S. fixed broadband service provider with nearly 26 million subscribers, appears to be finally getting set to offer a managed home WiFi experience to its customers.

According to individuals close to Charter and Plume Design Inc., the cable company will partner with the Palo Alto-based tech firm to deliver app-driven personalized whole-home WiFi experiences, AI cybersecurity protection and parental controls, including content filtering, to subscribers of Spectrum-branded broadband services.

Using Plume’s open-source software framework, which it calls OpenSync, Charter will gain access to wide-scale visibility of its users’ networks, while adding management tools for real-time experience management, troubleshooting and outage avoidance, the sources said.

A Charter rep told Multichannel News the cable company had nothing to discuss about a possible Plume deal, as did Plume representatives.

Plume is a startup backed by investments of $42.2 million, with Comcast, Liberty Global and Samsung among its primary supporters. Comcast has used Plume technology for several years to offer its xFi managed WiFi service offering. This product lets Xfinity Broadband users monitor their home networks via their phone, observing and controlling, say, the internet usage of their teenage offspring on a granular level.

These kinds of WiFi tools are becoming table stakes in the cable industry. Plume said in July that its software and home WiFi hardware appliances would be used to power Butler, Pennsylvania-based Armstrong’s new “Zoom Powered by Plume”-branded smart-home WiFi solution. Plume also has an agreement to offer its services to National Cable Television Cooperative members.

Deployment of the managed WiFi software is more than a customer satisfaction play. It also gives operators data-usage insight that helps to direct sales efforts and informs them on broader network capacity decision-making.

Certainly, it was an active Cable-Tec Expo for Plume, which announced a deal with cable CPE maker Advanced Media Technologies (AMT). Under the agreement, Deerfield Beach, Florida-based AMT will distribute Plume’s WiFi pods, primarily to independent broadband providers.

The cable industry is billing its big 10G initiative as the next big technology star. But given the current state of the cable access technology business, is it even ready for primetime?

Cable’s counter to the wireless business’s all-encompassing 5G hype bonanza, 10G actually incorporates many different technologies, all aiming to extend hybrid fiber coaxial (HFC) networks beyond speeds of 10 Gigabits per second and into lifespans stretching out another two or three decades.

But within that big 10 Gbps bucket is a lot of new, disruptive technology for cable operator engineers to digest, some of it competing with each other.

For starters, the shift to Distributed Access Architecture, in which headend and network functions are virtualized, has been described as the biggest technological change the cable industry has made since it migrated to HFC back in the early 1990s. Indeed, transitioning from a centralized Converged Cable Access Platform (CCAP) architecture to DAA is proving to be a highly complex process, affecting everything from core plant operation to the skill sets required from workers. “The migration from centralized access architecture to DAA has certainly proven to be more complex when compared to prior upgrade cycles,” said Sean Welch, vice president and general manager of Cisco’s Cable Access Business.

Related: Cisco Access Chief Welch: 'Don't Wait' to Transform Network Infrastructure

The shift to DAA is but one — admittedly huge — piece of the engineering puzzle. As chief technology officers and their teams reimagine their HFC networks for the futuristic era of autonomous cars, they’re also mulling pressure to move away from large proprietary hardware appliances, such as the cable modem termination system (CMTS), and move the work these devices do to off-the-shelf servers that will virtualize these processes.

As if that weren’t enough disruption, cable technologists are split as to which next iteration of DOCSIS (the standard that enables high-bandwidth data transfer over HFC) will best deliver 10G’s bandwidth promise. Led by Comcast, the industry had seemed to be lined up nice and neatly to adopt CableLabs’s Full Duplex DOCSIS standard (FDX). But due to a variety of issues, some operators are pushing FDX aside in favor of alternatives such as Extended Spectrum DOCSIS and Low Latency DOCSIS.

The level of complexity and disruption operators face is certainly “not trivial,” Todd Kessler, senior vice president of product at CommScope, conceded. Kessler’s company acquired Arris, cable’s biggest technology vendor, for $7.4 billion this year. At the SCTE/ISBE Cable-Tec Expo in New Orleans this week (Sept. 30-Oct. 3), Kessler said, CommScope will seek to position itself as a “strategic adviser” to its operator customers, “giving them all the facts they need to make good decisions.”

A No Good, Very Bad Year for Vendors

Certainly, for cable access vendors, some decisions would be nice.

Sales were down 38% sector-wide in the first quarter, according to research company Dell’Oro Group, which attributed much of the stalling to cable operators weighing DAA-related decision-making. And Dell’Oro on Sept. 25 published a report which found cable access equipment sales were down 40% in Q2. The demand just isn’t there right now, the firm said.

”I think we all have to keep in mind that many of the largest operators have been on a consistent, six-year cycle of purchasing and deploying capacity as they moved from DOCSIS 2.0 to 3.0 and 3.0 to 3.1,” Dell’Oro senior analyst Jeff Heynen said. “At some point, that cycle had to stop, even for a little bit, for the operators to deploy all that capacity.”

And stop the cycle has.

CommScope has let go most of Arris’s top-level management, including ex-CEO Bruce McClelland, with its network and cloud division reporting a 37% revenue slide to $344 million in the second quarter.

Cisco Systems, the second biggest cable-access supplier behind CommScope, doesn’t break out numbers for that sector. But it recently put a halt to the development of Full Duplex DOCSIS, and key executives, including former cable-access strategy chief John Holobinko, have left the company.

Revenue at Casa Systems did rebound 47% from a really tough Q1. But its $52 million in second-quarter sales were still off around 28% year-over-year.

Harmonic, which is disrupting the hegemony enjoyed by CommScope, Cisco and Casa with its virtual CCAP product, CableOS, saw revenue fall 14% in the second quarter. This was despite customer wins for CableOS that included a $175 million multiyear deal with Comcast, and another $55 million contract with an unnamed European operator widely believed to be Liberty Global. In the latest news, Harmonic said Comporium Communications in Rock Hill, South Carolina, had signed on to use CableOS in a new DAA configuration supporting DOCSIS 3.1 services.

Still, Kessler doesn’t see the overall cable access business perking up until next year. “We thought more operators would be past the evaluation phase by now,” he said.

Notes from rival cable access vendors jibe with this prediction.

“While we do expect MSOs to increasingly redirect investment into Distributed Access Architecture, we continue to believe that we haven’t yet reached an inflection point away from the industry-wide pause in cable spending,” Casa Systems CEO Jerry Guo said during a second-quarter earnings call in late July. Observing the industry from a more detached perch as CEO of Pineville, North Carolina’s Chamber of Commerce, Holobinko said he believes key issues regarding HFC aren’t being addressed by the new 10G tech.

“I agree there are too many technologies and all seem to be lacking the one thing that a mature industry needs — a solution to high operating costs,” the former Cisco technologist told Multichannel News. “The biggest challenge with cable access networks is, when compared to fiber and wireless networks, the day-to-day cost of operating and maintaining the cable plant is an order of magnitude higher than competitive access technologies.”

With this in mind, might cable operators start to seriously look at ditching HFC and going with fiber-to-the-home? There would certainly be operational efficiencies. The transition doesn’t come cheaply, though, as shown by Altice USA’s $5 billion FTTH initiative in its Optimum footprint.

While 2018’s Cable-Tec Expo in Atlanta was full of tour de force white-paper presentations and demonstrations of FDX, Extended Spectrum DOCSIS and Low Latency DOCSIS, vendors seem to be approaching this year’s New Orleans event with compromise solutions aimed at taking some of the pain points away.

For several years, the FDX standard from industry consortium CableLabs was widely viewed as the next iteration of DOCSIS, a standard that would someday delivery symmetrical 10 Gbps speeds over HFC networks.

But FDX presents certain inflexibilities. Notably, it requires an expensive “fiber deep” strategy, with no amplification permitted between the node and customer. Despite the support of Comcast, FDX has lost the customer volume needed for wide-scale vendor support, as evidenced by Cisco’s pullback over the summer.

CommScope will be demoing what it calls “Extended Soft Frequency Division Duplex,” which combines elements of both FDX and ESD. Rather than dictating symmetrical bandwidth, the technology allows operators to move bandwidth from downstream to upstream and vice versa, as desired.

Extended Soft FDD is more “amplifier friendly” than FDX, said Chris Busch, CommScope engineering fellow in the office of the CTO. “That’s a big boon to the operator,” he said, describing a technology being put into another new bucket of cable industry jargon, “DOCSIS 4.0.”

What is DOCSIS 4.0 to Busch? Like 10G, the term seems to be broad.

“I think it’s the next generation of DOCSIS performance,” he said.

Beyond easing pain points for emerging DOCSIS technologies, CommScope will also try to light the path for faster uptake of DAA.

Remote PHY refers to the technique of moving the physical layer of electronic circuitry (the “PHY”) out of Converged Cable Access Platform at the headend and putting that PHY circuit at the end of the network. Remote MAC-PHY means also moving the Media Access Control layer to the edge, as well.

Converting to this scheme represents a massive shakeup.

“Many operators are still in the evaluation phase, looking at ways to deploy Remote PHY or Remote MAC-PHY,” Kessler said. “Only a handful are in deployment. And that will likely stay consistent into next year.”

Rather than showing off some splashy new performance-driven DAA gear, CommScope’s product demos at Cable-Tec Expo seem to be focused on tools that drive down costs. DAA Aggregator, for example, lets operators connect up to eight HFC nodes to one Remote PHY device (RPD). This significantly increases the number of homes passed per RPD serving group — from a range of 20-40 to 150-300.

“It’s more capital-efficient,” Busch said. “It allows operators to gain the benefits of Distributed Access Architecture without as much investment.”

We’re Just Not There Yet

While the cable technology business’s recessionary trend certainly has a lot to do with the complexity associated with new standards and their adoption, Dell’Oro analyst Heynen believes that, despite all the hype, 5G isn’t — at least not yet — putting on the kind of pressure needed to make leading operators forget how much they just spent on upgrading to DOCSIS 3.1, while enabling 1 Gbps speeds that few consumers are using.

Is it too early to make 10G the star of the show?

“I don’t think spending improves significantly until [operators] feel there is a viable competitive threat to their 1-Gig DOCSIS 3.1 services, or an application or service [emerges] that challenges the capacity they have in their access networks now,” Heynen said. “That, plus slowing bandwidth consumption rates, are the reasons for the current trough in spending. I do see spending improving in the second half of the year, but certainly nowhere near the levels seen in 2018.”

Comcast’s X1 has received much attention as the prototype for modern, advanced video delivery systems that incorporate cloud DVR, voice control and WiFi management and, in the process, reduce churn.

But more quietly, since it first debuted in January 2018, Altice USA’s Altice One platform has carved out a similar success story, downsizing the cable operator’s video churn for the last six quarters while simultaneously spurring broadband growth.

During Altice USA’s second-quarter earnings call, CEO Dexter Goei called the launch of Altice One, which incorporates set-top, cable modem and WiFi router functions, to be “a very, very strong success.”

Indeed, video attrition during the period was 21,000 subscribers, down from 24,000 in the second quarter of 2018, despite cord-cutting levels reaching a record high for the broader pay TV industry. Broadband net additions were 13,000 vs. 10,000 in the second quarter of 2018.

Average revenue per user is also substantially higher in homes with Altice One, the company said, while not citing specific data.

The metrics are impressive, considering only about 400,000 Altice USA customers have the Altice One system. That’s 13% of the company’s base, up from 4% infiltration in the second quarter of last year.

Three Le Boxes in One

Blending hardware from Sagemcom, silicon from Broadcom, content security from NAGRA and transcoding services from Cisco Systems, Altice One combines advanced TV search and discovery, as well as cloud DVR and voice control, along with integration of key digital services, notably Netflix and YouTube, with more OTT services on the way. There are WiFi optimization and control features. New offshoots have been added, such as an Alexa-powered smart speaker.

RELATED STORY: Altice's Model Behavior

When European telecom conglomerate Altice suddenly swooped in and acquired U.S. cable companies Suddenlink Communications and Cablevision Systems in 2015, there hadn’t been a lot of recent investment in terms of advanced user interfaces and various other modern pay TV features across the two companies, Altice USA co-president and chief operating officer Hakim Boubazine said.

Indeed, Cablevision lost around 5% of its video customers from Q2 2014 to the second quarter of 2015, a time when cord-cutting was a thing, but not nearly as robust as it is today. The attrition wasn’t much better at Suddenlink. The technology and user experience were being overwhelmed by the many new ways to consume video in the marketplace.

“The [Altice One] platform has helped us transform the user experience,” Boubazine said, noting that the mere modern look of the CPE, which contains no ’90s-era “bulky remote control,” has been a key selling point that allowing Altice USA to tap into younger consumer segments.

Currently, Altice One — now on version 3.0 of its operating system — is available across Altice’s Optimum footprint, as well as the portion of the Suddenlink footprint that offers 1 Gigabit-per-second broadband services.

Despite its success, Altice One isn’t hoisting heavy promotion of the platform. It is offered to new customers, those who are moving their service and, notably, those who are seeking to ditch their pay TV service because they want something better. “We use it a lot as a retention play,” Boubazine noted.

Boubazine didn’t disclose how much Altice USA is paying per truck roll to install Altice One. The platform requires technicians to wire up only one device instead of a video set-top, modem and WiFi router.

“The installation process is actually super simple and that allows our technicians to spend more time explaining the features and functions,” he said.

Despite that simplicity, installing new CPE into homes isn’t cheap, and Altice USA has a lot of other places to focus its cash flow — most notably on building out its fiber network and wireless infrastructure.

Expect deployment of Altice One to keep crawling along rather than getting up to sprint anytime soon.

White-Label Opportunities?

Boubazine was also asked if Altice USA has considered a white label licensing strategy for Altice One, similar to how Comcast licenses X1. Notably, Cox Communications repackages X1 as Contour. Canada’s Rogers Communications, Shaw Communications and Vidéotron do largely the same thing.

“We have looked into it, but cable operators use so many different [back-end systems] and those have to be aligned [with Altice One],” Boubazine said. “We decided it was better to focus on our own company.”

Boubazine also said that Altice One is decidedly a child of the Cablevision and Suddenlink mergers.

During its gestation, Altice One was called “Le Box,” and was reported as a technological offshoot of Altice CPE systems already deployed in Europe. But Altice One resembles Le Box only in form factor. The “guts” of the system, Boubazine said, were almost entirely developed by Altice engineers stateside.

“As we acquired Cablevision and Suddenlink, we realized that we inherited some of the finest engineers in the industry,” he said, noting the core contribution of these technologists to the platform.

As it surveyed its U.S. cable assets way back in 2015, four years before its launch of Altice Mobile, Altice was focused, Boubazine said, on the concept of cable wireline and wireless convergence. For Altice USA, that means seamlessly blending WiFi and cellular access for customers. Altice is now in the process of building out that cellular piece. But the deployment of Altice One has been a key step in improving the WiFi aspect.

“And Altice One was the most urgent piece,” he explained, noting the platform’s ability to extend WiFi range in homes up to 40%.

Finally, Boubazine noted that Altice One is able to work across multiple encryption access systems, saving the need for the company to build three different pieces of CPE for three different types of backends.

“It’s the finest piece of engineering I think we have,” Boubazine said.

One of the pain points of the modern flat-panel LED TV set is the audio. Picture quality for these newer model sets, which most often support 4K and High Dynamic Range, is better than ever. In a viciously competitive consumer-electronics market, though, it’s the picture that gets the investment.

And it’s not like there’s a lot of room for speakers within these thin devices anyway.

Thus, the sound bar and its associated subwoofer have become essential accessories for the owners of newer TV sets. Credit Roku, which seeks to maintain its leadership as the No. 1 global supplier of smart-TV user-interface software by making an, er, intelligent play in introducing its new Roku Smart Soundbar.

Retailing for $179 and available through Best Buy and Roku’s own e-commerce channel starting in October, the new device is a 32-inch Dolby Audio-equipped sound bar with HDMI ARC, Optical Audio, USB 2.0 and Bluetooth connectivity.

For another $179, you can turn up the bass with the Roku Smart Subwoofer, which contains a 10-inch driver and a digital amplifier with 250 watts of peak power.

“We’ve benchmarked this against other sound bars that are more expensive, and we’ve gone out and talked to consumers to really understand what the pain points are,” Mark Ely, vice president of whole-home product management for Roku, said.

Not Just a Hardware Play

Roku’s new sound bar embeds its most premium over-the-top player device, the 4K-capable Roku Ultra, right into the hardware. That means that if you own, say, a Samsung smart TV, you can use your new Roku sound bar to bypass the TV set’s native Samsung operating environment and use Roku’s OTT platform instead.

For Roku, it’s just another way to extend its control of the global OTT market. During its second-quarter earnings call, Roku said it had reached 30.5 million active user accounts as of the end of June. Research company Convivia reported last month that Roku’s operating environment powers 43% of the world’s connected TV devices — everything from smart TVs to HDMI dongles to the little boxes that sit on top of smart TVs.

Amazon Fire TV, which has the next biggest market share, controls only around 18% of connected TV devices, Convivia said.

For Roku, selling a bunch of $179 sound bars and subwoofers would be nice. But it’s really about the proliferation of the Roku ecosystem.

Roku generated $250.1 million in revenue in the second quarter, a 59% year-over-year uptick. The majority of that revenue, $167.1 million, was generated from “platform revenue”— that is, selling advertising on apps that exist in the Roku ecosystem, such as ad-supported VOD service The Roku Channel.

Roku’s fast-growing platform business is up 86% on a year-over-year basis in Q2. The hardware business isn’t too shabby, either, growing at 24% to $82.4 million. But Roklu’s business is increasingly about its operating system and selling ads within it. Hardware is also a means for Roku to expand its global reach.

Like Netflix, Starting in Brazil

Roku has a small presence in the U.K. and France, but the company’s real international effort is currently percolating. It plans a major Latin American push that will start out in Brazil, the same country where Netflix began its global advance in 2011.

Netflix is a company that only makes content apps that fit into ecosystems such as Roku’s. Roku makes the ecosystem, the apps that fill it up (like Roku Channel) and the hardware that enables it (like the sound bar). Unlike Netflix, though, Roku doesn’t make original content.

Still, Netflix is the OTT company that Roku is compared to most often these days.

On Nov. 1, 2011, Netflix stock bottomed out at $9.22 a share. Less than two months earlier, the subscription streaming company began its international expansion to 43 countries and territories in Central and South America, as well as the Caribbean. Brazil was Netflix’s first launch in Latin America on Sept. 5, 2011. As of midday trading on Sept. 3, Netflix shares were valued at $289.47.

Roku, which traded below $30 a share last year, was closing in on a stock price of $160 at press time.

“In our view, Roku will experience similar phased stages of international growth as Netflix did during its international expansion,” Ralph Schackart, internet and digital media analyst at Chicago-based investment bank William Blair & Co., said in a note to clients late last month.

The dust is finally settling on T-Mobile’s purchase of Sprint, at least on the federal level.

Dish Network will facilitate the deal, paying T-Mobile $5 billion to become the nation’s fourth major wireless carrier, alleviating Justice Department concerns about reduced competition.

nvestors who are unexcitedly watching Dish switch from being a fast-eroding pay TV company into just another wireless company trying to make it in a highly competitive U.S. consumer mobile market want to know, how much will that cost?

Dish chairman Charlie Ergen has pegged the figure at around $10 billion.

“Verizon spends $15 billion annually to maintain a network that they’ve already built,” MoffettNathanson principal and senior analyst Craig Moffett wrote in a research note. “The idea that Dish might spend $10 billion (their own estimate on previous conference calls) and then somehow be finished is, well, just silly.”

Ergen is sticking to that estimate, though, and said he believes software virtualization of traditionally expensive network appliances is key.

“We still plan on building a network out and spending about $10 billion to do that,” he told investors during Dish’s second-quarter earnings call. “With the MVNO deal with T-Mobile, we’re able to extend our buildout for some of the less profitable areas longer term. So, our initial [estimate] will actually be less than we had envisioned short-term, and as a result our [operating expense] should be less than we had ultimately envisioned. But the $10 billion investment is still in the cards.”

Ergen has pointed investors to the example of Japanese e-commerce giant Rakuten, which is building what it describes as “the world’s first end-to-end fully virtualized, cloud-native mobile network,” aimed at competing against NTT DoCoMo, KIDDI and SoftBank, at a fraction of the infrastructural buildout cost.

“Rakuten is really building a 4G virtualized network, and they’ve taken it pretty far with virtualization,” Ergen said. “We will go farther.”

The expected disruption from the emergence of virtualized cable-access technology, along with migration by operators to Distributed Access Architecture, has finally arrived.

Last week, Harmonic said a $50 million deal with an unnamed “European MSO” client for its CableOS software product, which virtualizes the Converged Cable Access Platform (CCAP), is on track to begin volume deployments in the third quarter.

And in July, a “different international operator” signed a five-year contract with Harmonic to supply DAA gear worth $55 million, the the San Jose, California-based technology company said.

This followed Harmonic’s announcement earlier in July that its long-anticipated big CableOS deal with Comcast had finally come through, to the tune of $175 million.

CableOS — which replaces large proprietary appliances, including the cable-modem termination system (CMTS), with off-the-shelf x86 servers — is now commercially deployed by 16 cable operators, Harmonic said, serving 780,000 connected cable modems worldwide.

“It is increasingly clear that the cable access market is beginning to make a major pivot towards these virtualized CMTS distributed access architectures,” Harmonic CEO Patrick Harshman said. “And let me be clear, Harmonic is determined to take advantage of this opportunity not only by leading technologically, but to be the global market-share leader.”

Arris, Cisco Systems and Casa Systems have been the market-share leaders in a cable access business valued by Dell’Oro Group at $1.5 billion in 2018. But the research company, pre-eminent at gauging the cable-access market, has predicted for some time that Harmonic’s bold, prescient move into virtualization and DAA would put a dent in the current market dynamics.

Casa Systems was the first to feel the impact. The company’s stock stabilized, but not before enduring a roller-coaster drop of around 15% on the NASDAQ, initiated when Raymond James analyst Simon Leopold downgraded Casa stock to “underperform.”

James speculated that one of the international operators rendering big recent orders from Harmonic was Liberty Global, a major Casa client.

Happily for Casa, its stock shot up again later in the week, following its own second quarter earnings call. Revenue of $52.1 million was off from the $68.7 million reported for Q2 2018, but it represented a 47% uptick over the moribund first quarter of this year.

Importantly, Casa chairman and CEO Jerry Guo said his company is making progress with visualization and DAA.

“Our cable trials increased in the quarter by 53%, the vast majority of which was driven by existing and new consumer interest in our DAA, virtual CCAP core and new [broadband network module] products,” Guo said.

Finding new ways to tap into under-served segments of the video marketplace, Comcast has introduced a new technology for consumers who lack the ability to change the channel on their TV remote.

The cable operator has enabled a new feature that lets users control their X1 video service with their eyes.

The web-based system pairs with the set-top and allows the user to access a virtual, onscreen numerical and directional interface, via tablet or PC, controlling it with their gaze.

Users can change the channel, launch the guide, search for content and set recordings without assistance. They can also use eye control to set up Voice Control shortcuts.

“Changing the channel on a TV is something most of us take for granted but until now, it was a near-impossible task for millions of viewers,” Comcast vice president of accessibility Tom Wlodkowski said. “When you make a product more inclusive you create a better experience for everyone and we’re hoping our new X1 feature makes a real difference in the lives of our customers.”

Comcast specifically noted that individuals with spinal injuries or conditions like amyotrophic lateral sclerosis (ALS) can benefit from the service. Setting up the feature, however, won’t be cheap.

Comcast said it doesn’t charge anything to connect an eye-control remote to the X1 interface. However, customers must acquire eye-tracking hardware and software.

“Many people with these types of physical disabilities already have some type of adaptive device to control laptops and tablets and our eye control web remote basically works on top of that existing software and hardware,” a Comcast spokesperson said.

Cord-Cutting right now is a little bit like the quickening threat of global warming. As increased temperatures melt away long-frozen Alpine tundra, for example, even more carbon dioxide is released into the atmosphere, further accelerating the phenomenon.

Here, we can equate the upcoming debuts of new streaming services from Disney and AT&T’s WarnerMedia unit as the melted tundra. These services, it’s believed, will meld with Netflix, Hulu, Amazon Prime Video and other subscription video-on-demand platforms to form a glut of over-the-top content that analyst Alan Wolk calls the “Flixpocalypse.”

This, he said, will further quicken a cord-cutting dynamic that has already reached a critical stage.

“We have predicted that cord-cutting — which, in 2018, represented 0.65% of all people giving up both MVPD [multichannel video programming distributor] and vMVPD services — may grow to as much as 6% to 8% a year once the actual Flixpocalypse happens and there are seven or eight major [SVOD] services,” Wolk, the lead analyst for TV[R]EV, said.

According to a survey conducted in May by another research company, The Diffusion Group, 13% of legacy pay TV subscribers are “moderately likely” or definitely planning to cancel service in the next six months.

“More and more consumers are on the edge of cutting the cord, and adding Disney+, in particular, could be the straw that breaks the camel’s back,” TDG president and co-founder Michael Greeson said.

Tipped Over the Edge?

The industry has been talking about cord-cutting for a decade now, but lately things seem to have reached a tipping point, even if media stocks’ performance this year doesn’t seem to reflect much concern.

The U.S. pay TV industry lost more than 1 million subscribers in each of the last three quarters, shedding more than 1.4 million users during the first three months of this year, according to Kagan, a media research group within S&P Market Intelligence. According to MoffettNathanson, the combined video losses from cable, satellite and telco TV were more than 75% worse than the first quarter of 2018.

“With Q1 cord-cutting results now in the books, it may still be too early to abandon ship,” MoffettNathanson principal and senior research analyst Craig Moffett wrote in a May research note. “But it’s not too early to put on the life jackets.”

Indeed, while Moffett conceded that the subject of cord-cutting is “old news,” we do seem to have reached deep and uncharted waters.

No one thinks the pay TV ecosystem is going to disappear entirely. But we are looking at a near-term future in which the land surface covered by cable, satellite, telco and internet protocol-delivered pay TV services will be much smaller than it is even today.

The impact discussion used to focus on the cable providers, who, after all, got into business by providing subscription TV. But these companies have finally convinced their investors that their focus is on broadband connectivity.

Comcast, for example, lost another 120,000 video customers in the first quarter. But the No. 1 U.S. cable company saw its share price go up 19% in the first three months of 2019. Charter, which lost 145,000 video subscribers in Q1, saw its share price spike 12%. Same deal with Altice USA.

Meanwhile, virtual MVPD services, which had previously buffeted the subscriber losses from the linear side of the pay TV business, have stopped growing.

“There’s every reason to believe that things will only get worse,” Moffett noted. “If cable is, indeed, becoming less inclined to defend the status quo, then traditional MVPD losses will only accelerate. But if history is any guide, the response from the media companies will be to raise rates to pick up the slack. That will accelerate the declines.”

Media companies, which are most affected by cord-cutting, are also responding by deploying what Moffett refers to as the “lifeboats,” direct-to-consumer streaming services like Disney+ that are “ready and waiting if the status quo deteriorated to the point that it came time to abandon ship.”

Indeed, from the coming launch of subscription service Disney+ to Viacom’s $340 million purchase of ad-supported platform Pluto TV, the instinct of self-preservation among content creators is on full display as they look to a future in which pay TV media networks drive less and less revenue.

“Generally speaking, there will come a time when every TV network, big or small, will have to consider DTC [direct-to-consumer distribution] as a way to prop up declining pay-TV-related revenues,” Greeson said. “We’re seeing this already.”

Of course, as lifeboats go, some companies have the resources to build better ones than others. Disney started on its quest to build a three-headed OTT platform — underpinned by ESPN+, the upcoming $6.99-a-month Disney+ and Hulu — with its $1.58 billion purchase in 2017 of BAMTech, the acclaimed streaming technology shop founded by Major League Baseball.

Disney is better situated to self-distribute its content than any media conglomerate, thanks to the broad-reaching familiarity of its brands, Parks Associates senior research director and principal analyst Brett Sappington said. Key events along the way included paying $4 billion for Marvel Entertainment in 2009, $4.05 billion for Lucasfilm in 2012 and $71.3 billion for 21st Century Fox’s entertainment assets in March. Going back further, there was the $7.4 billion deal to acquire Pixar in 2006.

“We have a number of great creative engines across our company, all of which are dedicating their talent, focus and resources to develop and produce strong content for the Disney+ platform,” Disney chairman and CEO Bob Iger said, addressing investors in May.

In the buildup to launching Disney+, Iger suggested Disney would forgo $150 million in annual revenue that would have been recouped from other streaming services. Certainly, not every media company has the gusto to pass on $150 million.

All and all, “Disney has the ability to do things others can’t,” Sappington said.

For those who don’t consume a lot of live sports and news, Greeson said, “Disney+ will get them one step closer to a point at which they feel they’ve got enough services and content to cancel a $100-a-month cable service. We call this ‘the point of sufficiency’ and we’ve yet to hit it, though no doubt the new services will get us closer to this point.”

Longer term, Disney+ will pose an even greater threat to the current pay TV ecosystem if and when Disney bundles in the vMVPD Hulu with Live TV, Greeson added.

Disney, Moffett noted, “uniquely” has the assets to succeed in a world in which pay TV is winnowed down to skinny bundles built around sports and news, while entertainment gets shifted off to self-distributed streaming platforms. “But does anybody else?”

Analysts don’t see AT&T’s upcoming SVOD launch, built around its recently acquired WarnerMedia assets, as immediately impactful to the pay TV ecosystem.

“No doubt a $17-a-month bundle of HBO (which costs $15 a month in most other places) plus Cinemax (another $10 a month or more) plus Warner Bros. movies and shows will appeal to many premium consumers, but it will most likely lead to more cord shaving of premium cable networks than it will cord-cutting,” Greeson said.

Still Just Complementary?

So far, media companies have been careful to describe their newly founded or acquired OTT assets as mere hedges against the global power of Netflix, and not as alternatives to a fast-declining pay TV ecosystem.

Amy Kuessner, senior vice president of content partnerships for Pluto TV, which Viacom bought in January, said the AVOD platform represents a “billion dollar” opportunity for the MTV Networks parent. “But I can assure you that it won’t be at the expense of MVPD relationships,” she said. “We see Pluto as a complementary offering.”

With Pluto TV now reaching 16 million regular viewers a month and using a linear program guide-like interface that’s familiar to longtime pay TV consumers, the media conglomerate recently launched limited, on-demand versions of major network brands like Nickelodeon, MTV and Comedy Central on the platform.

Viacom has also taken the first steps to expand Pluto TV internationally, launching versions of the platform in the United Kingdom, Germany and Austria on Amazon Fire TV.

“I think with what we have seen with Viacom is going to become more common,” Sappington said. “They’ve winnowed down their brands and channels to around five major brands.” Viacom achieves scale for these brands through Pluto TV’s reach — scale needed to monetize the offerings through the media company’s fast-evolving advanced advertising wherewithal.

With Viacom currently earning around $2.5 million in “media network” revenue each quarter from operator affiliate fees and linear TV advertising, the conglomerate faces a future in which it must increasingly replace that revenue purely through OTT advertising.

“If pay TV continues its decline — whether or not it is driven specifically by the addition of Disney+ or WarnerMedia — operators will look to cut back on their content expenses and are likely to drop less popular networks,” Greeson said.

“Generally speaking, there will come a time when every TV network, big or small, will have to consider DTC as a way to prop up declining pay-TV-related revenues,” he added. “We’re seeing this already.”

With nearly 90 million U.S. homes still subscribing to linear pay TV, it isn’t going away anytime soon, Sappington noted. But shrinkage is occurring to a point that “you’re going to have to have some measure of self-distribution just to be able to survive.”

Disney and WarnerMedia have the resources and brand power to build such a DTC asset from scratch. And Viacom had the wherewithal to purchase one with scale right out of the box.

What About Everyone Else?

But what about smaller media companies? What do they do for a lifeboat?

“Smaller networks are pretty much screwed unless they have a strong brand image and strong fan base that will pay cash money to watch them,” Wolk said. “They will have to sell themselves or strike a distribution deal with one of the Flixes to survive,” referring to the major SVOD services.

Some network brands currently on the pay TV grid will revert to “production company mode,” Wolk said, cranking out “five to 15 hours of original content a week that can be distributed via VOD on the various Flixes or MVPDs.”

Sappington sees a future in which smaller media companies partner up, rolling their various brands into a joint venture not too dissimilar to the way Hulu was founded 12 years ago.

In predicting the erosion of the pay TV ecosystem, it’s important to impart some sense of time scale — we’re merely at a point where media conglomerates are starting to make some moves, portending a future in which cable, satellite, telco and vMVPD services are still around, but no longer a central focus of distribution.

We’ve finally reached a point where we can glimpse at that future. We’re not actually there yet. Cord-cutting hasn’t killed the pay TV business, but it’s no longer an abstraction. And we’re beginning to see the beginnings of an aftermath.

“None of this is happening in the next two to three years,” Wolk noted. “Five to seven years is more like it.”

AT&T has shifted its focus from its two-and-a-half-year-old virtual MVPD, DirecTV Now, and is currently focused on the launch of a premium pay TV service delivered over a proprietary thin-client set-top.

That was the key takeaway from David Christopher, president of AT&T Mobility and Entertainment, who spoke at the Bank of America Merrill Lynch Telecom and Media Conference.

AT&T has emphasized DirecTV Now “slightly less than we did when it first launched, because we are focused more on other elements of the portfolio, of rounding out the portfolio,” Christopher conceded.

The company is currently in beta on another internet protocol-delivered pay TV service, he said, one that’s designed to be delivered over a proprietary thin-client set-top and which is set to debut nationally later this year.

“It is going to have a low-cost piece of hardware that you install just like you would in Apple TV and that allows us to do several things,” Christopher explained. “One is, from a business-model perspective, the cost of acquisition is much lower. We don’t roll a truck, we don’t have somebody climb a ladder and so you think about the subscriber acquisition cost of this as being somewhere around half of what your satellite installation is. Secondly, because it’s self-install, it’s extremely easy for the user to get up and running.”

The device, Christopher said, “offers some really important functionality that we’re super-excited about. I’m not going to go into all the details here, but modern UI, really, really great search and navigation capabilities, application support, etc.”

This isn’t some new disclosure — AT&T executives have been speaking openly about their so-called thin-client service for more than a year now.

Notably, though, Christopher did reveal AT&T’s strategy in regard to hardware — customers will need a box, but secondary rooms can use apps to access the service.

“You don’t get all the benefits if you just make it an application,” Christopher said. “By having a piece of hardware that is really elegant and very seamless and easy to self-install, you can do things from a customer experience perspective that are more evolved and more capable than just running on somebody else’s hardware … It doesn’t mean we won’t have an application that can run on somebody else’s hardware for a second or third bedroom, etc. So we’ll play with that and think about that as we get to market.”

As for DirecTV Now, the service was once the apple in AT&T’s eye, its growth fueled by steep promotions tied to wireless products and services.

But AT&T put the promotional brakes on late last year, and the virtual multichannel video programming distributor has been in free fall ever since, losing 83,000 more customers in the first three months of this year.

As large and midsized cable operators transition to virtualized CCAP, one of the big questions has been, can CommScope’s recently acquired Arris unit maintain its leadership position against the hordes of virtualized insurgents like Harmonic and Nokia charging the gate?

“We’ve worked well with operators over the last 20 years and we feel that we’re a pretty trusted vendor at this point,” Tom Cloonan, chief technology officer of CommScope’s newly integrated Network and Cloud group, said. “It’s ours to lose if we can’t create a good virtualized system.”

In Cloonan’s view, CommScope already has a leg up with its new virtualized Converged Cable Access Platform (CCAP), vCore, which it showcased at ANGA COM in Cologne, Germany.

‘Using Stable, Hardened Code’

Just as it did back in 2013, when Arris transitioned from the C4 to its E6000 converged access router, it’s using a lot of what it calls “hardened” legacy source code for vCore.

“A lot of people were amazed at how well the E6000 worked when it first hit the field,” Cloonan said. “We worked off of 15-year-old code that had been modified and improved over the years for the C4. And we hope to reap that kind of success with a similar approach. We’re using stable, hardened code in a virtualized platform.”

Based on a micro services architecture, vCore performs CCAP functions in software using off-the-shelf x86 Intel-based servers. But as operators transition to Distributed Access Architecture (DAA) using remote PHY nodes, their legacy E6000 hardware can be used to handle media access control (MAC) processing in lieu of servers.

“We allow the product to change its personality,” Cloonan said. “You can download software and transition it from being a normal CCAP box into one that functions in the Remote PHY world.”

The ability to keep using the E6000 hardware is key, given that CommScope controls 55% of the $1.5 billion global CCAP market with its flagship product, according to the Dell’Oro Group.

CommScope is in trials right now with a number of operators for vCore. “The game plan is to roll out the product in the next 12 to 18 months,” Cloonan said. “We’re picking partners right now for deployment.”

CommScope moves into the virtual market as Comcast, working closely with Harmonic and its CableOS software product, is developing its own virtual CCAP technology — one it could possibly syndicate, just as it does with its X1 video platform, according to a recent Light Reading report.

“Comcast is on the verge of deploying significant CableOS channels in the second half of this year,” Jeff Heynen, senior analyst for the Dell’Oro Group, said. “There are still some hurdles to overcome with respect to management and interoperability. Comcast is in the very early stages of its R-PHY deployment and will likely use a combination of gear from Harmonic, Arris and Cisco, with Arris and Cisco providing R-PHY nodes tied to existing E6000 and CBR-8 CCAP cores.”

In Europe, Vodafone Germany, Com Hem, Stofa and TDS are in the midst of moving quickly to virtualization and DAA, seeking to capitalize on benefits including dramatically reduced power consumption and easier service and maintenance.

In the U.S., Cox Communications and Altice USA are also likely to make moves to DAA on “a soonish timeline,” Heynen said, adding that the “jury is still out” on Charter Communications and any respective DAA transition.

But right now, major domestic DAA activity remains focused on Comcast, which is trying to work out the economics of having a lot more nodes in the field do a lot more of the network processing.

“Comcast will deploy a significant number of virtualized platforms alongside the R-PHY nodes because, economically and environmentally, they have to get the overall price per service group down in order to hit very aggressive targets for their DAA deployment,’ Heynen said. “You can’t deploy 10 times your existing node base without doing something very radical to the current DOCSIS channel pricing regime.”

Also at ANGA COM, CommScope was busy demonstrating several other technologies that are even more forward-looking — low-latency DOCSIS and Frequency-Division Duplex (Soft FDD) DOCSIS.

Within the confines of industry tech consortium CableLabs, CommScope is on committees developing these respective technologies, and the vendor used ANGA COM to show how they might work.

With 5G promising to reduce the typical 25-35 millisecond latency down to as low as 1 millisecond — the kind of network performance that would benefit advanced gaming, virtual reality and autonomous vehicles — CommScope is hoping to deliver a similar level of performance with low-latency DOCSIS.

Among the low-latency solutions being discussed in committee, according to Cloonan, is a system of dividing network packets by application, identifying those that apply to low-latency applications and giving them priority.

‘Soft FDD’ Emerges As Alternative

CommScope also is working with CableLabs on Soft FDD, which Cloonan said could emerge as an alternative for cable operators for which a transition to the “node plus zero” environment required by the next-generation Full Duplex (FDX) DOCSIS standard simply isn’t feasible.

Ultimately, FDX promises symmetrical data speeds as high as 10 Gigabits per second, with the signals stacked on top of one another — a scheme that doesn’t respond well to application beyond the node.

Soft FDD would allow operators to “take FDX equipment and not use it in an FDX way,” Cloonan said, keeping the upstream and downstream signals separate, as they have been for the past 50 years.

Rather, through software, operators would be able to remotely determine how spectrum is split from upstream and downstream channels.

Suburban New Yorkers will once again be able to buy a cellphone plan from their cable operator.

Altice USA — which put Cablevision Systems’ WiFi-only mobile play, Freewheel, out to pasture when it bought the Bethpage, N.Y.-based cable company shortly after its 2015 launch — is on track to deploy its own consumer wireless service this summer.

According to The Wall Street Journal, which said it spoke to unnamed company sources, the service will likely be called Altice Mobile and will be bargain priced somewhere between $20 to $30 a month.

That price undercuts roughly by half the base mobile plan for Sprint, from which Altice leases 4G LTE network resources via a mobile virtual network operator (MVNO) agreement signed in 2017.

It’s unclear at this point if that price applies to an unlimited plan or a “by-the-Gig” data scheme that is used by Comcast and Charter Communications in their respective already launched MVNO-based mobile services. Comcast, for example, offers customers the opportunity to structure their mobile plan in $12-per-Gigabyte increments. (That, of course, is a bargain for minimalist users who consume very little data on the mobile network.) Altice USA did not respond to a request for comment by press time.

Also unclear: Can Altice make money on bundling mobile plans using another company’s network?

Not a Cash Cow

So far, it doesn’t appear that mobile has generated a ton of revenue for either Comcast or Charter, both of which have MVNO agreements with Verizon Communications, and also collaborate on technology and business plans for their services.

Comcast said Xfinity Mobile, which launched back in early 2017, generated $225 million in revenue in the first quarter, up from $185 million in Q1 2018. Comcast ended the January-March period with 1.4 million Xfinity Mobile customer lines, up from 577,000 the Q1 prior.

Charter, which launched Spectrum Mobile last year, said it now has 310,000 wireless lines in the market, after adding 176,000 in the first quarter.

Charter hasn’t disclosed revenue figures for its nascent mobile service, but chief financial officer Christopher Winfrey did say during the operator’s Q1 call that “mobile is ramping nicely and the early results of this product launch remain promising.”

This growth is occurring in a saturated U.S. wireless market, where the big incumbents, Verizon, AT&T, T-Mobile and Sprint are engaged in an aggressive promotional war for customer growth.

Analysts, however, don’t seem impressed by the market infiltration for either Xfinity Mobile or Spectrum Mobile.

“It should be clear by this point that the current [MVNO] deal is a money-loser for the cable operators; it’s not profitable and it likely never will be,” MoffettNathanson principal and senior analyst Craig Moffett wrote in a recent report.

Moffett’s issues stem from the cost of the MVNO agreement, which were supposed to be offset by the offloading of mobile data traffic to the respective Comcast and Charter WiFi networks. With both cable companies pricing their respective unlimited plans at $45 per line, the analyst estimates that a customer using 8 Gigabytes a month generates around $40 in network leasing costs.

“Throw in, say, another $5 per month for voice, and unlimited customers are already underwater even before customer service, customer acquisition costs and [selling, general and administrative expenses],” Moffett said.

As for the WiFi offloading plan, he added, “Cable’s out-of-home WiFi network is a bust; the industry stopped expanding it years ago after it became clear that it was never going to provide a robust out-of-home user experience.”

For their part, both Comcast and Charter have touted the value of their mobile services as churn busters — yet another reason for customers to be tied to the wireline internet and TV bundle. “Churn reduction arguments are nice,” Moffett said, “but they’re really just tiebreakers.”

So into this market comes Altice USA, with 3.3 million video customers and 4.1 million internet customers. It has what it believes to be an edge: owner’s economics on the Sprint network. Partial owner’s economics, anyway.

Under the agreement signed with Sprint, Sprint can build as many small cells as it wants on Altice’s network to, among other reasons, expand its 5G wherewithal. Sprint doesn’t have to pay any lease or backhaul fees, only for the hardware and construction costs. Altice, meanwhile, incurs no costs when it uses those small cells to support its mobile service.

Speaking recently about what he calls an “infrastructure-based MVNO,” Altice USA CEO Dexter Goei said Sprint has already deployed around 19,000 small cells on its network.

“We have relatively attractive wholesale economics compared to other MVNOs,” Goei noted on Altice’s May 2 first-quarter earnings call. “Our core network infrastructure is ready to go, giving us full access control over the customer experience and allows us to better manage traffic.”

Small Cells Save on Costs

Indeed, the more small cells that are added, the more Altice’s MVNO costs will come down over time. Further, T-Mobile has already agreed not to disrupt the deal if and when it closes on its $26 billion bid to acquire Sprint.

“It’s a rather elegant solution,” Moffett said. “Sprint gets a huge cost and time-to-market advantage versus Verizon, AT&T, and — if the [merger] deal is rejected — T-Mobile. And Altice USA gets an MVNO agreement which gets cheaper and cheaper over time as more and more traffic is carried by their joint small cells.”

Goei added, “We’re doing a similar MVNO price point to other MVNOs out there, and it’s going to be profitable right out of the box.”

If adoption of HDTV was a Sprint, achieving broad acceptance of 4K is proving to be closer to a marathon — on a real hot day. But SES, which markets an increasingly popular soup-to-nuts 4K/HDR solution for pay TV operators, said it’s making progress.

Steve Corda, vice president of Americas media platforms for SES, told Multichannel News that his company’s Ultra HD Platform now has an estimated viewership of more than 500,000 pay TV homes, with regular live-sports events produced by Fox Sports driving viewership.

Corda concedes that it’s a rough estimate. Through its Ultra HD Platform, SES offers pay TV operators a dozen 4K networks, including Insight TV and NASA TV UHD, as well as a live-events channel. The Ultra HD Platform includes everything from ingest to encoding and distribution to the set-top box.

SES’s North American partner list for the platform includes Armstrong Utilities, Dish Network, Frontier Communications, Buckeye Broadband, RCN, Service Electric and WideOpenWest. A number of tier-1 operators have the platform in various forms of trial, Corda said.

All told, Corda estimates that MVPDs which have commercially deployed the 4K platform collectively reach around 65 million video subscribers. He also postulates that around half of North American pay TV homes have 4K TVs.

How many of these pay TV users with 4K sets actually have the right set-top to watch 4K programming, let alone pay for the service? Corda doesn’t get that information from the operator partners, but he can hazard an educated guess.

“We’re probably in around 2%” of pay TV homes reached by the solution’s operator partners, Corda said. “But last year at this time, we were probably at 0.1%.” Putting it another way, “I would say we’re reaching hundreds of thousands” of pay TV homes,” he noted. “Last year, I probably would say it was in the tens of thousands.”

Last fall, Fox Sports began partnering with SES to deliver 4K sports events including college football, Major League Baseball, NASCAR and men’s college basketball.

Corda said that SES will deliver around 100 Fox Sports events in 4K HDR this year on its platform’s live events channel, all at 22 Mbps using HEVC.

“When we started providing live sports is when we started seeing a significant uptick,” Corda said. “In fact, some of the folks that we trial with went to commercial deployment just because of that.”

Speaking to Investors during Harmonic’s first-quarter earnings call, CEO Patrick Harshman declared his company’s intention is to be “No. 1” in the cable access-network technology business, displacing incumbents Arris/CommScope and Cisco Systems.

But like an NBA team tied in the closing minutes of a playoff game seven, Harmonic faces some nervous moments as it seeks its title. The tech vendor is waiting for Tier 1 clients to get done with trials of its CableOS and actually start deploying the virtualized cable access product.

As leading operators such as Comcast move towards Distributed Access Architecture (DAA) and virtualization of key network components, San Jose, California-based Harmonic stands to seize sizable market share with its DAA-focused fiber nodes and CableOS virtualized cable access product, which turns giant pieces of hardware like the cable modem termination system into software.

“Harmonic has quite a bit of momentum; they’re really pushing the envelope in terms of distributed access technology,” analyst Jeff Heynen, research director of broadband access and home networking for the Dell’Oro Group, said.

CableOS Tests Wrap Up

Harmonic has said four of the top eight cable operators in North America and Europe are engaged in commercial trials of CableOS, one of which is widely known to be Comcast. The company also said it has 32 commercial deployments and field trials of the product currently underway, and that 670,000 cable modems are now tied to CableOS, up 24% from the fourth quarter.

In March, Harmonic announced a pact with the National Cable Television Cooperative to jointly offer the virtualized cable access solution to the co-op’s more than 750 members.

Harshman said one large foreign operator signed a $50 million contract for CableOS.

Unfortunately, Harmonic’s bottom line has yet to reflect this momentum. First-quarter revenue was off 11.1% year-over-year to $80.1 million. Notably, revenue from cable-access products was down more than 30% to $12.9 million.

Harmonic has offered shareholder guidance that cable access revenue will range from $100 million to $130 million for the year and needs to see business pick up significantly in the ensuing three quarters to come through.

Harmonic isn’t alone. Competitor Casa Systems, which reported a 56% Q1 revenue slide last week, also says it’s in a “holding pattern,” waiting for MSO customers to get off the dime with emerging access tech.“We’re seeing an industrywide slowdown as cable operators implement a shift to virtual CCAP and DAA,” Casa Systems CEO Jerry Guo told investors, describing a “quarter we’re not at all happy with.”

For his part, Harshman spent much of the April 29 earnings call assuring investment analysts that major deployments of CableOS are coming, starting in the second quarter.

“There were a couple of major architectural change decisions made by our lead customers,” the CEO said, explaining the deployment delays. “And going into the beginning of the year, frankly, there was a little bit of uncertainty about the exact time frame that those could be implemented and how we would kind of get back on track. But the good news is, all that work is just about done, and we feel as though we’re largely currently getting back on track.”

Harshman assured investors his confidence stems from hard evidence. “We’re not just talking about verbal dialogues here, we’re talking about very detailed spreadsheets,” he said. “And frankly, plans that we’re investing in.”

One analyst asked if the deployment delays could be caused by an unforeseen cable access competitor making a late-game play against Harmonic.

“We don’t know what we don’t know,” Harshman conceded. “We have not heard of anything else being demoed in the lab, successfully and competitively. It’s prudent not to be overconfident. But it’s hard to imagine, frankly.”

A Big Market to Fight Over

Harmonic and Nokia, which also serves the DAA and virtualization market, are competing for a big prize. Heynen said the cable access market was worth $1.5 billion in 2018 and is growing at a single-digit but still nice pace.

As the analyst explained to Multichannel News, the benefits of virtualization and DAA are myriad. “You can save on rack space, you save on power consumption and you save on hardware costs,” Heynen said. “Comcast is going to be a big driver of DAA. The question is, how fast does Comcast move?”

That’s a question that Harmonic shareholders would certainly like to have answered themselves.

CommScope is preparing its first quarterly earnings report since closing on its $7.4 billion purchase of one of the cable industry’s biggest technology vendors, Arris.

With the biggest manufacturer of pay TV set-tops, cable broadband gateways and cable access network gear, not to mention new wireless connectivity products being developed and sold under the Ruckus Networks banner, all under the control of the Hickory, N.C.-based CommScope, what happens next?

Multichannel News posed that question to Jeff Heynen, research director of broadband and access and home network for Dell’Oro Group. Heynen has been observing the business of cable technology for nearly 20 years. Here are five things he believes are worth considering going forward in a cable industry now heavily under the influence of CommScope:

Can CommScope maintain Arris’s profitable global leadership position in cable access? This is the “No. 1 question” about the merger, according to Heynen, who said Arris controls about 55% of the worldwide market for the converged cable access platform (CCAP) and for cable modem termination systems (CMTS). This market, he said, was worth about $1.5 billion worldwide in 2018 and is still growing at a single-digit pace.

In the run-up to the merger’s closing just a few weeks ago, the narrative is that the deal was driven by complementary movement into wireless markets like Citizens Broadband Radio Service (CBRS), a huge focus for Arris’s Ruckus Networks division.

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” BTIG Research analyst Walter Piecyk wrote shortly after the deal was announced. “CommScope and Arris have complementary products that address these diverse sets of service providers.”

But CommScope also covets Arris’s network and cloud division, Heynen said, and hopes that not only will the CCAP/CMTS market continue to grow, but Arris will be able to maintain its dominant market share.

Both of those are big ifs, Heynen said, with upstarts including Harmonic and Nokia developing alternative Distributed Access Architecture solutions for operators and looking to displace leaders Arris, Cisco Systems and Casa Systems.

As operators begin to virtualize cable-access components like CMTS and push these functions out of the plant and closer to the subscriber, “Harmonic has a lot of momentum and is really pushing the envelope” with its virtualized cable access technologies, Heynen said.

The biggest operator client, Comcast, is already moving aggressively in the direction of DAA, he added. “You can save on rack space, you save on power consumption and you save on hardware costs,” Heynen said. “Comcast is going to be a big driver of DAA. The question is, how fast does Comcast move?”

Will the deal deliver CommScope the kind of synergies it needs to rekindle growth? CommScope is projecting $150 million in annual run-rate cost synergies in year three of the merger. But what about sales synergies? The company also expects a 30%-plus boost in adjusted earnings per share in the first full year post-closure, but investment analysts think that figure could be even better.

With operators pushing fiber ever deeper, “there are obvious synergies in being able to sell the [optical] infrastructure as well as the electronics,” Heynen said.

“In theory, CommScope should be able to leverage the Arris brand name, at least on the electronics side, and be able to bundle packages of new fiber nodes along with the additional bandwidth operators buy when they purchase Arris equipment,” he said.

CommScope’s stock is still recovering from an abrupt 30% hit it took a year ago, when investors became suddenly aware that its fiber connectivity equipment and mobile solutions sales were slowing down. Indeed, CommScope needed some kind of catalyst to juice sales of fiber, splitters, splicers and everything else that goes into the optical distribution network.

As an example of a potential cross-selling opportunity, Heynen cited the potential of Comcast’s upcoming migration to Full Duplex DOCSIS.

“If Comcast wants to do Full Duplex, it will need to achieve a goal of having only 50 or 60 homes per node,” Heynen said. This is a lofty objective, as fiber nodes typically service around 500 individual homes.

“It will be a phenomenal amount of spending. It’s not going to happen just over two years or five years, but it’s going to happen.”

Is CommScope really going to chuck Arris’s CPE division? Since the moment the deal was announced, the popular assumption has been that CommScope will sell Arris’ Customer Premises Equipment (CPE) business, which as been beset by challenges ranging from global parts shortages to the secular decline of the pay TV set-top.

But Heynen doesn’t see divestiture happening. “Set-tops are a mature business but they’re still a good run rate business if you can manage cost and manage supply chains,” he said. “Certainly, the set-top box market is declining, but it still throws off a lot of cash CommScope didn’t have before.”

Meanwhile, Heynen believes DOCSIS 3.1 gateways also have plenty of near-term potential.

“As much as Comcast and Charter like to say their DOCSIS 3.1 rollouts are over, they’re nowhere near done on the CPE side,” he said. “Most of their customers are still on DOCSIS 3.0 gateways.”

The National Association of Broadcasters said a successful test transmission of a Nielsen audience measurement watermark has been conducted using the new ATSC 3.0 broadcast standard.

The test was conducted by Tribune Media’s WJW late last month at the NAB/Consumer Technology Association ATSC 3.0 test station in Cleveland. The NAB bills the facility as a “living laboratory” to test ATSC 3.0 features, equipment and technologies.

The watermarks are inaudible signals in a program’s audio that help identify the program for audience measurement purposes.

Catherine Herkovic, executive vice president and managing director of local television at Nielsen, said the transmission of watermarks will enable backers of the so-called Next Gen TV standard to measure its impact with audiences.

“These transmissions validate that Nielsen audience measurement performs optimally with next-generation digital TV standards,” she said.

“Broadcasters are eager to deliver interactive benefits and dazzling features through Next Gen TV to our millions of viewers, and this milestone brings us another step closer towards the deployment and adoption of Next Gen TV,” NAB chief technology officer Sam Matheny said in a statement. “We thank Nielsen for their hard work, and we will continue working with them and others to bring Next Gen TV to market.”

Amino’s Jamie Mackinlay doesn’t believe the commonly held assumption that the proprietary pay TV set-top box will give way to popular over-the-top streaming devices like Roku and Amazon Fire TV.

Mackinlay, senior vice president of marketing, product management and sales operations for the Cambridge, U.K.-based technology company, traded on the London Stock Exchange and rooted in IPTV, continues to reassure customers their legacy set-tops are just fine. And that those boxes can deliver next-generation OTT video experiences to customers over these older devices without so much as a truck roll.

At this week’s NAB Show, Mackinlay and Amino will pitch their “Operator Ready” Android TV solution, a cloud-based system for delivering an operator-branded video service to customers that also incorporates all the streaming apps they download in the Google Play store as well as Google Voice functionality.

This system can be remotely uploaded to legacy set-tops, with processing conducted in the cloud.

“We know you can get a cheap Android TV box, slap it up, and it’ll cost almost nothing, but that doesn’t solve the operator’s problem,” Mackinlay said. “They want a managed device in the customer’s home, one that’s integrated into their systems.

“When you rely on Roku or Apple TV, you lose control of the device and you lose control of the data,” he continued. “You have no control of what’s happening. What we’re saying is, Don’t do that.”

Amino’s concept of conducting processing in the cloud and delivering MPEG video back to legacy set-tops isn’t a new one. Charter Communications partnered with ActiveVideo to do this several years ago.

Among its 250 worldwide pay TV customers, Amino has used Linux-based approaches with clients like Cincinnati Bell, which saved $20 million in capital expenditures by not upgrading 150,000 set-tops, according to Mackinlay.

These days, Amino’s focus — like a lot of video tech vendors — is on the operator tier version of Android TV, an open platform Mackinlay said is very quickly catching on with his clients. About 10% of Amino’s customer base is now using Android TV, he said.

In December, Shalini Govil-Pai, senior director of product management for Android TV, told Multichannel News that the platform is now being used by more than 100 pay TV operators around the world. This includes AT&T, which is making Android TV operator tier the system that powers the new slimline set-top for its now premium live-streaming service.

“What Google did with operator tier was take a significant step toward in terms of branding and the levels of control that are acceptable to operators,” Mackinlay said.

At Amino’s NAB Show booth this week in Las Vegas, the company will host what it calls its “Beat the Box” challenge. Essentially, it will compare the cost of upgrading an operator’s video system using its Android TV solution to what they’d spend otherwise.

“We’ll walk people through the various strategies, and we’ll help them create a modern television experience,” Mackinlay said.

On Monday (March 25), Apple is expected to finally unveil its long-awaited video streaming platform at a press conference at its Cupertino, California, headquarters, an event many believed would feature some big-name celebrity talent attached to the service’s billion-dollar original programming slate.

Leading into the splashy entrée, though, there were far more questions than answers as to what the new service will look like, which streaming services it will directly compete with and whose devices it will play on.

“I have no better guesses than what others have written,” said Michael Greeson, president and co-founder of The Diffusion Group, a boutique OTT research and analysis shop. “I’m taking a wait-and-see attitude toward the announcement, as I’ve been burned with pre-announcement prognostications about Apple’s video efforts before.”

For the better part of the last decade, Apple executives have been talking off the record about plans to honor the vision of the company’s late co-founder, Steve Jobs, with a disruptive new video service. “Apple’s lofty plans to build an online television service are coming into sharper focus,” read a Wall Street Journal headline from 2015, describing a virtual MVPD-like service.

Apple had also been in talks with Comcast about a new video service that would combine the tech giant’s expertise in user experience with the MSO’s strength in broadband infrastructure, the WSJ noted at that time.

Nothing became of the Comcast talks. And by the time Apple started what would become cumbersome negotiations with media companies to program a virtual multichannel video programming distributor, Dish Network and Sony had already come out with Sling TV and PlayStation Vue.

These were just a few instances over the last few years in which Eddie Cue, Apple’s senior vice president of internet software and services, was reported to have been leading the company into a major streaming service launch.

How many times has this happened?

“I’m not sure,” Greeson responded, “but it would take two hands to count them all. There have been a lot of fits and starts over the years.”

What We Do Know

Going into Monday’s presser in the Steve Jobs Theater — taglined in Apple invitations as “It’s show time” — it’s certain that the new service will be backed by a modest original programming slate, overseen by former Sony Pictures Television executives Jamie Erlicht and Zack Van Amburg, who report to Cue, who reports to Apple CEO Tim Cook.

According to The New York Times, Erlicht and Van Amburg, working out of Apple’s Culver City, Calif., studio headquarters, have already “blown well past” a $1 billion production budget set aside for originals. In all, the Times said, Apple has ordered roughly two dozen series from creatives including Oprah Winfrey, J.J. Abrams, Damien Chazelle and Chris Evans.

The first company to surpass $1 trillion in market capitalization before flattening sales reduced its valuation to a current level of around $918.5 billion, Apple’s content budget is only a fraction of Netflix’s, which spent $8 billion on series and movies in 2018.

Notably, we also know that Apple’s new service won’t have anything to do with Netflix, as Netflix CEO Reed Hastings said the world’s top streaming service will steer clear of the upstart.

Beyond these key facts, we’re going to learn an awful lot from Apple’s show and tell, starting with the new service’s basic business model.

Is it a subscription video-on-demand (SVOD) service, like Netflix or Amazon Prime Video? Will it be all or partially ad-supported? Will it package a skinny bundle of live programming networks like Sling TV or DirecTV Now? Will it aggregate subscription services, a la Amazon Prime Channels?

Conversations with Apple insiders point to the service blending originals — and rentable and sellable movies, TV shows and music in the iTunes Store — with apps from third-party SVOD and AVOD suppliers. There might even be music apps, such as Pandora, Spotify and iHeartRadio. Notably, Comcast just introduced a similar model, Xfinity Flex, a $5-per-month service targeted to internet-only customers.

“Besides the original content slate, I’ll be looking closely at the extent to which it mirrors uber aggregators like Prime Channels and Roku’s new curated app store,” said Greeson, going out on a limb to offer some prediction.

Another key question: What devices will be supported by Apple’s new platform? Will it be just for iOS mobile devices (the iPhone and iPad), Apple TV and MacBooks? Or will it play in the broader spectrum of consumer electronics, including Android mobile phones, and Roku and Amazon Fire TV OTT devices?

Notably, Apple launched the “Apple TV” app two years ago, which is designed to curate and organize, based on users’ algorithmic consumption patterns, all of the TV iPhone, iPad and Apple TV users watch. Will the new service be a replacement, or extension, of that Apple TV app?

Other notable questions: What will the new service cost? Morgan Stanley predicted a potential $8 monthly fee, while Goldman Sachs projected $15 a month. And when will it launch? There are conflicting reports ranging from the spring to the fall.

Yes, there are a lot of unanswered questions. But a decade after Apple launched what was arguably its last truly transformative product, the iPhone, and with revenue down 5% in the company’s fiscal first quarter, look for Apple to pull out quite a few stops when the clock hits “show time” Monday at 1 p.m. ET.

The good fourth-quarter news for Dish Network was that its virtual pay TV service, Sling TV, grew by 50,000 subscribers during a three-month period in which its biggest competition, AT&T’s DirecTV Now, shrunk by 267,000 users.

The bad news? Sling TV grew by 50,000 customers.

Indeed, Dish’s low-margin virtual MVPD has always been a catch-22: Its growth offsets the ugly decline of the core satellite TV business, which dropped another 334,000 customers in Q4. But the economics of the money-losing Sling TV skinny bundle, which retails for $25 a month, remain a drag on the bottom line, at least until Dish can more fully develop tools like programmatic advertising to better monetize the platform.

With Sling TV now at 2.43 million users and representing 19.6% of an overall Dish subscriber base of 12.32 million customers, average revenue per user fell another 1.1% to $85.46. Dish ARPU is down more than 3% since its all-time high of $88.16 in 2016.

“Pay TV ARPU is down due to a higher percentage of Sling TV subscribers in the pay TV subscriber base,” Dish senior accounting officer Paul Orban conceded during the operator’s fourth-quarter earnings call.

Overall, Sling TV grew by 208,000 users in 2018, a marked slowdown from the more than 700,000 estimated adds in 2017.

But there are green shoots. Orban said the ARPU decline would have been greater if not for revenue stream developments in advanced advertising and new features such as cloud DVR. Sling TV also benefited from a $5 price hike last year.

PASADENA, Calif. — CuriosityStream chairman and founder John Hendricks made waves at the Television Critics Association Winter Press Tour with his prediction of the coming “streaming wars” that will eventually winnow the field of subscription video-on-demand services competing for consumer dollars.

Hendricks said CuriosityStream, his factual content subscription service, will be one of the players left standing when the shakeout ends. The $2.99-per-month offering, which reached 1 million subscribers last year, comprises more than 2,000 technology, nature and science-themed titles.

CuriosityStream has secured $140 million in new private funding from such investors as Blum Capital Ventures and TimesSquare Capital Management to fuel its next growth phase in terms of original programming and global marketing, president and CEO Clint Stinchcomb said.

Stinchcomb spoke with Multichannel News about the service’s continued evolution, his thoughts about the future of content distribution, and the big “washout” ahead for in the sector. The interview was edited for space and style reasons.

MCN: John Hendricks talked about the beginning of the streaming wars on the emerging digital platforms. How do you see that oncoming battle affecting the traditional cable business in terms of its future viability?
Clint Stinchcomb: John Malone says your advantage today and potentially forever is connectivity. If [cable operators] embrace connectivity and offer every service of consequence, but not too many services, then they will be well-positioned. What they have to figure out is, how do they leverage connectivity better than they are today? I think over time, we’ll see these mature network groups either get dropped in their entirety or lose carriage for some of their lesser channels. We’re already seeing that outside the U.S., and we’ve been the beneficiary of that in places. All the guys are looking to reduce their fixed costs on the content side and over time, I think, they will look to embrace the new technologies like 4K. It’ll be managing a business that’s declining, but at the same time there are some real opportunities.

MCN: Where does CuriosityStream fit in today’s distribution environment?
CS: What we have today is a pure factual service, and we say that we’re programming to the full factual category — science, history, technology, lifestyle — with over 2,000 titles and growing. So many networks that started with factual programming tended to move away from that and embrace reality programming, so that created a big opening for something that was purely factual. We think through this combination of quality and quantity we’ll be in pretty good shape if we continue to stick to our knitting.

MCN: How do you break through the clutter of a very crowded content distribution marketplace?
CS: There are a lot of networks in the space, but [factual programming] is all we do — it’s not something we do on the side. If we can create programming that is breakthrough quality, we’ll be in pretty good shape. Again, there are a lot of people in the space, but at the same time we don’t feel it’s a zero-sum game. A lot of networks are going to wash out, and I really feel that if you’re not one of the four, five, six big streamers and you have a service that’s $5 or more, you’re probably not going to grow. We have a very digestible price point which enables us to sell CuriosityStream to consumers, to MVPDs and to educational institutions, so we’re pushing aggressively on the distribution side.

MCN: More than half of CuriosityStream’s audience is made up of hard-to-reach millennials. What are the keys to appealing to that vital audience segment?
CS: For one, it’s easy to sign up — just go to CuriosityStream.com and sign up. Also, of our more than 2,000 titles, about a third of them are short-form titles of 15 minutes or less. Those are digestible bits that millennials are consuming. We’ll launch soon a modern newsmagazine series that will feature nine-minute segments on the topics of the day, like “what is blockchain?” Most people don’t know exactly what that is. I think things like that attract millennials.

Like the monster in a horror movie that won’t ever quite die, TV commercials are coming back to life for viewers on popular streaming services.

As the Netflix model of subscription streaming captured the attention of the video business, a seven-decade paradigm of taxing, in modern parlance, consumer attention in exchange for free television seemed to be sunsetting. Younger viewers were offended, we were told.

Popular subscription streaming platforms like Hulu and CBS All Access have launched ad-free premium versions. Cable and broadcast networks compensated for viewership losses by further saturating their time periods with heavier and heavier commercial loads, which served only to drive more viewers to subscription streaming.

But surely, and not so slowly, media and telecom businesses are starting to embrace free-to-consumer, ad-supported models. Free streaming, or what the wonkier folks in cable call AVOD (ad-supported video on demand), is suddenly cool. YouTube, Viacom-backed Pluto TV and Amazon have all shaken things up of late with bold moves in the ad-supported space.

Part of the reason has to do with old-school technology. “The same year that Hulu sunset its AVOD offering, 2016, we began to notice a meaningful uptick in consumer interest in free content, with Walmart starting to actively marketing antennas right next to streaming devices,” BTIG Research analyst Rich Greenfield said in a report issued late last month. “Now, antenna-based TV viewing is the fastest growing segment in linear TV, with Nielsen reporting that 14% of U.S. households are using antennas vs. 10% in 2014.”

But consumer interest in free content “goes well beyond broadcast TV,” Greenfield added.

As Comcast and NBCUniversal prepare to launch a new streaming service, for example, the plan is to provide the platform to Comcast pay TV subscribers at no additional cost.

“We think this approach has a much better chance to get scale quickly,” NBCU CEO Steve Burke said during Comcast’s fourth-quarter earnings call. “There’s nothing better than free for consumers … and we know there’s a huge demand for interactive digital advertising.”

Hulu responded to a recent Netflix price increase by lowering the monthly bill for its base tier, which now offers the OTT joint venture’s full on-demand catalog for just $5.99 a month for subscribers who are willing to put up with — gasp! — commercials.

“This may be the shrewdest move I’ve seen, and I’ve been covering this space for 15 years,” said Michael Greeson, president and director of research at The Diffusion Group, a research firm focused on the OTT market.

Viacom in January paid $340 million for ad-supported streaming service Pluto TV. As it looks for a streaming outlet for its various networks that isn’t Netflix, Viacom now has a free-to-consumer platform with 12 million active monthly users at its disposal.

“We’ve been focused on developing a differentiated direct-to-consumer streaming service that would exploit our considerable content library and leverage our unique advertiser capabilities and relationships,” Viacom CEO Bob Bakish told investors. “Pluto TV fits squarely into that strategy.”

Studio Lionsgate’s AVOD revenue has doubled since 2018, executive vice president of worldwide digital distribution Thomas Hughes said.

Indeed, the list of streaming media players migrating to ad-supported business models is lengthy.

YouTube, for instance, confirmed in November that it will begin moving the premium shows and movies produced by Susanne Daniels’s YouTube Originals unit — including the midlife-themed The Karate Kid sequel Cobra Kai — out of the $11.99-per-month YouTube Premium service, making the titles available to the free YouTube platform’s 1.9 million active users.

“We’re primarily an advertising-supported business,” YouTube chief product officer Neal Mohan said at CES last month. YouTube provides “a great way for advertisers to reach really engaged viewers,” he added.

Amazon last month officially announced Free Dive, an ad-supported service residing in the online retail giant’s Internet Movie Database (IMDB) platform, that will let consumers stream fairly recent major studio films for free.

And Roku, whose device offers many streaming services without cable TV service, has seen advertising sales within its OTT ecosystem — and more specifically, on its Roku Channel — become by far the biggest revenue driver, surpassing hardware sales.

As Walmart looks to beef up the AVOD portion of its Vudu platform, which had mainly been just a renter and seller of digital TV shows and movies, Vudu head of AVOD Julian Franco told Multichannel News the big-box chain had recently polled its customers and found out that most would be willing to sit through some commercials if it means they’ll pay less for video.

Subscription Fatigue?

The AVOD trend is all juxtaposed with what’s become a broadly held belief among video executives: Consumers’ willingness to support more subscription VOD services may be reaching a limit.

In September, researcher Parks & Associates released a study suggesting the subscription OTT market had become “saturated.” Consumers weren’t necessarily tossing away subscriptions to popular platforms like Netflix, Hulu or Amazon Prime Video, Parks found, but they weren’t adding new services to their monthly expenses, either.

“The idea of the average household subscribing to Netflix, Hulu, Amazon, HBO Now and YouTube Premium all at the same time is ludicrous,” Farhad Massoudi, founder and CEO of ad-supported TV company Tubi TV, said on a panel at last month’s CES. “The average household has an income of $54,000 a year. They’re not buying $8 avocado toast.”

Of course, no one is ready to proclaim the market for paywalled video dead, either. Netflix continues to drive incredible growth: It ended 2018 with 14.5 billion subscribers worldwide. The Walt Disney Co. recently disclosed that its $4.99-per-month live sports-fueled service, ESPN+, has passed 2 million subscribers after less than 10 months, with a single UFC mixed-martial-arts event in January driving around a quarter of those signups.

Hulu said it added 8 million subscribers in 2018 and now has a base of 25 million paying users. CBS Corp. said last week that it expects the combined subscriber ranks of SVOD platforms CBS All Access and Showtime to reach 8 million in 2019.

But with new SVOD platforms on the way from Disney and WarnerMedia, there are subtle signs of a coming slowdown in this crowded market. In the U.S., Netflix is still growing strong, adding 1.5 million users in the fourth quarter. But that was less than the nearly 2 million U.S. users it took on in the fourth quarter of 2017. This modest decline came after Netflix increased its content budget by 35% in 2018, to just more than $12 billion.

Cord-cutting among subscription linear pay TV services is now viewed as somewhat chronic and endemic. Market leaders AT&T, Comcast, Dish Network, Charter Communications and Verizon Communications combineed to lose 2.5 million video subscribers in 2018.

The virtual pay TV market, thought of until recently as a low-margin hedge against much of this customer loss, is also slowing down in a big way. The market leader, Dish Network’s Sling TV, added only around 200,000 subscribers in 2018 after taking on an estimated 700,000-plus in 2017. AT&T’s DirecTV Now is coming off a fourth quarter in which it lost a whopping 267,000 subscribers. Much of that loss was attributed to customers unwilling to pay full price for the streaming service after heavy promotions ended.

“For years, everybody dismissed AVOD and tried to copy Netflix,” Tubi TV’s Massoudi told MCN. “But it turns out there is subscription fatigue. The average household is not going to subscribe to all of these services.”

This is undoubtedly unwelcome news to Disney and WarnerMedia, which are in the process of launching subscription streaming services aimed at Netflix.

‘Get Scale Quick’ Schemes

“I think what they’re going to find is that it’s very difficult to drive subscriber momentum and growth, and scale, as quickly as they need to to achieve a leading position,” Hulu chief marketing officer Kelly Campbell said at CES.

While the health of the subscription market is open for debate, most AVOD operators believe ad tech advancements will make their platforms far more profitable in the future.

Though virtual MVPD Sling TV continues to lose money for Dish Network, Dish executive vice president of programming and media sales and Sling TV president Warren Schlichting recently told MCN that emerging programmatic ad-sales efforts are just beginning to yield “incredible results.”

Programmatic has the ability to expand TV’s overall ad revenue base, which has been stuck at around $70 billion per year for the better part of a decade, Schlichting added. At the same time, ad sales on such digital platforms as Google have reached $107 billion.

Programmatic TV ad sales, which mimic the automated exchanges of the digital marketplace, have the potential to migrate spending back to TV by “exploding the value” proposition for advertisers, Schlichting said.

In October, research firm eMarketer published a report estimating U.S. ad spending on digital video would grow about 30% in 2018, to $27.82 billion.

As for Sling TV rival DirecTV Now, AT&T CEO Randall Stephenson said the company’s new advanced-advertising division, Xandr, doesn’t yet have its platform “stood up to really monetize” DirecTV Now in a “meaningful” way. But he believes that will change in 2020.

Viacom chief financial officer Wade Davis said the media company “has been investing since 2015 in driving the industry forward around targeted advanced TV ad campaigns. And we think it’s going to be not far off of [being a] $1 billion [business] by the end of this year before you start adding Pluto in.”

Viacom’s CEO Bakish thinks Pluto TV’s demographics — about 50% in the 18-34 range — will only help matters.

“Pluto TV, with its nascent ad-sales force, currently sells less than 50% of this inventory,” Bakish told investors. “So there’s plenty of upside here.”

Some 80% of Comcast’s pay TV footprint, as well as that of its recent acquisition, U.K. satellite-TV operator Sky, is capable of delivering addressable advertising, NBCU’s Burke said. For Comcast’s new streaming service, capitalizing on that addressable advertising opportunity will require the platform to achieve user scale quickly. NBCU believes a free-to-consumer model is a better way to achieve that goal.

“Between the United States and Sky’s footprint in the U.K., we think we should start and try to gain as much scale as possible with an ad-supported, free-to-consumer service,” Burke said.

Gen Z in the House

While the expected monetization potential of advanced advertising explains, to some degree, the migration to AVOD models, it’s still a little hazy to some of us how we arrived at this location.

Wasn’t the emerging millennial-age population not going to put up with commercials any longer? Well, it turns out that the generation behind the millennials is OK with ads.

At least that’s what Hulu says.

“Gen-Zers think differently about TV,” Hulu CMO Campbell said. “They’re more receptive to advertising. They’ve grown up in this IP-powered universe and they’re used to targeted advertising.”

Hulu research shows that Generation Z, those born in the late 1990s and early 2000s, are 39% more likely to watch an ad than the base population, and they’re 29% more likely to actually pay attention to the commercial, Campbell said.

None of this is to say that Gen Z, or anyone else for that matter, is comfortable with sitting through the kinds of ad loads we’ve experienced on linear TV over the last decade.

Vudu AVOD chief Franco said the delicate rapprochement between younger consumers and TV advertising works only if ad pods are strategically placed within streams. Pods can’t be loaded too much — no more than two 30-second spots in each — and they must be spaced out within the context of the programming.

Still, he’s convinced AVOD is the way forward for Vudu.

“We have 150 million people coming into our stores,” Franco said. “And they’ve told us they’ll watch ads in order to save money on video.”

Fifteen months after it purchased startup video company Layer3 TV and promised a new service that would profoundly disrupt the “arrogant” pay TV business and get rid of its many “pain points,” T-Mobile said it would launch the platform in the first half of this year.

T-Mobile executive vice president and chief operating officer Mike Sievert said during the No. 3 U.S. wireless operator’s fourth-quarter earnings call that a “predecessor product under the Layer3 TV brand” has already launched in four cities.

“We’re getting great learnings from customers, great feedback about features they’d like to see, and we decided to develop those features and some additional quality improvements before rebranding and rolling out a home product,” Sievert said.

The new platform, he added, would be bundled alongside a 4G LTE fixed wireless broadband product that’s also currently in development. But the broadband and pay TV products can be deployed independently of each other, Sievert said. (T-Mobile, which is still trying to get regulatory approval for its proposed merger with Sprint, has bigger plans to deploy a 5G network in 2020.)

So what will the very disruptive pay TV service look like? As for the home-based, Layer3-derived video platform, the details are still fuzzy. Separately, T-Mobile is developing a mobile video play, and that has a little more shape at this point.

The self-proclaimed “Uncarrier” has no plans to launch a skinny-bundled vMVPD. Rather, T-Mobile seems to be developing a business like Amazon Channels, which aggregates subscriptions to streaming services like HBO Now and CBS All Access.

Prior to the T-Mobile acquisition, Layer3 TV was largely focused on an in-home, full-freight pay TV service with 4K-capable boxes delivered over IP.

“We don’t have plans to develop an undifferentiated skinny bundle out there,” Sievert said. “There are plenty of those, but we think there’s a more nuanced role for us to play in helping you get access to the great media brands out there that you love, and to be able to put together your own media subscription in smaller pieces, $5, $6 $7, $8 at a time.”

“It’s subscription-palooza out there,” Sievert added. “Every single media brand either has or is developing an OTT solution, and most of these companies don’t have a way to bring these products to market. They’re learning about that. They don’t have distributed networks like us. They don’t have access to the phones like we have.”

As for the long delay in bringing the home-based pay TV service to market — it was supposed to debut last year — Sievert said, “We’re not date-driven when it comes to the home part of the strategy, we’re quality-driven.”

While a low-scoring game left many Super Bowl LIII fans with a big yawn, video streaming technology at least reached a partial victory, with higher scores compared to last year.

Traditionally, latency — the time it takes the action on the field to reach eyeballs in a home — has been one of the biggest technological hurdles for video streaming operators to solve.

It was still a problem during this year’s game. According to streaming technology company Phenix, latency among streams of the big game ranged from 28.2 seconds for the CBS Sports app all the way to 46.7 seconds for the Yahoo Sports app.

That’s at least better than last year, when Phenix tracked delays ranging from 20 seconds all the way to roughly five minutes.

While the overall ratings performance for Super Bowl LIII was down 2.7% to 100.7 million viewers, more people streamed the game than ever. The average streaming audience per minute was 2.6 million viewers, up 31% over the 2018 Super Bowl, according to Nielsen. The number of devices used to stream the big game was up 20% to 7.5 million. And the total amount of streamed live game action was up 19%, to 560 million total minutes.

It’s not all about latency. While Phenix, which said it had an on-site tester at Atlanta’s Mercedes- Benz Stadium, measured CBS Sports as best in class for latency, there were numerous reports on Twitter of the app crashing in the last five minutes of the game.

With bigger audiences come bigger stakes for the performance of video technology.

“It goes beyond just an annoyance and causes a major domino effect, damaging the reputation of the streaming platforms to impacting revenues when people don’t want to pay for underperforming subscriptions to brands choosing to pull away and advertise on functional platforms that have the most eyeballs,” Phenix chief marketing officer Jed Corenthal said.

Of course, technology marketers also see streaming’s biggest event as an opportunity. Verizon, perhaps 5G’s most vociferous proponent, used Super Bowl XLII in 2018 to kick off its big marketing push, streaming the game in virtual reality over a 5G network.

Meanwhile, broadcaster proponents of ATSC 3.0 often make the Super Bowl the lynchpin of any discussion touting the benefits of their “one-to-many” technology.

“When all of us want to watch the same program at the same time, [with streaming] you’re delivering on a multiplicative basis a file which may be many gigabytes in size,” Sinclair Broadcast Group technology chief Mark Aitkin told Multichannel News at last month’s CES. “In unicast, I have to deliver, for example, a 1 Gigabyte file to everybody. Multiply that by thousands. With broadcast, I deliver just one 1 Gb file, and everybody’s got it. … It’s very simple. Our job is to get in front of the largest population as possible.”

A two-year-old legal showdown between 21st Century Fox and Netflix over the streaming service’s alleged improper poaching of studio executive talent heated up last week, when Fox accused Netflix of having a “blueprint” for stealing away executives.

In a filing in Los Angeles Superior Court seeking a summary judgement, Fox attorney Daniel Petrocelli argued Netflix “systematically” employs a spreadsheet to track studio executive talent, contacting potential recruits via their personal email and offering compensation for personal legal defense to help them break their contracts.

Fox has told Judge Lawrence Cho that it will accept compensation of only $1 if he rules in its favor. In its own motion for summary judgement, Netflix accuses Fox of holding its executives “hostage” and seeks to have the judge rule that that Fox’s entire system for locking executive talent under contract is null and void under California law.

If neither of these motions succeeds, the case is set for trial in May.

Fox filed suit against Netflix in 2016, after Netflix hired Fox 21 TV development executive Tara Flynn and film executive Marcos Waltenberg.

Fox isn’t the only studio to complain about Netflix’s executive recruitment tactics, or to sue over the matter.

In October, Viacom also sued the streaming service after Momita SenGupta left to become VP of physical production for original series at Netflix.

It wasn’t that long ago that entire towns held meetings to complain about their lack of access to Verizon’s Fios-branded, fiber-based wireline service. But while the Fios broadband service continues to grow, albeit more slowly, Fios TV is eroding like everything else in linear TV, losing another 46,000 customers in the fourth quarter.

Most of those users fled before they could experience Verizon Fios TV One, the platform upgrade it started rolling out on a limited basis in December.

“I was looking at the app the other day and it’s leagues better than one it was,” TV[R]EV founder and lead analyst Alan Wolk said.

With Fios TV now in decline, and Verizon firmly fixated on wireless 5G services, “the question,” in Wolk’s mind is, “will Verizon take Fios and make that the vMVPD for their 5G service?”

It’s certainly not a slam dunk they will. Notably, Verizon has packaged Google’s virtual multichannel video programming distributor (vMVPD) service, YouTube TV, in early promotional packages for its fixed 5G service.

“It seems to make sense to use Fios,” Wolk added.

Maybe. Speaking during Verizon’s fourth-quarter earnings call, CEO Hans Vestberg wasn’t entirely clear on Fios TV’s trajectory in the emerging 5G era.

“Initially, 5G Home has been focused on other cities than our footprint for Fios,” he said. “But ultimately, we need to see that our customers have all the choices when it comes to how they want to consume the video. We see the trends in the market.”

Cable industry executives say they aren’t very worried about 5G. It’s going to take years for wireless operators to deploy hundreds of thousands of small cells. Plus, the cable industry’s infrastructure is ideal for delivering broadband wireless service to residential areas.

The problem with that analysis is that 5G threatens the cable business model in at least two different ways.

Cable understands 5G’s theoretical ability to deliver high-speed, high-capacity fixed wireless services. By leveraging millimeter wave spectrum, small cells and higher spectral efficiency, wireless operators could potentially compete with MSOs in providing internet access and television content to homes. Wireless operators can also bundle mobile and fixed broadband services at steep discounts, because while cable operators can also bundle mobile and fixed broadband services, they must buy the mobile service from wireless operators at wholesale prices.

That’s the theory, but does it work in practice? Millimeter wave signals have limited range and are easily blocked by obstacles. The technology is expensive and uses power inefficiently. Wireless operators must obtain local government approval before constructing small cells. Site preparation involves not only installing radios and antennas safely beyond the reach of pedestrians, but providing power and backhaul facilities. A Tier 1 wireless operator might need hundreds of thousands of small cells to compete with cable operators throughout most of its nationwide footprint. At current prices, five hundred thousand small cells would cost at least $20 billion.

Stealth Disruption

However, disruptive technologies have a habit of sneaking up on the market leaders. Last year, the Federal Communications Commission adopted small-cell rules intended to speed site approvals, simplify site preparation and ensure local governments charge fair and reasonable site-leasing fees. While these rules may be challenged in court for infringing states’ rights, more than 20 states have enacted small cell-friendly regulations. And if history is any guide, we can expect millimeter wave technology will benefit from significant price reductions and performance improvements over the next decade.

In a study recently published by my company in collaboration with Rysavy Research, we evaluated 5G-based fixed wireless broadband business models by modeling network capacity per square kilometer and determining the likelihood of individual cells achieving breakeven revenue based on detailed capex, opex and financing assumptions. We found that millimeter wave spectrum has sufficient capacity to compete with cable operators’ current hybrid fiber-coax networks, but that operators must “thread the needle” by selectively deploying small cells in the best locations (in terms of factors including home density, backhaul costs and competition).

We also found a second threat. In developing countries such as Mexico, cost-sensitive young consumers are using smartphones and wireless service as an all-in-one solution — one device and one network to satisfy all of their phone, internet and TV needs. While midband spectrum (at 3.5 Gigahertz) doesn’t have sufficient capacity to compete head-on with cable, it can be used to double capacity and enable lower-cost data plans. For millennials and members of Generation Z who don’t mind a smaller screen, a mobile device with a higher data allowance (for example, 60 to 100 Gigabytes) offers a significant savings over separate mobile, Internet, and TV devices and service plans. In fact, a recent CNBC report projects that three-quarters of the world will use just their smartphones to access the Internet by 2025.

Wireless users also have access to larger screens. A tablet can be used (in place of a desktop PC and HDTV) to surf the Internet and watch videos. Samsung, LG, and others have been developing handsets with foldable screens. And most smart TVs support screen sharing via WiFi.

Cord-Cutting Is a Factor

There is one more factor to consider. A growing number of consumers are switching from cable TV to Internet TV services such as Hulu, Sling TV and YouTube TV. While these services provide fewer channels, and local channels must be accessed via an antenna, they offer significant cost savings over cable TV. The availability of Internet TV services also relieves wireless operators from having to assemble their own channel lineups.

Haven’t we seen this movie before? Current market leaders tend to overestimate how safe their position is and underestimate how vulnerable they are to disruption. Mainframe computer makers dismissed microcomputers as toys. Remember when the Bell System seemed invincible, and when Nokia dominated the global handset market?

Fifth-generation wireless is not just the next in a series of incremental advances. It’s a constellation of improvements with a new and more flexible architecture. This is not a time for the cable industry to be complacent.

Ira Brodsky is president of Datacomm Research, a St. Louis-based consultancy.

While Viacom’s $340 million purchase of Pluto TV highlights the over-the-top universe’s sudden fixation with ad-supported video-on-demand, Tubi CEO Farhad Massoudi has actually been beating the drum of free, ad-supported streaming services for the better part of a decade.

The former Yahoo engineer founded the OTT company that became Tubi TV back in 2010. As Netflix became the paywalled blueprint by which most subsequently established streaming services were built, Massoudi long advocated the need for a robust, free-to-consumer, ad-supported streaming platform as a vital complementary service.

Subscription Fatigue Sets In

“For years, everybody dismissed AVOD and tried to copy Netflix,” Massoudi told Multichannel News. “But it turns out there is subscription fatigue. The average household is not going to subscribe to all of these services.”

With Netflix adding about 8.8 million subscribers in the fourth quarter, saturation in the subscription streaming market hasn’t necessarily hit the fan. But with Disney, WarnerMedia and other media companies pulling back their content from the major SVOD platforms, and set to launch subscription walled video gardens of their own, the check is in the mail.

Notably, Hulu has reduced the price of its partially ad-supported base tier by $2 to $5.99. The belief is that consumers will put begin putting up with a few commercials again in order to get some relief from all the OTT services dinging their credit card statements each month.

San Francisco-based Tubi, backed by $26 million in private capital, according to Crunchbase, believes it is well-positioned.

At press time, the company was still preparing an announcement expected to come out soon touting its latest viewership benchmarks.

Massoudi said viewership has increased by a factor of 4 times just in the last year, with the platform’s collection of more than 9,000 movie and TV titles — culled from major suppliers including Paramount Pictures, Lionsgate and MGM — easily accessible to any consumer with an iPhone or Android; Roku or Fire TV; Xbox One or PlayStation gaming boxes; and pretty much any smart TV, just to name a few of the devices on which the Tubi app is playable. Notably, Tubi is natively integrated into Comcast’s X1 platform, alongside Netflix and YouTube.

As for specific content available on the platform, Massoudi said Pulp Fiction was the most popular title on the platform in December.

Beyond content, Tubi has made sizable investments to not only develop ad tech, he said, but also advanced search and recommendation features.

“We’re more of a data company that’s focused on the media ecosystem than a media company focused on data,” Massoudi said.

Positioning Tubi’s technology chops is to his company’s advantage right now. Massoudi would not go into specifics on M&A, but it was widely reported that Viacom also looked at Tubi before choosing Pluto TV to be its AVOD launching point.

Certainly, there are other media companies out there with needs similar to Viacom. But for his part, Moussoudi said Tubi can keep on growing on its own.

“We’re very comfortable with our path of remaining independent,” he said.

Just like its peers, The Walt Disney Co. and WarnerMedia, NBCUniversal faces a challenge, according to CEO Steve Burke.

“People are watching professionally produced content at higher levels than ever,” Burke said. “We’re just not monetizing it as well online as we should.”

Unlike Disney and AT&T-owned WarnerMedia, which are approaching this problem by building streaming platforms based on Netflix’s tried-and-true subscription video-on-demand model, NBCU is coming at things another way.

Its platform will be ad-supported and free to Comcast and Sky subscribers, more than 50 million combined customers.

“We think this approach has a much better chance to get scale quickly,” Burke said during Comcast’s fourth-quarter earnings call. “There’s nothing better than free for consumers, and we have enough product that consumers are currently viewing on other platforms online for free and charge [for] that we think putting it all together in one place very, very good technology, and then leveraging our relationship with Comcast Cable and Sky.”

Burke added: “We know there’s a huge demand for interactive digital advertising. In fact, we were constantly trying to find more ad inventory because advertisers want to be in very, very good, professionally produced content. So our idea to enter the business is to leverage Sky’s technology, it’s called NOW TV in Europe and also parts of what we’ve been doing at NBC and Comcast Cable.”

As for the technology backing the new platform, that is being leverage from Sky’s existing NOW TV platform, he said.

NBCU plans to make most of its TV and film content library available on the free service. The conglomerate will still license movies and shows to Netflix and Hulu, Burke said, making those decisions case by case.

Burke also noted that in the U.S., 80% of the households capable of receiving addressable advertising are multichannel TV subscribers. “We’ll have discussions with Charter and DirecTV and everybody around the world that’s a multichannel supplier,” he said.

LAS VEGAS — Perhaps strangely, it was a broadcaster who was among the most prominent and active figures at CES, instead of some newfangled high-tech disruptor. Sinclair Broadcast Group was not only showing off its long promised system-on-a-chip ATSC 3.0 hardware that it hopes will one day be embedded into smartphones around the world, it was also signing deals to embed its ATSC 3.0 technology into autonomous vehicles, among other technological initiatives.

Sitting in Sinclair’s suite at the Wynn, with the very golden Trump Las Vegas conspicuously dominating the backdrop, Sinclair vice president of advanced technology Mark Aitken sat down with MCN to discuss his company’s broad-reaching technology agenda.

MCN: You worked with an Indian manufacturer (Saankhya Labs) to build chips that support the new ATSC 3.0 broadcast standard and you have them here at CES in January, just as you promised. Are they ready to deploy?
Mark Aitken: We’re a month out of the foundry, and we’re ready to stamp chips in the tens of millions. This is sort of a soft launch. Two years ago, if you had told me, “you’re going to be in the chip business,” I would have said, “you’re crazy.” But necessity is the mother of invention. The common adage is, rising waters lift all boats. And that’s certainly what we’re feeding into [with the ATSC 3.0 chips]. What’s good for Sinclair in most every way is good for the rest of the industry.

MCN: You’ve offered mobile device makers 1 million of your chips for free. Any takers?
MA: We’re already knee-deep in discussions with one USB device manufacturer. They’ve told us, “All right, I’ll take a million chips, and I’ll put them in a USB device that you can plug into the bottom of a phone with an embedded antenna.”

MCN: Is getting the major smartphone vendors to integrate ATSC 3.0 proving much harder?
MA: There’s an economic battle underway. You look at the FAANG [Facebook, Amazon, Apple, Netflix and Google] companies — they gather huge amounts of intelligence and data [on smartphones], and they analyze it. Well, you get [our ATSC 3.0 chips] onto a device, and suddenly it’s a two-way device, and you’ve got broadcast television, and now I’m competing for eyeballs and time. By the nature of developing the application environment that goes on the device that enables these free services, suddenly I’ve got the ability to tap into the data analytics, and I’m effectively stealing time away from their platform.

We think there’s an economic benefit, and we certainly think there is a consumer benefit. We’ve offered to a major carrier 5 million chips, we’ve offered the engineering of those chips into the devices and we’ve offered a piece of the IP data stream, but that has not been enough to entice them.

MCN: What’s the value proposition of embedding broadcast reception capabilities into smartphones?
MA: You have a chip set that consumes just several tenths of milliwatts of power. That means you can put it in a cellphone and not drain the battery. It means you can put a device in a cellphone that provides for the most fundamental of emergency alerting, emergency informing, device wakeup, all of those things that we’ve heard lots of about. But let’s cut to the chase. There’s content that everybody wants access to. And there’s content that only you want and only I want. The latter is easily served on a one-to-one basis. But when all of us want to watch the same program at the same time, you’re delivering on a multiplicative basis a file which may be many Gigabytes in size.

In unicast I have to deliver, for example, a 1 Gigabyte file to everybody. Multiply that by thousands. With broadcast, I deliver just one 1 Gigabyte file, and everybody’s got it. You have this growing warehouse of spectrum that’s coming into the hands of the carriers. But we seem to have the same problems all the time. Just try to watch the Super Bowl on your cellphone. It’s very simple: Our job is to get in front of the largest population as possible. The one-to-everyone approach is a distribution technique that’s much needed in today’s telecommunications environment.

MCN: But doesn’t 5G have the capacity to render those unicast concerns moot?
MA: I was reading an article yesterday that positioned 5G as solving the problem of lack of broadband in rural America. Hogwash. If you don’t have line of sight, you don’t have coverage. So when you look at a Verizon deployment of 5G in millimeter-wave spectrum, you are literally looking at radio heads that are spaced, in some cases, less than 300 feet apart. 5G and millimeter wave is a full buildout of the most dense network that you can imagine.

MCN: At CES, Sinclair has announced agreements with audio company Harmon and Korean mobile operator SK Telecom to develop ATSC 3.0-based automotive technology. What is Sinclair doing in the automotive market?
MA: Part of that is entertainment. But I would venture to say a bigger part of it is about data distribution to vehicular platforms. How are you going to lock down a secure environment where I have V-to-V and V-to-X communication requirements as we move increasingly close to an autonomous vehicle world? How do I provide instantaneous information to a million vehicles about catastrophic event — a bridge is out, say. And how do I integrate that into all of the internal workings of this AI-assisted autonomous vehicle population? Broadcast is ideally suited to distribute big files to everyone in reach of that signal, whether it’s a high-density mapping situation, or emergency situation or entertainment.

With 2018 winding down, here are five technology forecasts that will impact the cable industry, along with the broader media and telecom industries, in 2019.

1. Netflix is in for a bad year. Netflix has long been preparing for the day when key programming suppliers such as WarnerMedia and The Walt Disney Co. build their own streaming platforms and no longer license its content. That is, of course, what its multibillion-dollar investment in original shows has all been about.

That strategy is about to be put to the test.

WarnerMedia CEO John Stankey suggested to analysts earlier this month that Netflix’s library will “thin out” as WarnerMedia and Disney launch their platforms next year, and that can’t be good news. According to a study just published by Parrot Analytics and Kagan, Netflix originals still don’t even generate half of the platform’s total viewing.

“Netflix has been great at developing a lot of content, but what it hasn’t been great at is the traditional, Hollywood style of marketing and creating enough buzz around shows,” Omar Akhtar, an analyst for the San Francisco-based Altimeter Group, told Yahoo Finance earlier this year. “That’s not where their budgets lie. They’d rather spend on great content.”

2. A major virtual multichannel video programming distributor will go away. Virtual pay TV services ended 2017 on a tear, with leaders Sling TV and DirecTV Now adding 711,000 and 888,000 users last year, respectively.

But the market is too crowded. Rising program costs are driving up monthly bills and squeezing margins, which are already too tight.

Growth has ground to a halt. In fact, AT&T recently announced that it is raising prices on DirecTV Now and cutting back on programming.

Though he was careful not to lump his startup in with struggling corporately backed competitors, fuboTV co-founder and CEO David Gandler told Multichannel News that at least one vMVPD could fold it up in 2019.

“If you can’t figure out how to make money on this, why would you do it?” Gandler said. “I think you’re going to see people saying, ‘Either I missed something, or we’re not executing.’ I would anticipate that there will be companies that will have to rethink their strategy.”

3. 5G will move beyond mere hype. While 2018 has been festooned with plenty of 5G hype (see Cover Story), we’re set to see plenty of real-world deployment in 2019.

According to Deloitte, more than 1 million 5G handsets and another 1 million 5G modems will be sold next year.

“It won’t happen overnight, but 5G will profoundly change our interactions and experiences, which is good news for consumers as they demand better performance and more access to content,” Deloitte analyst Kevin Westcott said.

4. Cable will begin to commercially deploy Full Duplex DOCSIS. With the fresh cycle of 5G hype spurring discussions about speeds in excess of 1 Gigabit per second, cable will respond with its own next-generation network technology standard, Full Duplex DOCSIS.

CableLabs, which led development of FDX, believes the technology could be used to deliver 10 Gbps speeds, both upstream and downstream, in the next few years.

For its part, Arris expects to start commercial deployment of Full Duplex hardware and software toward the end of 2019.

5. The pay TV set-top business is in for major changes. Roiled by cord-cutting and a move to cloud-based video systems that favor thin-client customer premises equipment, the pay TV set-top business is on the ropes. By this time next year, all or most of the major current vendors could be sold.

Last month, Technicolor SA, which paid $2.1 billion in 2015 for the Cisco Systems set-top unit, said it is in preliminary talks to sell all or part of itself. Not only has Technicolor’s pay TV operator client base consolidated, it’s also grappling with the global shortage of critical electronic parts, most notably multilayer ceramic capacitors.

Meanwhile, CommScope, which is in the process of buying No. 1 set-top vendor Arris, said recently that it’s still trying to figure out what to do with “one of the more maligned” elements of Arris’s portfolio.

Everybody likes to be first.

So no one was fazed, really, when in the highly anticipated but slow-motion race to deliver 5G — a next generation of wireless broadband — Verizon Communications breathlessly announced the service’s first North American rollout.

That rollout was limited to an unknown number of participants in four cities, and the technology was proprietary. Still, the PR blitz glanced at an intended target: Verizon senior vice president and chief technology architect Ed Chan said the initial deployment markets were chosen because that is “where cable is today.” One investment banker called it an “existential threat” to the cable industry.

With the top cable operators controlling 65% of U.S. fixed broadband connections, it’s understandable that MSOs are a target. But cable’s dominant position hardly seems under existential threat right now. After the Verizon launch, analysts for CCS Insights declared the 5G threat to cable as “overblown,” predicting that by the end of 2020, 5G fixed wireless solutions will “remain niche.”

At the SCTE/ISBE Cable-Tec Expo in late October, NCTA–The Internet & Television Association CEO Michael Powell dismissed 5G as the wireless industry’s “latest widget,” comprised of “25% technology and 75% marketing.”

Chiming in, CableLabs CEO Phil McKinney recalled his days spent at Teligent in the late 1990s, with the wireless company unable to overcome the obstacles of establishing point-to-point communications in big cities — a big part of 5G’s plan for global urban domination. “I think 5G is going to have similar issues,” he said.

And addressing investors, Charter Communications chief financial officer Chris Winfrey said, “I don’t see anything about 5G that ever makes it comparable to DOCSIS 3.1 or DOCSIS 3.1 Full Duplex, or any capability we have through fixed-line service.”

Who’s right?

The truth is, of course, a lot more nuanced.

5G’s Arrived: Sort of

5G isn’t really “here” just yet. The first 5G-capable smartphones haven’t even hit the market — we won’t see a Samsung Galaxy with 5G-capable chips hit the street until well into next year. (It’s predicted to arrive in March.)

There’s speculation Apple won’t debut a 5G iPhone until 2020. And yes, there are fixed wireless 5G services for the home already out there, but it’s very hard to tell at this point how many people actually have access to them.

Most agree that in years to come, 5G standards will deliver a significant transformation of mobile internet capabilities, just as 4G LTE standards did seven years ago — and 3G did a decade back.

Backers of 5G call it a “foundational” technology that enables brand-new uses, including connected, self-driving cars, smart agriculture, remote surgery, virtual and augmented reality, and other entirely novel ways for us to entertain ourselves. Some boldly predict it will bring the the “fourth industrial revolution.”

HFC Sticking Around

But the vast improvements wrought in network speed and latency won’t necessarily lead to displacement of the incumbent DOCSIS-enabled hybrid fiber coax paradigm, which is itself in the process of evolving into a Full Duplex, 10-Gigabit-per-second future.

And with 5G calling for dense clustering of “small cell” network infrastructure, which can efficiently be delivered by MSOs in many areas, the cable industry could likely play a key role in developing a technology that is disruptive to the wireless business.

Essentially, 5G is an international standard, overseen by the 3rd Generation Partnership Project (3GPP), the body that previously worked to harmonize the 3G and 4G cellular standards. Right now, it’s a largely a collection of well-founded ideas, designed to evolve over time.

Release 15, the 3GPP’s finalized version of its global 5G standard, outlines improved use of higher radio frequencies to deliver faster speeds and lower latency.

Most notably, 5G will deliver far greater speeds than the current 4G standard — or, for that matter, what most wireline services are capable of today. The new standard taps into the so-called “millimeter wave” spectrum, ultra-high frequency radio waves in the range of 24 to 100 Gigahertz that can hold and deliver gobs more data.

Early 5G networks promise speeds as high as 6 Gbps. The standard’s developers believe the technology will one day support speeds as high as 20 Gbps.

Latency will be vastly improved, too, going from 20 to 70 milliseconds with 4G to as low as the ultra-responsive sub-1-millisecond range.

Not only does 5G tap into richer frequency ranges, it includes key technologies that maximize performance, allowing the technology to “bond” up to 16 channels at once, for example. In terms of quadrature amplitude modulation (QAM), 5G can pack as many as 256 data points (256-QAM) into the same wave.

And all sorts of Internet of Things applications are being architected into 5G, with the standard supporting density of up to 200,000 sensors in a 1 million square kilometer area.

For 5G, the big variable is spectrum, with ultra-high frequencies requiring very short-range broadcast of signals, thus the need for so many “small cell” devices. These short-throw, ultra-high frequencies are also prone to all sorts of interference, falling leaves included.

The Federal Communications Commission is actively working to open access to these high frequencies. Last week, the agency voted unanimously to free up spectrum in the upper 37 GHz (37.6-38.6 GHz), 39 GHz (38.6-40 GHz) and 47 GHz (47.2-48.2 GHz) millimeter wave bands.

Although the emergence of — and hype surrounding — 5G is an international phenomenon, few companies around the world can match the exuberance of the top U.S. wireless carriers, Verizon, AT&T, T-Mobile and Sprint.

In fact, Verizon was so eager on 5G that it couldn’t wait until December to launch. That’s when the 3GPP’s so-called 5G New Radio (5G NR) standard was finalized, ensuring that all 5G hardware and software is on the same page.

In October, the carrier launched its $70-a-month 5G fixed wireless service for homes and businesses, with professionally installed customer premises equipment built around Verizon’s proprietary GTF standard. The service is reportedly capable of delivering downstream speeds of 940 Megabits per second, but Verizon said the average is around 300 Mbps. At some point in the future, Verizon has pledged to turn around and upgrade everyone’s CPE and software to 5G NR, truck rolls included.

Not that it appears to be a huge risk at the moment: Verizon hasn’t released a coverage map for the seemingly very limited portion of cities like Los Angeles that have its new 5G service.

Indeed, it may be premature to declare Verizon to be actually out in the market with a true 5G deployment. But the carrier seems intent on investing heavily in the standard nonetheless. Last week, when it announced voluntary layoffs of 10,600 workers, it declared the cost savings earmarked for 5G infrastructure.

Surfing the Broadband Waves

“It’s a totally different way to doing broadband, meaning, instead of having a cord into the house, you have a wireless wave into the house, but the experience is the same,” Verizon CEO Hans Vestberg said at the UBS Global Media and Communications Conference earlier this month. “And I think that’s a big opportunity for us.”

Verizon also plans to deploy a standards-based 5G mobile service next year. Overall, 5G activity should ramp up significantly throughout 2019.

AT&T is about to light up fixed home 5G services in 12 cities, working primarily with technology partners Ericsson, Nokia and Samsung, and mixing a range of mid- and low-band spectrum in suburban areas with millimeter wave spectrum in urban areas. The No. 2 U.S. carrier plans to be ready to go in around a third of the U.S when the first 5G mobile devices hit the market it the first half of 2019.

“I’m probably about as energized about 5G as any technology innovation that we’ve ever deployed,” said AT&T chairman and CEO Randall Stephenson, also speaking at the UBS Global Media show. “It’s such a radical game-changer to have the kind of capacity, performance of a network with — I’m going to exaggerate — but no latency. It’s effectively a no-latency network.”

While AT&T has big consumer-facing plans, IoT will get a big push, too.

“Our early priority for 5G will be enterprise applications,” Stephenson said. “We’re already having a lot of interest in people pursuing robotic plants.”

Nos. 3 and 4 carriers T-Mobile and Sprint, meanwhile, have also announced both home-based and mobile 5G rollouts for 2019. Notably, amid their attempts to sell their $26.5 billion merger to regulators, the pair are pitching the notion that the free market needs a powerful third provider of fixed internet service, beyond Comcast and Charter.

“What’s really resonated with many of the agencies on the Hill and in the states is the fact that you have two going to three,” T-Mobile executive vice president and chief financial officer J. Braxton Carter told attendees at the Bank of America Merrill Lynch Leveraged Finance Conference earlier this month.

“That the two scaled incumbents control two-thirds of the cash flows, the vast majority of subscribers are basically oligopolists to begin with, or let’s just call it a predatory duopoly,” Carter added. “And the creation for a third scaled player … really increases the environment from a two-player market that’s out there.”

While the cable industry doesn’t yet believe the wireless business can launch a true replacement for wireline broadband — at least not without cable infrastructure — there seems to be agreement that the wireless guys are doing a better job right now, marketing-wise, claiming the network of the future.

At Cable-Tec Expo, Powell lamented the fact that cable hasn’t managed to effectively tie its own innovative work with Full Duplex and Extended Spectrum DOCSIS into the national lexicon with a term like “10G” — a reference to the theoretical but well-founded 10 Gbps speeds cable can expect to deliver in just a few years.

Indeed, the cable industry is arguably as far along with these wireline innovations as wireless is with 5G. But we don’t hear nearly as much about them.

Despite reliably delivering on its own, relatively muted technology hype for decades, Powell said that cable is getting “left behind in the nation’s optimistic narrative of the future.”

Us and Them

“We have a better platform to deploy [5G] technology, I think, than the cellular industry does, because we are fully distributed from a high-capacity wireline perspective,” Charter chairman and CEO Tom Rutledge said at the Goldman Sachs 27th Annual Communacopia Conference in September.

“If you think about what 5G is, it is small cells,” Rutledge added. “Small cells mean you needs lots of wired line connectivity to make the small cells work. We think we are actually in a better position to do that than traditional cellular companies. Yes, 5G can be used to compete against us. It is very capital-intensive.”

Seeking to calm the nerves of investors leery of debt and rising subscriber churn at satellite-TV service DirecTV (see Platforms, page 28), AT&T is laying out a plan to make its $84.5 billion purchase of Time Warner a necessary catalyst to compete with Netflix around the globe.

AT&T’s recently acquired WarnerMedia division will launch a broad-reaching streaming service, leveraging content from Warner Bros., Turner and HBO, in the fourth quarter of next year. At an investor day event, AT&T’s top executives didn’t announce a name for the new service, or any pricing. But they did describe three basic tiers.

The entry-level package will be focused on theatrical movies. There will be a more premium bundle including original shows along with blockbuster films. A third ultra-primo tier will add an extensive library of WarnerMedia content, plus licensed third-party content, to the other offerings.

“We understand that this product has to be good enough” to get viewers to spend money on it, WarnerMedia CEO John Stankey said.

The subscription over-the-top market is crowded, he acknowledged, but incumbents like Netflix will become vulnerable when WarnerMedia and The Walt Disney Co. — plotting a similarly ambitious direct-to-consumer launch — start withholding licensed movies and shows for their own platforms.

“Some of the incumbents should expect that their libraries are going to become a lot thinner,” Stankey said, adding that as much as 80% of viewing for the top SVOD services comes from licensed shows and movies.

AT&T also said it will earmark $12 billion of its increased cash flow next year for debt repayment.

This is the satellite-TV business AT&T paid $49 billion for just three years ago?

Coming off a record bad third quarter, during which it lost 359,000 customers, the DirecTV satellite-TV platform is probably up against more bad news in Q4, as it grapples with expiring promotional deals and suddenly resurgent programming price increases.

Indeed, the linear side of the DirecTV business ended Q3 with fewer subscribers (19.63 million) than when AT&T closed on the business in the summer of 2015 (20.28 million). AT&T continues to shuttle at least some of the departing subscribers to its lower-margin virtual pay TV services. But in the meantime, average revenue per unit (ARPU) is down, churn is up and investors are nervous.

This angst is showcased in a new MoffettNathanson report, highlighting some of the challenges the satellite platform is facing beyond just the normal bad weather or the cord-cutting trend.

Promos Come Home to Roost

When it first took over DirecTV, AT&T signed up a lot of customers to expanded promotional deals, looking to goose subscriber growth early on while easing churn for other businesses. In June 2016, for instance, the telco added a second year of promotional pricing for new customers who also subscribed to another AT&T service, wireless in particular.

The promotion, which subtracted an average of $40 from the monthly bills of participating subscribers, succeeded in sparking DirecTV customer growth, with the platform adding 342,000 customers in the second quarter of 2016 and another 323,000 in Q3 of that year.

But this year, DirecTV’s promotional chickens have come home to roost.

As MoffettNathanson noted, even though AT&T cut the promotion back to one year, having a sizable portion of the subscriber base on two-year deals caused its total number of discount customer payments to spike — the expanded two-year promo deals weren’t coming off the books fast enough to make room for new standard one-year deals.

By April of this year, the research firm estimated that as much as 40% of the overall DirecTV customer base was on a promo deal. Coupled with the growth of the low-margin (zero margin?) DirecTV Now business, average revenue per user (ARPU) suffered.

Just as quickly, those two-year deals began to expire. By the third quarter, the percentage of the subscriber base on promotional pricing fell to 15.9%. It’s expected to fall to 15.2% for the fourth quarter.

AT&T has said it will work with customers facing sudden price increases for pay TV service, but not everyone seems to be sticking around.

Investors welcome the expected improvements in ARPU, but are concerned about subscriber losses.

“To the extent that rates do rise significantly for that much of the subscriber base, one might have reasonably expected elevated churn in response,” the MoffettNathanson report concluded. “There is no such thing as a free lunch.”

Further complicating AT&T’s outlook is a sudden flurry of program licensing renewals, which started with 21st Century Fox and could soon include The Walt Disney Co., Viacom and CBS Corp. This acceleration of program pricing will put even more pressure on AT&T not to raise consumer pricing and further elevate churn.

Of course, the same dynamics apply to DirecTV Now, the virtual platform to which AT&T freely admitted it was “transitioning” its satellite customers to earlier this year.

AT&T has talked of a future in which DirecTV Now — as well as a more robust, soon-to-launch virtual platform — will offer far greater advanced advertising revenue at a much lower operational cost.

“The key is, as we roll that out to full production or full availability to our customers, you will see subscriber-acquisition costs come down significantly because it’s the cost of that box as opposed to the cost of an employee rolling a truck, climbing the roof and installing the satellite,” AT&T chief financial officer John Stephens said at a November investor event, talking about AT&T’s upcoming DirecTV-branded pay TV service, which will be delivered via IP to proprietary set-tops.

Speaking to investors back in April, Stephens also pointed out AT&T’s advanced advertising objectives with IP-delivered video services. In the second quarter, he noted, “we were up 9% in [advertising] revenues. We have a base of about $350 million a quarter, in that range … So the team is actually proving that this works already with our existing [framework].

“We’re getting higher CPMs and getting higher revenue streams and making it more effective,” he added.

Stephens also talked up new DirecTV Now features, such as a cloud digital video recorder, as a means to “add new revenue streams and help counter some of the revenue and margin pressure we are dealing with.”

‘Transitions Are Never Easy’

Overall, he described the AT&T pay TV business as in transition, a word he used about a dozen times.

“Transitions such as this are never easy, but we have shown that we’re able to do this time and time again, whether it’d be with our voice or broadband or wireless services,” Stephens said. “We don’t expect video to be any different.

Now, the challenge for AT&T is making sure its core satellite TV business doesn’t erode too fast to effectively transition to an IP-based service, which still has hours to cook in terms of being an effective, advanced-advertising driven, profitable business.

In a statement released to FierceVideo, AT&T seemed to walk back the transition talk at least a little, renewing its allegiance to satellite.

“We have no plans to discontinue satellite service,” the telco said. “Our video strategy involves offering our customers choices in how they want to receive their video service, including via satellite, our wireline service or streaming over home broadband, regardless of their provider.”

It’s not a bad idea at all, but it won’t be cheap.

That seems to be the conclusion among media analysts who have crunched the numbers and prospects for The Walt Disney Co.’s upcoming subscription streaming service, Disney+, slated to roll out late next year and compete head to head for subscription dollars around the world.

“I actually think it’s a smart move,” TV[R]EV analyst Alan Wolk said. “Disney is such a strong brand both in the U.S. and overseas. The content will largely consist of known quantities, whether it’s High School Musical or one of the superhero franchises. That’s a much easier sell than all of the unknown/untested programming that Netflix is betting on.”

After watching Netflix actually surpass it — briefly — in market capitalization earlier this year, Disney has made a series of bold moves to better compete with the subscription video-on-demand platform in the future, starting with the $71.3 billion purchase of 21st Century Fox’s entertainment assets.

But a massive global pivot into the streaming age doesn’t come cheap, and that’s only the top line item of the bill.

While modeling the New Disney economic model post-Fox acquisition is a challenge for investment analysts, figuring out near-term impact of Disney+ to the bottom line certainly doesn’t make it any easier.

Nathanson Breaks It Down

MoffettNathanson analyst Michael Nathanson has taken an interesting stab. He starts with revenue. Predicting on the domestic side that Disney will seek to undercut Netflix on price, it’s estimated that in its first year, Disney+ will sell for around $8 a month, penetrating around 2% of U.S. homes and accounting for around 2.4 million subscribers.

At that rate, Nathanson estimated Disney+ domestic revenue at around $114 million for its first year in the market, growing to around $735 million on 9.5 million subscribers by 2022. On the international side, Nathanson projects about 6% market penetration generating around $850 million in revenue by 2022.

From content to technology, putting it together all won’t come cheap. Disney will reportedly spend $30 million to $35 million over a four-year window on many of its exclusive Disney+ original series, with $100 million being committed alone to a live-action Star Wars show.

In terms of technology, Disney already spent $1 billion to own a piece of BAMTech, the streaming tech company built by Major League Baseball Advanced Media. Nathanson estimated that Disney will spend another $350 million in marketing to get Disney+ off the ground in the first year.

Perhaps the biggest hit will come from the disruption of legacy businesses. This starts with a $400 million revenue hit resulting in Disney’s decision not to renew its output deal with Netflix, which expires at the end of 2018. Home-video revenue will also be impacted to the tune of $270 million by 2022, Nathanson estimated, and $750 million will be taken out of theatrical TV licensing by that time. On the TV side, $300 million in revenue will disappear from series being distributed on SVOD. And these are just some of the dollars that are draining from one pocket as the streaming pocket fills.

Accounting for an 80% margin, the disruption to legacy businesses’ earnings before interest and taxes (EBIT) caused by Disney+ will tally around $1.85 billion.

Subtracting Disney+ incremental expenses — and lost revenue from disrupted core businesses — from the new service’s total revenue, Nathanson found that the direct-to-consumer product “will negatively impact Disney’s EBIT by roughly $490 million in FY 2019, and around $1.4 billion in FY 2020 through 2022. After taxes, this would represent a hit to net income of over $1 billion.”

And this is before the complexities of involving the acquired Fox assets are put into the equation. Ditto for Hulu, the SVOD platform now 60% owned by Disney.

Saturated Market

Disney+, meanwhile, is launching into a market far more saturated with subscription streaming options than it was when Netflix conducted its initial domestic and international expansion campaigns.

“We assume that Disney+, given its much more limited content offering and late-mover status, will be growing at 40% of the rate of Netflix’s ramp,” Nathanson wrote.

None of this is to suggest that analysts, for the most part, don’t see Disney+ as a worthwhile pivot for Disney’s future.

“Augmented further with Fox’s content production and international assets, as well as a majority ownership in Hulu, we believe New Disney can deliver healthy growth while executing on a successful transition into the streaming future of TV,” Morgan Stanley analyst Benjamin Swinburne wrote in an investor note.

For his part, Iger billed the service’s early gestation — which includes content from core brands from Disney core brands including Pixar, Marvel, Star Wars and soon, National Geographic — as just a “starting point.”

“We plan to continually elevate the experience and enhance the value to consumers with a constant pipeline of exclusive new content as we move forward,” Disney CEO Bob Iger told investors earlier this month.

While Dish Network’s core satellite-TV business is once again experiencing accelerated declines, it can no longer count on Sling TV as a buffer for its subscriber metrics.

Dish’s nearly four-year-old virtual multichannel video programming distributor added just 26,000 customers in Q3. The operator wasn’t yet breaking out Sling subscriber metrics last November, but estimates were that it gained around 240,000 Sling TV users in Q3 2017.

The just-finished third quarter is thought to be Sling TV’s slowest since it launched in Q1 2015, alongside Sony PlayStation Vue.

“I think one of the phenomenons you’re seeing is — I don’t think that [the] OTT business is slowing down,” chairman Charlie Ergen said during Dish’s Q3 earnings call. “I think it’s probably accelerating [overall]. But you’re seeing a lot more players in the marketplace than just Dish and Sony, now with DirecTV and now with YouTube and others and Hulu.”

Some deceleration for Sling TV undoubtedly came from a $5 monthly price increase applied to the vMVPD’s base Orange tier during the quarter — an effect Dish expects to continue through Q4.

But the vMVPD sector, led by Sling TV and its 2.37 million subscribers, does seem to be cooling overall. The runner-up in the category, AT&T’s DirecTV Now, added just 49,000 users in Q3 after growing by 342,000 customers in the second quarter. (DirecTV Now added 296,000 users in the third quarter of 2017.) That platform’s deceleration came as AT&T ended a number of sign-up promotions.

With their respective operator client bases consolidating, and each facing expensive transitions to next-generation wireless technology product lines, two struggling telecom vendor giants joined forces last week.

In a deal valued at $7.4 billion, financing included, Hickory, N.C.-based CommScope purchased Suwanee, Ga.-headquartered Arris. The pact combines two vendors of roughly the same girth; each is market-capped around $5 billion. At $31.75 a share, CommScope paid a 14% premium for Arris.

The deal is expected to close in the first half of next year. CommScope will be in charge of the combined company, but Arris CEO Bruce McClelland and his management team, as well as the Suwanee office, will remain in the fold. Private-equity giant The Carlyle Group has invested $1 billion into CommScope to finance the deal in exchange for a 16% stake. It will have two seats on the board when the deal closes.

The combined company should generate estimated annual revenue of around $11.3 billion and EBITDA of around $1.8 billion.

Both CommScope and Arris are selling the deal on the notion that they sell complementary network components for technologies like Citizens Broadband Radio Service (CBRS). Analysts tend to agree, but actual stock buyers remain skittish — evidenced by CommScope’s 20-plus percent slide on Wall Street in the aftermath of the announcement.

Certainly, both companies could use a boost.

Arris spent lots of money over the last six years bulking up in the pay TV set-top business, acquiring Motorola Mobility’s customer premises equipment division (formerly General Instrument) for $2.35 billion. In 2015, it gobbled up No. 2 set-top supplier Pace out of the UK for $2.1 billion. With large operator clients like Comcast looking to phase out of full-service pay TV set-tops, and milk the last life out of those they have in the market, Arris is looking to transition, evidenced by its $800 million purchase of Ruckus Wireless last year. But around 35% of its revenue still comes from the fading set-top business.

Shortly after the deal was announced, Arris reported a 4.5% third-quarter revenue decline to $1.651 billion.

CommScope is looking to transition into 5G connectivity products, as well, but it’s struggling in the here and now of the mature 4G era (although sales were up 2% in the third quarter to $1.15 billion).

BTIG Research analyst Walter Piecyk estimated that the combined companies could realize $300 million to $450 million in annual cost synergies.

Edwards conceded that the North American pay TV set-top business is in decline. “But it is a good cash generator, so that’s something that doesn’t scare us,” he added. “We have managed a lot of businesses for cash in our past.”

REUNITED

It turns out CommScope and Arris have been together before. Here’s a timeline showing how, in a complex series of deals spanning 21 years, CommScope just paid $7.6 billion for assets it had previously been connected to.

1997: Horsham, Pa.-based General Instrument (GI), which specializes in semiconductors and other cable and satellite TV electronics hardware, splits into three companies: General Semiconductor, Next Level Systems and CommScope.
1998: Next Level Systems, which houses the former GI’s cable and satellite set-top business, changes its name to GI Corp.
2000: Motorola pays $17 billion for GI. Combined with Zenith Communications assets, GI will be the foundation of a unit that will ultimately be rebranded as Motorola Mobility.
2001: Google buys Motorola Mobility for $12.5 billion.
2012: Arris pays $2.35 billion for Motorola Mobility’s Home division, which houses the former GI assets.
2018: CommScope pays $7.6 billion to buy Arris.

As subscription-based streaming has become an increasingly mature, competitive business, the advertising revenue side is emerging as undiscovered country.

Consider the Roku Channel as the Netflix of the fast-growing advertising-supported video-on-demand (AVOD) business.

Roku just posted third-quarter revenue growth of 39% (to $173.4 million), driven by the rapid expansion of platform advertising sales on the Roku Channel.

Roku is still known for its over-the-top devices that connect TVs to the internet. But since the first quarter, it has been making more of its money selling advertising.

Platform revenue comprised 47% of Roku’s revenue in the third quarter of last year. In the just-reported 2018 third quarter, platform revenue had spiked to 57%, or $100.1 million.

That growth tracks with the free-to-consumer Roku Channel, which expanded out to the open internet in September, a year after its launch.

Roku distributes the streaming apps of about 5,000 partners in the OTT ecosystem that operate on its industry-leading device platform. That platform currently serves 23.8 million active accounts, up from 16.7 million in third-quarter 2017.

The Roku Channel is but one more app, offering library movies from suppliers including Warner Bros. and Sony Pictures, as well on-demand news channels from ABC News and Cheddar, to highlight a small cross-section of the content.

Roku doesn’t break out how much advertising revenue the Roku Channel is generating specifically. But it’s been called the platform’s fastest-proliferating app ever.

“The Roku Channel has become a material source of ad impressions and monetization on the platform, something we believe will grow over time given the expanding reach and popularity of the channel,” Roku CEO Anthony Wood said in a note to shareholders. “Increasing reach and engagement allows us to continue to improve content quality and selection on the channel, which fuels its relevance to our user base.”

Roku Channel growth also tracks the expansion of engagement with the platform in general. Total hours spent by users streaming video increased to 6.2 billion in the third quarter, up from 3.8 billion hours in Q3 2017.

Wood said he believes Roku has the advanced-advertising capability to further monetize this growth.

“A key differentiator, and competitive moat, is our direct relationship with customers on our platform which allows us to continuously collect rich data, including user registration, and anonymized behavioral information — like audience engagement with streaming channels, streaming ads and traditional linear ads using opt-in technologies like Automatic Content Recognition (ACR),” Wood said. “We gather this data and create user segments, develop lookalike audience and predictive models and activate segments for use in a variety of business operations, including recommendations for users in The Roku Channel, analytics for our content publishers and targeted advertising for brands. Our platform is also capable of ingesting CRM and third-party data sets from advertisers and data providers, to augment our already rich data set.”

You’d think social media giant Facebook would be ramping up the spend on advertising for its one big Facebook Watch video service hit at the moment, Ball in the Family, a reality show following basketball’s famously bombastic Ball family around the world.

The show’s producer, Steve Ezell, who’s traveled with the Bunim/Murray Productions-produced show since it debuted 15 months ago, said that family patriarch Lavar Ball’s youngest son, LaMelo, would return to the United States from self-imposed exile in a Lithuanian pro league — big news on digital outlets ESPN.com and Bleacher Report.

Would Facebook tout the breaking news to promote the third season of Ball in the Family?

Not really. Nothing, in fact, was planned for advertising.

“Because of the nature of the [Ball] family,” Ezell said, “everybody is advertising for us.”

For those wondering about the potential of the world’s largest communications platform to take over TV with Facebook Watch, the still relatively new free-to-consumer, advertising-supported video service is starting out unconventionally.

In an age in which vast quantities of news gets distributed on a social network reaching 2.27 billion active monthly users across the globe, it would seem logical that Facebook might find ways to exploit user data to target viewers to shows. A nifty algorithm, for example, could surface those headlines in the feeds of the basketball fans it allegedly knows far too much about, reminding them about its little Ball family reality show.

“We have access to a lot more data than we traditionally would working for a TV network,” conceded Ezell, who doesn’t even work directly for Facebook.

That kind of intimate promotional capability is the Holy Grail for most TV marketing executives toiling away at linear cable and broadcast networks. But if your interest was piqued by last week’s Ball news, you’d have to search for the show on Facebook, or check to see if it was still on the “Watch List” of shows you’ve previously viewed on the platform.

Just like Ball in the Family, more than a year after launch, Facebook Watch is just kind of quietly sitting there, hardly a failure but by no means a hit. “Facebook appears to be making a big play here, though its internal promotions belie the strategy,” Michael Greeson, president of research firm The Diffusion Group, said.

The promotional strategy is dictated by the “open” design of Facebook’s platform, said Matthew Henick, the social media firm’s head of content strategy and planning. The handful of premium shows on Facebook Watch — which also include the Jada Pinkett Smith-led gab show Red Table Talk, the Brillstein Entertainment Partners-backed melodrama Sorry for Your Loss and Queen America, featuring Catherine Zeta-Jones as a beauty pageant coach — get no more of a promotional boost than do the hundreds of far-cheaper-to-produce digital shorts from internet video companies like Refinery29 and Mashable.

Similar to YouTube, the best and most popular Watch shows will ostensibly end up winning the day, virally distributed via platform search and by the sharing of friends.

Maybe.

Sorry for Your Loss stars Elizabeth Olsen, the sister of twins Mary-Kate and Ashley Olsen and an acclaimed indie film actress, as a young widow unearthing all sorts of strange secrets about her deceased husband. The show has been exceptionally well-reviewed, with its first season generating a very impressive 95% “fresh” score on TV critics aggregation site Rotten Tomatoes.

But according to Facebook’s metrics, which are readily apparent on a Watch show’s page, just like they are on YouTube, only around 130,000 users have clicked “start” on the most recent episode. (Facebook debuted the first four episodes of the show on Sept. 18. There are 10 first-season episodes of Sorry for Your Loss.)

“They haven’t really figured out how to promote anything they do,” said Alan Wolk, founder of TV[R]EV, concurring with fellow analyst Greeson.

14M Regular U.S. Viewers

As Watch reached its one-year anniversary in August, The Diffusion Group released an anemic user survey assessment, which said the service would spend between $1 billion to $2 billion on video content this year. The researcher said Watch was being used regularly by only around 8% of U.S. Facebook denizens.

Worse, only around half of Facebook’s U.S. user base had even heard that there was a free video offering on the social media network.

“People don’t know what it is,” Wolk said. “It’s not even clear to people that Watch is a separate thing [within Facebook].”

Conversely, 8% of 214 million translates to a sizable audience of around 14 million regular Facebook Watch viewers, which in the ultra-competitive realm of over-the-top distribution, ain’t a bad first-year performance by any measure.

According to eMarketer, spending on Facebook dominates internet video advertising. Last month, the research company noted that spending on online video ads in the U.S. will grow 30% in 2018 to $27.82 billion, making up a fourth of all digital ad spending. The report projects that Facebook will end up controlling 24.5% of that digital ad spend, or around $6.81 billion.

Perhaps with all of this in mind, Facebook said in August it would charge forward with international expansion of Watch. In the United Kingdom, for example, Facebook is already funding shows like Barcroft Media’s Most Interesting Homes and ZigZag Productions’s Troy the Magician.

Despite what he still considers a “slow build” of Watch users here in the U.S., TDG’s Greeson conceded “it would be remiss to underestimate Facebook’s longterm potential as a large-scale video provider.”

Like Amazon, Apple, Netflix and Google — the other four companies making up the “FAANG” acronym for Silicon Valley’s most highly market-capped companies — Facebook approaches video with goals that are more diffuse and less direct to the bottom line, relative to most TV companies, Greeson said.

“This is why technology companies are so dangerous to legacy media companies,” he said. “Pure-play video, music or gaming operators must survive on revenue and profits from those services, whereas Facebook, Google, Apple and Amazon have such deep pockets and vast business empires that they can spin up a service in short order and lose money on it for years if it serves a higher purpose, like keeping Facebook users in the branded ecosystem for longer.”

In his report, the TDG analyst specifically noted the Watch platform success of Localish, a digital-first brand launched by ABC Owned TV Stations. In July, Localish premiered More in Common on Facebook Watch. Through early November, the uplifting reality show had gathered 172,400 Facebook followers, which are tantamount to “subscribers” on YouTube. Not bad for locally produced content by a station group.

Housed in the “news” section of Facebook Watch, More in Common is comprised of heartwarming stories, culled from the news teams of local ABC stations, about Americans who have “come together despite their differences” to accomplish notable goals in their respective communities.

It’s in line with other “pro-social” unscripted Watch shows, including Returning the Favor, another local-do-gooder focused Watch series starring Mike Rowe, former host of Discovery Channel’s Dirty Jobs.

Is this kind of unscripted show Watch’s “brand lens”? Cue the maybe emoji.

“Unscripted content definitely works well on the platform, but we are seeing really strong signals with viewers connecting with each other around scripted content, whether it’s a drama like Sorry for Your Loss or stand up comedy clips from Dry Bar Comedy,” Henick said.

Ricky Van Veen, Facebook’s head of global creative strategy, has recently said that the platform looks for “hot starts” with known talents, such as the Ball family or Pinkett Smith.

Led by Digital Natives

While FAANG has rattled the TV business largely by poaching from the Burbank-native ranks of traditional film and TV companies, Watch has put mostly digital natives in charge of video.

Henick, for example, has a master’s degree in digital media studies from Stanford University and cut his teeth at internet content company BuzzFeed.

Van Veen was the co-founder of seminal digital content platform College Humor and also spent time at Barry Diller’s Internet conglomerate, IAC. Fidji Simo, Facebook’s vice president of video, used to work at eBay. Angel Gonzalez, sports and original programming manager for Facebook, has a background in banking and construction.

Notably, though, Mina Lefevre, head of development and programming for Facebook Watch, worked at MTV as executive vice president and head of programming and development.

“We have people with very traditional TV backgrounds on our originals team both in development and production,” Henick said, noting Lefevre specifically. “We didn’t recruit them solely for their traditional experience, but for their creative tastes and willingness to experiment in this new video environment. ‘Internet content’ and ‘traditional TV’ are merging very quickly.”

Ball in the Family producer Ezell said he mostly interacts with Lefevre and Gonzalez. He said the creative process of working with Facebook is not too different from dealings he’d have with a cable network. Network notes, he said, are often given, but tend to be on the “lighter side.”

It’s unclear as to how precise metrics of Watch shows are, despite what appears to be transparency. As Wolk noted, unlike, say, Nielsen metrics, which measure viewing minute by minute, Facebook is only showing the world how many starts there are to an episode. So, on the surface, a metric like the 27.4 million views for the premiere of Ball in the Family may appear impressive, but it doesn’t tell you how many of those views came from start/stop viewing from the same user, or how many unique users watched the show.

Still, Facebook’s viewer metrics do tell a story of the platform perhaps serving its larger goal, which is to simply increase overall engagement. For example, beyond the 4 million “views” for the pilot episode of Sorry for Your Loss, Facebook tells us that nearly 8,600 people have reacted to the show, 1,000 users have commented on it and nearly 2,500 watchers have shared it with their friends.

For large tech companies like Facebook, Greeson said, “media services are commonly a means to a larger end, not ends in themselves.”

ATLANTA — As cable operators around the world enter the finishing stages of DOCSIS 3.1 deployment, it’s still unclear as to how much current demand there is for services at 940 Mbps downstream, the technology’s current speed threshold.

But Arris is now challenging the industry to see downstream speeds of 1 Gigabit per second as just a signpost that’s coming up fast. With the Internet of Things putting more connected devices in the home, and applications like 4K streaming and virtual reality emerging, the vendor has said cable operators are going to need to bring speeds of 20 Gigabits per second into the home in the next 10 to 15 years.

While compounded annual growth rates (CAGR) for downstream internet traffic have stabilized a little of late, “upstream is actually accelerating, 25-30%, which is quite a bit higher than the 20% it used to be,” Tom Cloonan, chief technical officer of Arris’ Network Solutions unit, said. The Suwanee, Ga.-based vendor is now focusing on technologies that improve upstream capacity and latency, he noted.

In doing so, Arris is walking a bit of a marketing tightrope, as it tries to sell a more immediate network upgrade, Full Duplex DOCSIS (FDX), and a separate, theoretical one that is further out, Extended Spectrum DOCSIS.

Upstream Traffic Jam

As subscribers’ bandwidth demands grow and equipment capacities increase, MSOs will need to expand their upstream spectrum, and FDX provides a somewhat immediate opportunity to do just that, Cloonan said.

FDX enables DOCSIS 3.1 hybrid fiber-coax (HFC) networks to support shared 10 Gbps transmission capabilities both upstream and downstream. The current technology, DOCSIS 3.1, will support 10 Gbps downstream and just 1 Gbps upstream, once all of the standard’s features are finally actualized.

With CableLabs completing the specifications for FDX a year ago, Cloonan and his team used last week’s SCTE/ISBE Cable-Tec Expo in Atlanta to show off network solutions based on the second generation E6000 Converged Cable Access Platform, with an eye for FDX upgrades occurring in the next two years.

Indeed, at the booths of multiple technology vendors, Full Duplex was in the here and now at Expo. Operators such as Comcast, for instance, were looking to swap in FDX-capable nodes as they transition to Distributed Access Architectures (DAA). Arris has already been in the market touting the FDX upgrade potential of its DOCSIS 3.1 network solutions, such as one recently deployed by Australia’s NBN earlier this year.

To make FDX a reality, Cloonan explained, operators will need to be able to move quickly to a node+0 environment and be willing to upgrade their Cable Modem Termination Systems (CMTSs), nodes and CPE.

Of course, that’s asking a lot for some cable companies.

Though it’s further out and currently in the research and development phase, Cloonan said Extended Spectrum DOCSIS may be better suited for operators that want assurances that their future high-capacity networks will work in existing node+X environments that may not support FDX operation, which requires node+0, where amplifiers are not used.

“There are a lot of operators who have no intention of getting to a node+0 environment in the next 10 years,” Cloonan said. “It’s going to take a while to run fiber deep enough to get to node+0.”

Capable of working in node+6 configurations and delivering theoretical symmetrical speeds as high as 60 Gbps, Extended Spectrum DOCSIS (aka “DOCSIS 4.0”) is being championed by operators including Cox Communications.

With Extended Spectrum DOCSIS, operators would use more — a lot more — than the 1.2 Gigahertz of plant spectrum they currently exploit for DOCSIS 3.1. In fact, they’d use more than the 1.8 GHz leveraged by FDX. Extended Spectrum’s visionaries see as much as 3 GHz, or even 6 GHz, being used.

It was Cloonan who first pitched the Extended Spectrum idea two years ago, with technologists proposing the use of 6 GHz of spectrum and Fiber Deep to deliver symmetrical speeds as high as 50 Gbps.

Earlier this year, Jeff Finkelstein, executive director of advanced technology for Cox Communications, told Light Reading that he had a team of Georgia Tech graduate students perform calculations suggesting the concept could actually work.

“A lot more work has to be put into it to prove it will work,” added Cloonan, who envisions a goto- market for Extended Spectrum sometime in the mid-2020s. “It’s not going to be put into the field next week.”

Of course, all of this work on advanced DOCSIS technologies is unfurling as Arris continues to support the current DOCSIS 3.1 standard.

“From Arris’ point of view, we’re still developing 3.1 features,” Cloonan said. “The spec is several thousand pages long. Certainly, not every feature was turned on on day one. We’re still rolling features in. It’s still a very active program.”

ATLANTA — SCTE/ISBE has announced a 10-year plan for Cable-Tec Expo that will include frequent stops at cable industry hubs Denver and Atlanta, increased commitment from the MSO community and broad measures designed to increase sales interaction for exhibiting companies.

Following 2019’s 50th anniversary event in New Orleans (Sept. 30-Oct. 3), the organization’s signature trade show will visit Denver and Atlanta multiple times through 2029, while making one-time stops in Philadelphia and Washington, D.C.

MSO sponsors, meanwhile, will take the lead in creating program content, securing speakers and ensuring participation by senior leadership. SCTE/ISBE will also implement broad measures to enhance the value proposition for exhibitors, working to increase interaction with customers and potential customers through reconstruction of the Cable-Tec Expo Exhibitor Committee.

“Our goal with this plan is to continue to build the relevance and value of Expo as a platform for driving learning and development, applied science and technology leadership for the next decade,” said Bill Warga, VP of technology for Liberty Global and chairman of the SCTE/ISBE board of directors.

ATLANTA — Cisco Systems used the opening of last week’s SCTE/ISBE Cable-Tec Expo to highlight two key operator initiatives, as well as a new network node upgradeable to Full Duplex DOCSIS (FDX).

First, the tech vendor said Sioux Falls, S.D.-based cable operator Midco has put Cisco’s Cloud Native Broadband (cnBR) CCAP solution into trials, delivering 1-Gigabit per second services to Mobridge, S.D.

Secondly, Cisco said Canada’s Cogeco has become the first operator to deploy its Infinite Broadband Unlocked licensing plan, which restructures DOCSIS software licensing across the operator’s entire footprint, rather than by service groups.

Lastly, Cisco revealed the GS7000 FDXi, a smart Remote PHY node billed as “FDX-ready.” The smart device is remotely programmable.

Moving CCAP to the Cloud

The tech company’s programmers spent 24 months moving the “monolithic” DOCSIS 3.1 program found on traditional Converged Cable Access Platforms (CCAP), reprogramming it as a series of many “micro-services” that can run from the cloud, Cisco director of access networks strategy John Holobinko said.

Traditionally, implementing new iterations of DOCSIS to, say, enable new features required an arduous process — it was very difficult to alter one line of a “giant piece of code” without “unintended consequences” somewhere else, Holobinko said.

That limited the ability of operators to create flexible, evolving network technology environments.

However, the compartmental abilities of the cnBR solution allow operators to make changes to only one micro-services portion at a time, without affecting the rest of the network if something goes wrong.

“The velocity of [network upgrades] goes from once a year to once every two weeks,” Holobinko said.

Like competitors Arris and Casa Systems, Cisco’s introduction of virtualized services is essentially disrupting its own product line. In this case, Cisco is replacing its cBR-8 CCAP business with a cloud-based solution.

Of course, as Holobinko noted, Cisco is also in the server business.

“If you need additional capacity, instead of deploying more of these giant cBR-8s, everything is elastic and scales across the network,” he added.

As operators rethink their networks and move to Distributed Access Architectures delivering services at 1 Gbps, the traditional means of accounting for software licensing fees has become untenable for some, Holobinko contended.

Traditionally, he explained, technology vendors like Cisco “lowered the price of the hardware, sold it close to cost, then gained our revenue from the software.”

Further, he said, traditional schemes such as basing fees based on the number of users served by a line card don’t work in a virtualized system with no line cards.

Thus the introduction of Infinite Broadband Unlocked (IBU), which bases fees on users across the entire footprint, letting operators pay DOCSIS software licensing fees only for subscribers they have.

According to Michel Blais, vice president of engineering and operations for Cogeco Connexion, the system allows Cogeco to “upgrade our current broadband network to enable the majority of Cogeco Connexion’s footprint to be 1-Gig ready.”

Make It FDX Ready, Too

Earlier this year, Comcast vice president of network architecture Rob Howald made news by indicating a desire to see a DAA node hit the market that had the ability to be easily upgraded to Full Duplex DOCSIS at a later time. Howald said he’d like to see such a product hit trials in the second half of 2018.

The logic seems simple enough — why upgrade nodes twice amid the transition to DAA?

Cisco seems on schedule, with the vendor declaring that its GS7000 FDXi will be available in 2019.

Holobinko said the nodes can be made FDX-capable with a simple modular addition — a “two-minute procedure,” he said.

Further, with some operators complaining that up to 90% of their nodes are operating “suboptimally,” the smart devices allow for adjustments at the headend and limit the amount of time they spend “sending a guy out with a screwdriver,” Holobinko said.

Virtual MVPD Philo is adding three networks to its "premium" $20-a-month tier, which now includes 50 channels.

The additions include aspireTV, Earvin “Magic” Johnson’s lifestyle channel focused on the icons and trendsetters of black culture; Revolt, Sean “Diddy” Combs’ hip-hop-themed network targeted to Gen Z audiences; and UPtv, a family-oriented network featuring hit archival TV shows such as Gilmore Girls, Home Improvement and America’s Funniest Home Videos, was well as PG-rated and safer box-office hits of yesteryear.

Related: Philo Unleashes Entertainment-Focused OTT TV Service

The additions come as Philo nears its one-year mark. The channels are added to the operator’s premium tier, which includes A&E, AMC, Comedy Central, Discovery Channel, Lifetime, Logo, MTV Live, Nick Toons, TLC, Travel Channel, VH1 and Viceland.