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Cable Vet Calls on Industry From the Cloud

Cable veteran Michael Willner sold Insight Communications, the MSO he founded, to Time Warner Cable for $3 billion last February. Now the former NCTA chairman is back calling on his former colleagues after taking the reins of Penthera Partners, a technology company he and Insight cofounder Sidney Knafel invested in.

Penthera has developed software that moves HD video between the cloud and mobile devices. One application allows video sharing; another product downloads HD video for later playback.

In an interview with B&C business editor Jon Lafayette, Willner talks about why these products will help the cable industry at a time when it is under pressure from rising programming costs, slowing household formation and growing competition from over-the-top video options. An edited transcript follows.

Didn't you want to take some time off or hit the beach before joining Penthera?

Oh my God. Don't give me those nightmares.

It must be good to get out of the cable business. I keep reading about how rising programming costs make it tough for operators to be able to make a buck.

Yeah, it's a very complicated set of circumstances that the operators are living under right now. Frankly, one of the reasons we sold our company was it was really getting very hard to be a smaller operator, so it was time to move on. Time Warner [Cable] showed a real interest and it was a good fit for them, so it just made a lot of sense.

So what put you on the scent of this company?

I have a long history of believing that the cable industry could and should be in the forefront of new technologies with regard to its core video product. I was introduced to [Penthera's] CTO through a mutual friend and really was very impressed by the technology. They had already thought that there was a natural place for the cable industry in the deployment of this technology, with a business- to-business strategy, much more than a business-toconsumer strategy. And when I heard them out, I guess I was able to con! rm their view that there should be real interest on the part of cable operators, cable programmers, satellite companies and telephone companies to deploy this engine as they all move into un-tethering the consumer from the set-top box and the living-room TV to mobile devices they can download and take with them.

When did that happen?

It was after we sold [Insight], in about March. I made an investment in [Penthera] and woke up one morning and found myself in an operating role. I got together with [Knafel] more recently and said, you know, we ought to put some more money in this company. We're making an investment that is large enough to put us in the driver's seat and make sure that we get this company launched, really.

Can you tell me how much money you've put into this company?

No, it's a private company.

When people talk about video sharing, it starts to smack of Napster and the things that messed up the music industry. That's not the kind of uncontrolled video sharing we're talking about here?

No, we're actually trying to be law-abiding citizens here. When we say video sharing, we mean user-generated. For instance, if you have kids who are in Little League and your parents live down in Delray Beach, Fla., and if you shoot a 10-minute video of the kid playing in the third inning, that 10-minute video on an iPhone today is in high-definition and is a huge file. You can't just send it off by email to the kid's grandparents, so you have to have some way of giving them access to that video in an efficient way. And then the cable play here is that not only can you send it from your iPhone to somebody else's iPhone through our cloud, but you could also, in a cable-company IP-enabled set-top box, deliver it to a living-room television set. So this kind of bridges the gap from the mobile world to the living room set-top box world as well. That's one product.

The other is basically a download engine that takes authorized programming. If you're an HBO subscriber you can download HBO episodes of True Blood rather than just stream it, which is today's technology of HBO Go. You'll also be able to download it into your device so that you can un-tether it either wired or wireless, not have a Wi-Fi connection, take it with you and watch it on an airplane, in a park, wherever you want to watch it. And those rights are now being developed and authorized by a number of programmers.

It sounds like an invitation to piracy, if you can take something that HBO is streaming, download it, put it in your device and share it.

There are plenty of controls that are attached to these downloads. They will self-destruct after a given period of time. They are authorized just like with a DVR. You can copy once but you can't copy more, so you can't move it around. But it turns your iPad into a mobile DVR is what it does.

How does the cable company make money off of this?

Cable companies are developing cloud strategies for storage. And remember, we're primarily business-to-business, although we do have an app in the Apple store called Ribit, which is the video-sharing service. But cable operators are thinking about cloud storage as part of their strategy. It's value-enhancing to consumers who have premium services to be able to watch them on mobile devices. There isn't a cable company that I can think of that doesn't already have a mobile strategy. And the reason why they have one is because it's important in customer retention and to get customers to upgrade to higher levels of service, where some of these options are offered.

Would the consumer buy this or would it be bundled into the subscription price?

Right now the thinking is to bundle it into the mobile applications that the operators are already deploying. Comcast has a mobile app, Time Warner has a mobile app, Cox has one. They all have one. The idea is to build this engine into their mobile apps and give the consumer additional technology so they'll utilize the service more extensively.

You would sell licenses to the technology?

That's right.

You said you needed to be in an operating role. Are there some problems with the folks who were running the company?

No. The two founders were computer experts. I think I had a little more business-to-business customer-facing experience that they were eager to tap, so we carved a role out for me. Since then, and really on his own volition, for personal reasons, [cofounder] Sam Leinhardt stepped back a little bit. He'll remain on the board and act as special advisor. But I've recently taken over as CEO of the company to run it day-to-day.

How far along are you in terms of talking to any of the operators?

We're talking to all of the usual people. There aren't that many.

Is it odd being on the other side of one of these negotiations?

I knew exactly what to expect.

How would you characterize that?

No comment.

The trick in negotiating with a cable company is to be someone's idea of a priority. How do you make this into a priority of someone at one of the cable companies?

I think that the service that I've just described, of being able to move large quantities of data, and in the cable companies' world that would be video primarily from one device to another, is already a priority in most cable operators' minds. I think they view the consumers' desire for that capability to be very high and expanding rapidly. There are a lot of challenges involved in being able to deliver that kind of service as a network operator in terms of bandwidth, how much congestion it brings up on the network, especially when you're dealing with high-definition video, so a lot of the specific software that we have created helps network managers manage the network better, helps consumers manage their battery life and their costs better instead of using 4G cellular or if they have a limited service through their cable company or phone company, so a lot of the software whistles and bells that we have built in allow a lot of user controls to be set so they can be most efficiently utilized by the consumers.

Do you have other products in the pipeline?

We do. Not really able to talk specifically about them right now. But the fundamental engine is kind of common across the product line right now-if you think of Ribit, the app that's in the Apple app store right now, and this Virtuoso product, which is a download service for network operators to be able to download programming. Those are two very different products using the same engine and there are other applications that are in development right now that would exploit the capabilities of this engine for very different users, very different applications, some of them having absolutely nothing to do with video.

But speaking of video, the operators are still trying to figure out how to implement their TV Everywhere strategies. Will this help them in moving TV Everywhere along?

I think this is an enhancement to the deployment of TV Everywhere, and I say that in the generic sense, not in the branding sense.

How does this help with TV Everywhere?

It's a new capability, first of all. Don't forget, nobody can download to go now. It allows people to provide transferability in both directions, upstream and downstream, which expands the concept of TV Everywhere from just network programming to both network- and user-generated programming. And it also manages the transferring of large data files very efficiently, determining when and how these files should be transferred and at what speed and what the cost structure is. I think it helps the industry advance its agenda of moving to next-generation video.

Are you also targeting the various over-the-top companies who could use the same capabilities to advance their businesses?

We're not limiting ourselves to any set of relationships and we thing that there's a natural play here for cable. There's also a play here for satellite companies, for phone companies, for technology companies who are creating business models around clout services and other things that people are doing.

I think there's a whole list of potential business-to-business partners that the company can be dealing with. But again, it's not all about video. It's about moving large files very efficiently. And not everything out there is video, although most consumers think that way. There's lot of stuff that goes from place to place that's big and clunky but not video.

But this isn't the kind of product that will unhinge the whole industry and create unbundling and change the nature of who subscribes to what by making different forms of video available?

This is a technology that is inevitable. We think we have the best mousetrap already developed in order. But this is not the Napster that took down the music industry, even from a legal standpoint. We're just trying to enable people to do things that consumers want to do.

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