The cable industry has embraced blogging for its latest public relations campaign. The campaign basically tries to refute cable’s negative reputation of continually raising prices and offering poor customer service, by positioning the cable industry as the main driver of dismantling the century old telephone monopoly in the U.S. IP Democracy reveals the strategy in this recent post.

The National Cable and Telecommunications Association (NCTA) is leading the charge through a $1 million dollar online ad campaign, which buys ads on leading blog sites. Those ads link back to a NCTA operated blog, CableTechTalk, which offers commentary about cable’s role in competiton. It’s an interesting strategy for such a traditional industry. It will be interesting to see if and/or how the telecom industry responds.

First it was the cable companies complaining to the FCC about Verizon breaking the rules with their “prevent defense.” Comcast, Time Warner Cable, and others complained that Verizon was trying to prevent Verizon customers from leaving once they received a number portability request from a cable competitor. The cable companies accused Verizon of aggressively pursuing those customers with a “please don’t leave” campaign. Cablecos complained, saying that practice is against the spirit of FCC rules and may be breaking the law. Verizon says nonsense, and that they are just doing a routine marketing strategy.

Well now its payback time. Verizon is now the complainer and has petitioned the FCC, asking that the process for switching cable service should be streamlined. By Verizon’s estimation, it’s somewhat easier to switch phone companies than to switch video providers. For switching phone companies, but keeping the same telephone number, there is an “automated” number portability system, where a customer simply tells their new phone provider they would like to switch. The prospective phone service provider initiates the number portability request on behalf of the new customer. But according to Verizon, when a customer wants to switch video providers, they have to initiate the disconnect themselves from their existing provider. Verizon says “no fair.” “This significantly complicates the process of switching video providers, thereby entrenching the cable incumbents' dominant market position," Verizon said in the petition. Of course the cable industry begs to differ. “Verizon's fairy tale complaint is a lame attempt to deflect criticism from its years-long illegal practice of misusing proprietary information to prevent consumers from switching to a new phone provider," Brian Dietz, vice president of Communications for the National Cable & Telecommunications Association (NCTA) said in a statement. Life in the fast lane of competition, I guess.

Cable’s lack of a clear wireless strategy has been seen as somewhat of an “Achilles heel” for them. After all, their growing competitive nemesis, namely AT&T and Verizon,, have clear wireless strategies and are executing them quite well. The ability to grow the triple play bundle to include wireless (the so called quad play) hasn’t been around long enough to draw firm conclusions about its competitive impact. But most analysts would agree, all things being equal, having a wireless option in your back pocket should prove to create an advantage. The other issue of course is wireless’ role as a growth engine. AT&T and Verizon have it and their triple play cable competitors do not.

All this leads to speculation about cable companies getting into wireless, and quickly. A recent Wall Street Journal article adds to the speculation by reporting that Comcast, Time Warner and Brighthouse are in talks with Sprint and Clearwire to invest significantly in a WiMAX partnership. According to the article, the three cable companies are talking about investing close to $1.7 billion, with Comcast being the lead with $1 billion. One idea suggests that the cable company investment would give them access to wholesale capacity to launch their own branded wireless service. Cox recently signaled their intention to pursue some type of wireless strategy as well by acquiring $305 million worth of 700 MHz spectrum.

While conceivably it makes sense for these companies to partner, it does have a little cloud hanging over its head. After all, these are the same companies that jointly launched the ill fated Pivot Wireless. Will they learn from those mistakes? These same companies are also sitting on a boat load of AWS spectrum. Perhaps they’ll look to leverage that spectrum in this venture, although there is no clear path for WiMAX over AWS spectrum. All this chatter points to a somewhat simple reality. Cable recognizes that it’s probably in their best interest to have a wireless arsenal of some type going forward. It would be a wise hedge against telecom competitors seizing a potential quad play rush. The real question is, can they figure it out fast enough? With wireless penetration exceeding 80% in the U.S. and telecom having such a wide lead, cable risks wireless irrelevancy before they even get going, unless they get going quickly.

The nation’s six largest cable companies are planning to launch a jointly owned company that would allow national advertisers to purchase an ad from a single entity, which in turn would appear on all six systems. Comcast, Time Warner Cable, Cablevision, Cox Communications, Charter Communications and Bright House Networks are in the process of finalizing the new company, which has been codenamed Project Canoe. The goal of Project Canoe is to provide targeted ad opportunities across all of these MSOs and increase the cable industry’s ad revenue take from $5 billion a year to $15 billion a year.

Read more details in this New York Times article.

Michigan passed a law, Public Law 480, about a year ago that lowered some barriers to market entry for incumbent cable company competitors. The goal was to encourage competition on the local level for cable TV services by allowing basically a statewide franchise. Multichannel News reports that a recent study reveals very little competition has actually arrived. Only 110 communities out of a possible 2,000 now have a legitimate competitor. Commenting on the study’s results, Michigan’s attorney general Jon Kreucher put a new twist on cable’s triple play accomplishments. "Unfortunately, cable companies scored the triple-play last year: Very poor levels of new competition, exceptionally bad levels of customer service, and prices that often increased ten times faster than the national consumer price index for other forms of recreation," said Kreucher. Needless to say, Michigan authorities are disappointed in the lack of competitive progress.

The Michigan example illustrates the reality of the competitive landscape. Beyond major metro markets, competition takes time to develop. As Gary Kim points out in his IP Carrier blog post, competition is expensive and time consuming. The cable overbuilding business is not for the faint at heart. Outside of the urban and suburban markets targeted by AT&T, Verizon, and the few remaining cable overbuilders, your left with the independent telco sector to fuel competitive build outs. While independents have been quite active with triple play competitive offerings, they aren’t in a position to dramatically increase competition on a wide scale basis. They simple don’t have the scale. It’s generally one community at a time. At that pace, tens of thousands of communities across this country will be lucky if they ever see facilities based competition for cable. Some will argue DBS is enough and if the market conditions are right, a community regardless of location will eventually see competition. In other words, you can’t force competition on a market where the returns for multiple operators don’t warrant it.

BroadbandTV will deliver the a la carte programming nirvana that consumer’s desire, and it will do so at the subscription pay TV model’s peril. That’s according to this recent BusinessWeek article, Winning the Broadband TV Game. The authors postulate several theories which suggest that consumers will adopt broadbandTV to gain access to the content model of "give-me-what-I-want-when-I-want-it,” and reject the current model of “take-what-we-offer-you.” They also suggest that 40% of U.S. consumers will have some way of connecting their TV displays directly or indirectly to the Internet within 3 years. By five years, that number will grow to 70% and represent a true mass market. The tipping point is well on its way because televisions are now shipping with Ethernet ports and broadbandTV enabled gaming consoles will be in one third of all U.S. TV households by 2010. The implications suggest that cable, DBS, and telcoTV providers are in trouble. “The barriers that have long inhibited Internet-based TV are beginning to crumble. The TV manufacturers will win; the gaming companies will win; the best new platforms blending personalized and branded content will win; Hollywood will win; and consumers will win. And, unless they find ways to adapt very quickly, telecoms and cable companies will lose.”

To be fair, the BusinessWeek article is authored by Herve Utheza and Gary Morgenthaler, both of whom are heavily invested in the broadbandTV space. But they bring up some interesting issues. The reality of broadbandTV today is it’s simply too complicated for average consumers to install, find, and watch content consistently. Should those barriers be lowered through things like broadbandTV enabled set-top-boxes, game consoles, and even the televisions themselves, the story could change. If broadbandTV does truly become plug and play, we may very well see some Utheza and Morganthaler broadbandTV predictions come true. Cable and telcoTV providers may be challenged to adapt their business and revenue models to ensure they don’t concede their subscription TV business to the burgeoning broadbandTV ecosystem. DBS may feel the broadbandTV pinch more, because they don't have broadband connections to the home, making a broadbandTV strategy somewhat more complicated for them.

In-Stat, an Arizona based market research firm, reports that its most recent cable MSO survey reveals 54% of cable operators face competition from telecom operators in the form of telcoTV. TelcoTV doesn’t always equate to IPTV. Verizon FiOS uses the same technology as cable companies for the video portion of their triple play, but delivers it over FTTH architecture. In-Stat postulates that this increased competition is driving cable companies to invest more in their networks and offer more competitive features. For example, In-Stat says that 90% of the cable companies participating in the survey report offering HDTV.

The FCC imposed a cable company cap on the amount of market share any one cable company can obtain. The cap prevents any MSO from serving more than 30 percent of subscription multi-channel video customers nationwide. As of today, the cap really only impacts Comcast as a stand alone company, with their existing subscriber base of 24 million. Although FCC chairman Kevin Martin also made a point of emphasizing these rules apply to a consortium of companies as well. The main rub from the cable industry is that their key competitors, namely big telcos, seem to have unfettered access to huge merger approvals from the FCC, while this new cap prevents them from doing the same in their industry. Companies like Comcast would like to reserve the option of growth through acquisition to more effectively compete with the AT&T and Verizon’s of the world.

In some regard, I can understand this argument. But this cap, should it hold up to court challenges, may be a blessing in disguise to the cable industry. It may force them to diversify their acquisition strategies and focus on acquisition targets other than just more MSOs. For example, wouldn’t it be a smarter move for Comcast to focus their next major acquisition on a wireless company, and not another cable company? Seems to me, they need diversification of talent and expertise in all areas of telecom in order to compete with telecom behemoths. I’m not sure buying another cable company will accomplish that. Would it be a smarter long term move for Comcast to buy Sprint, than say Cox? Maybe Cox would have an interest in buying XO Communications – after all they’ve been recently toting their success in growing their enterprise telecom business. I may be over simplifying a lot of complex issues here, and for all I know, there may be some obscure regulatory rule that prevents these type of mergers as well. But my fundamental point is the real growth opportunity for cable lies in acquiring more telecom market share, not more cable TV share. This new FCC cap may just help create such a scenario.

CableLabs and the Digital Transmission License Administrator (DTLA) have reached an agreement that will allow cable operators to distribute their content in IP format across home networks. The new standard represented by this agreement is known as Digital Transmission Copy Protection-IP (DTCP). This agreement will most likely result in the easy transfer of content, including VOD, to a variety of devices within the home, including laptops and mobile media players. Major Hollywood studios, including Sony Pictures, Walt Disney, and Warner Bros. have signed off on the deal. The proliferation of home networks has made the issue of content distribution much more relevant.

By reaching this agreement, the cable industry is moving forward in a unified way to ensure their operators have an effective and approved in-home network distribution method. The adage that subscribers want to consume content anywhere, anytime, and on any device is a driving force behind this move. This new agreement will contribute to the cable industry’s effort to meet this growing demand, and increase their competitiveness.

New analysis from ABI Research suggests that the cable industry’s poor reputation for customer service may present problems for them, while opening windows of opportunity for their competitors. “We’re starting to see more bundles of voice and data integration offerings, and we have seen promotional pricing to capture the market. But there is such discontent among CATV subscribers that telcos are able to move in and steal customers,” says Stan Schatt, vice president and research director for ABI. Before telecom competitors start patting themselves on the back, ABI suggests that telecom customer service is not exactly stellar either, just better than low performing cable. Interestingly enough, cable is being rated higher than telcos for phone service in recent studies, but as this ABI research suggests, lower for their core video service.

ABI goes on to postulate that telcos have a real advantage when/if they are able to leverage IPTV and its many potential advanced features. Coupled with cable’s poor service reputation, telcos have a real opportunity to seize the market. Cable recognizes these deficiencies and says they are committed to improving their customer service practices. Comcast CEO Brian Roberts recently acknowledged that Comcast needed improvement and outlined some steps they plan to implement. Time will tell if this is just lip service. ABI suggests that telcos may gain competitive advantage from these factors, provided they can execute well and not make some of the same customer service mistakes that has led to cable’s poor reputation.