Basic Encryption Has New (OTT) Enemy

Boxee recently told the FCC that cable companies should not be allowed to encrypt their basic service tiers. In a presentation to the Commission, the company said if the FCC permits basic encryption, products like its OTT-console would stop working - forcing consumers to use leased STBs, while harming start-ups trying to innovate the video delivery space.

In a company blog post, Boxee CEO Avner Ronen said not only would the rule-making harm his company, but cable is trying to get legislation passed that would prevent 3rd party STB providers from disrupting the industry's lock on video distribution. Cable's "real motivation," Avner says, is to prevent consumers from connecting cable from the wall directly to a TV (or Boxee Box). "You will need to rent a set-top box from your cable provider, pay an extra $5-$15 per month and it will no longer work with your Boxee Box or similar devices."

Not surprisingly, cable doesn't agree, and the NCTA wrote a 12-page response to the FCC saying Boxee's claims "are simply wrong." In the letter, NCTA VP and General Counsel Neal Goldberg says encryption will improve service reliability, increase internet speeds and increase the value of other services consumers want. Further, Goldberg penned an op/ed piece taking the company to task publicly over how Avner's idea would enable all video service providers to compete except cable.

"Boxee should be applauded for their creativity... Instead of telling regulators that its service is a replacement for payTV service, they now seem to be saying their service is dependent on subscription TV," Goldberg said. The company's stance is even "more ironic given that all of cable's competitors - from satellite to Netflix to Boxee itself, already encrypt programming" but cable's desire to do so won't help consumers "at all."

Referring to Boxee as a "competitor" (original quotes), Goldberg said the company is using "patently false scare tactics" by saying TVs receiving basic cable without a STB would go dark. He said the company's "disinformation campaign" is a poor attempt to distract from the reality that a "simple technical fix" exists that would solve the entire issue... the CableCARD. "If Boxee included a CableCARD slot, its customers could access encrypted channels without a set-top." •

Promo Wars: Cablevision v. Verizon

Two weeks ago, analysts said they were surprised to see such a "cut-throat" promo coming from Cablevision for new customers in New York: $70 per month, no contract, 2-year rate lock, a free DVR and an iPod touch to sweeten the deal. The offer was called 'the most aggressive' seen to this point and an indication that Cablevision was getting serious on the pricing front.

Now it seems Verizon has responded, and not necessarily in the way you might think. The service provider blanketed the same neighborhoods with its own deal featuring triple-play pricing of $99 per month, no contract, a multi-room DVR and price locked for 12 months. ISI Group's Vijay Jayant said the offer was a good deal but far less attractive than Verizon's previous promos and "much more benign" than CVC's. So what gives?

As far as Cablevision is concerned, Jayant says not to read too much into the promo. "Whether (CVC) is struggling to keep sub share or just going on the offensive won't be known until they report (Q4) results," he said. "But at the very least, this can't be interpreted as a positive data-point for subscriber trends."

However, with Verizon, the analyst says not to overlook the relevance. "There's no telling how many customers (are) receiving these competing offers, (but) given Verizon's strong FiOS video results, this fresh non-aggressive promotion might serve as an indication that they are not feeling the need to compete irrationally."

The bottom line: If you're a 'glass 1/2 full' investor, Jayant says news is good for CVC as it hasn't triggered a price war. If you're a 'glass 1/2 empty (which the analyst says is 'more likely')... Cablevision "is feeling the heat." •

Etc.: Wireless Group Opposes JOBS Act - EWTN Sues Gov't over Contraception - 'Patent Troll' Claims Internet Ownership

Rules & Regs: A group of wireless carriers including Sprint and T-Mobile wrote to the FCC this week in opposition to the JOBS Act. Language written in the proposal would effectually strip the FCC of its authority, er... responsibility to ensure competition in the marketplace and prevent monopolies from forming. The group maintains if the bill passes, AT&T and Verizon will be able to squeeze smaller carriers out of the picture during wireless spectrum auctions. AdWeek has this story, while Engadget has quite a lively discussion here. --- The FCC's Enforcement Bureau said the commission should deny Comcast's request for a stay of an earlier decision that the company placing the Tennis Channel on a smaller tier violated program carriage regulations. Comcast has said that moving the channel would violate its constitutional rights; the bureau says 'no way.' "The public-interest would be served by providing broad public access to additional cable programming where, as here, there has been a sufficient showing of discrimination. Comcast was afforded its due process by participating in a full and fair adjudicatory proceeding, and it is now the public's turn to get that to which it is entitled," the bureau said. The decision is in response to claims that Comcast discriminated against Tennis in favor of its own NBC Sports Network (aka Versus, at the time of the complaint).

In Court: EWTN Global Catholic Network is suing the Dept. of Health & Human Services, HHS Sec. Kathleen Sebelius and others to 1) stop the imposition of the contraception mandate, and 2) rule the mandate is unconstitutional. Filed in U.S. District Court in Birmingham, AL, EWTN says it's the first Catholic organization to file suit since the final HHS rules were published by the Obama administration. "EWTN is being forced by the government to make a choice: either we provide employees coverage for contraception, sterilization and abortion-inducing drugs and violate our conscience or offer our employees and their families no health insurance coverage at all. Neither of those choices is acceptable.” EWTN President and CEO Michael Warsaw said this week. "We had no other option but to take this to the courts." --- A former Motorola software engineer was found guilty of stealing trade secrets from the company. The China-born naturalized U.S. citizen was stopped by customs officials while trying to leave the country with more than 1K proprietary documents. Details of the case can be found at the DOJ's website. ---  Securities lawyers at Goldfarb LLP have filed a class action suit against Cablevision. The group alleges that CVC failed to disclose that it was experiencing higher costs while losing 44,000 video subscribers – a factor which helped lead to a 26% drop in CVC shares.

M&A: The WSJ is reporting that Google's $12.5B deal to buy Motorola Mobility could receive DOJ approval as early as next week. However, antitrust interests are still concerned. Read more. --- SNL Kagan says TiVo is open to the idea of being taken over. Citing sources close to the matter, the firm says TiVo would consider "solid buyout bids to boost shareholder value, although the current plan is to remain independent."

Research: Nielsen says the number of HHs with broadband internet and no paid TV subscription is on the rise. Currently at 5%, the firm says these HHs grew by ~23% during the past year, stream 2xs as much video, and watch 1/2 as much TV. Paradoxically, U.S. homes with both paid TV and broadband increased 5.5% last year, but the source for TV services varied. Nielsen says the number of HHs subscribing to cable decreased 4.1% y/y, satellite increased 2% and telco increased 21.1%. --- Strategy Analytics says the average 'advertised' download speeds for global 4G services is higher than 14 Mbps. The firm says the U.S. is basically the planet's 4G LTE guinea pig as providers continue to erode at existing DSL subscriber rolls. SA data says the number of plans advertising maximum download speeds +21 Mbps represent 20% of the total... and to expect global averages to exceed 15Mbps by mid-year and 20 Mbps by the end of 2012. --- SNL Kagan says the total number of live OTAs for the 1,726 full-power digital stations jumped to 4,552 at the end of 2011 from 2,518 at year-end 2010.

Online: Sports Business Journal is reporting that ESPN.com has dropped to the 3rd most-visited site for sports news online behind FoxSports.com. The fall is ESPN's first month outside the top-two spots (Yahoo Sports remains the top destination). Check out comScore's data at SBJ.

QRs: ARRIS posted Q4 revenue of $281.1M, up from $274.4 in Q3 and $266.2M in Q410. Adjusted net income in Q411 was $.21 per diluted share, which includes a $.01 net loss per share as related to the company's acquisition of BigBand, as compared to $.19 in the same period the previous year. --- SiriusXM posted record revenue during its Q4 of $3B, a y/y increase of 7%. The company reported adjusted EBITDA of $731M, a 17% y/y increase, with record FCF of $416M (up 98% y/y). SiriusXM ended the period with 21.9M subscribers and projects 1.3M net sub adds for 2012. --- BCE posted net earnings to shareholders of $486M, a 52.8% increase, with adjusted earnings per share of $.62 (up 5.1%). The company posted a 20.4% increase in BellTV net subscriber adds of ~28K, bringing its total to 2.08M, with a 1.6% increase in TV operating revenue. BCE said TV ARPU was down 1.5%. --- Lionsgate reported revenue of $323M, EBITDA of $16.3M and a net loss of $1.7M ($.01 per basic common share) for its FQ312 ended Dec. 31, 2011. --- Groupon's first earnings report included a Q4 net loss of $42.7M on revenue of $506.5M (nearly a triple y/y increase). The company said its 'billings' (the $ collected before paying merchants), also tripled to $1.25B from $415.3M in Q410.

Tech: Google is reportedly developing a home-entertainment system that streams content wirelessly throughout the home. The WSJ says its a "sharp shift in strategy" for the search giant. Read more.

$$$: Smart TV tech firm Flingo raised $7M in funding led by August Capital. The SF-based start-up integrates streaming video and interactive ads into connected TVs.

Service: BendBroadband is one of the nation's first smaller cable operators to launch its TV Everywhere service with content available from Turner Broadcasting including TBS, TNT, CNN, Cartoon Network, truTV and Adult Swim. Bend's subs now have access to more than 500 hours of online and mobile video content, including some titles from Hulu. --- Internet service before electricity? Apparently so. Telecompetitor has a cool story about how the California RLEC Sebastian helped bring DSL and voice service to the town of Iowa Hill... a small community that doesn't even have electricity.

Deals: Rentrak signed a StationView Essentials contract with Hubbard Broadcasting for all of the company's stations: Albany, NY (NBC); Albuquerque-Santa Fe, NM (NBC); Duluth-Superior, MN (ABC); Minneapolis-St. Paul, MN (ABC and IND); Rochester, NY (NBC) Rochester-Mason City-Austin, MN (ABC). --- A+E Networks signed an agreement with video tech firm FreeWheel to deploy its Monetization Rights Management (MRM) system across all of the network's mobile properties.

Patents: Media analytics firm TRA was issued a new patent for using consumer purchase behavior for targeted TV viewers.  The patent includes integrating the firm's system with ad networks, the use of identification tools outside the HH, embedded program and commercial code data, and the use of data in VOD advertising. More info here.

Retail: Samsung said it expects to sell 50M HDTVs in 2012 and that 50% of them will be smart (connected) sets. --- Apple says it will reveal the next iPad in mid-March.

Over, Up & Under: Spanish regulator CMT says FTTH connections in Spain increased 206% in 2011, with cable subs increasing by 4.9% and DSL connections up by 3.7%.

Wow!: Eolas Technologies, the tech firm who successfully sued Microsoft in 2007 (and since has earned the reputation of 'patent troll'), now is claiming ownership of  the internet. Or, at least, any interactive application the internet affords. Wired has the story brewing in small-town Texas.

People: Filmmaker/actor/avid golfer Clint Eastwood has been named creative board chairman to Back9Network, the new "golf lifestyle" channel. More from THR.

Obit: Longtime FCC engineer Nai Tam died Jan. 23 after a 2-year battle with brain cancer.

--- Catch today's media market news in The Evening BRIDGE. •