The cable-ized future of broadband

Stacey Higginbotham has an interesting post up over at GigaOM on the coming convergence of the worlds of the internet and telecommunications. She describes a possible future, discussed at the Fiber to the Home conference in Austin yesterday, in which gigabit infrastructure and software-defined networking makes it possible to deliver discreet “channels” of services or applications over broadband, much as a cable TV system offers channels of programming:

When you combine gigabit networks and software defined networks you get more services delivered via broadband and a network that can adapt to the demands of applications on the fly. Because of this — and the increasing importance of the services one can deliver over gigabit networks — Joe Kochan of U.S. Ignite, a group trying to develop gigabit applications, proposed a different type of pricing model: one where users buy access to set of capabilities for either an application or a genre of applications.

Kochan proposed a medical channel that, for example, might have the security features one needs for relaying medical data, along with a high-speed, low-latency connection required to teleconference with a doctor or nurse. An education channel might have the capacity for interactive video as well as the applications a child might need for their work. Because one could also offer digital rights management, maybe the textbooks could be accessed online via that channel [snip]

For example, if there’s some kind of entertainment channel, one could argue that it might support Netflix’s protocols but not those used by BitTorrent or some other entertainment provider that may have a new protocol or alternative delivery mechanism that could result in a richer user experience at the expense of the network.

Here’s another way broadband could become more like cable TV: the media companies know broadband is where the money is for operators and they want to tap that money for retransmission and carriage fees.

As we saw in the battle this summer between CBS and Time Warner Cable, the broadcast network essentially treated TWC’s broadband business as simply another form of retransmission of CBS content, and demanding that the revenue the operator generates from that business be put on the table as part of the re-trans negotiations.

While the TV blackout that resulted from the retransmission consent fight affected only three markets, CBS cut off online access to its content by TWC broadband subscribers nationwide. As I noted back in August, CBS executive VP of planning, policy and government relations Martin Franks gave away the game as to what was up at a hearing before the New York City Council over the TV blackout.

In response to a claim that MVPDs do not have the profit margins to absorb the price hikes being demanded by CBS and other networks, Franks pointed to the “handsome profit margins” cable operators earn from the broadband side of their business.

“They could easily choose to absorb these programming costs and still be very profitable,” he said.

The media companies know that pay-TV subscriber rolls are falling, and the carriage and retransmission fee gravy train they’ve been riding will eventually slow. To get it back up to speed they will need another source of fuel, and the “handsome profit margins” operators earn from broadband is the obvious place to look.

The channel-ization of internet, as described by Stacey, would make it easier to port the pay-TV business model — for better or worse — to broadband platforms.