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2007 Top Ten: Cable Fables & Lessons Learned

DECEMBER 24, 2007

Capacity crunch? Surging satellite and telco competition? Plummeting stock prices? Regulatory jihad? Lawsuits? Angry Net Neutrality zealots? A hammer-toting granny with 'tude? Yeah, it's fair to say that the cable industry faced a wide swath of issues in 2007.

And that made it difficult to filter it down to just 10 cable "fables" and "lessons learned" this year. But, darn it, we gave it the old college try, anyway.

See any glaring omissions? If so, share your thoughts on the message boards.

But, in the meantime, please take a gander at our some of our cable highlights and lowlights for the year:

No. 10 (Lesson): Take the digital high road
This year's No. 10 is a strong candidate to be next year's No. 1. Cable has already tried to go out of its way to help consumers understand what the February 2009 digital television transition means, especially for those among us who still get TV over the air. While those folks will need a new converter box affixed with a ho-hum logo to ensure that their old analog sets don't show snow the day of the transition, cable's key message to its customers is fairly straightforward: "It's all good!"

No. 9 (Fable): Docsis 3.0 is breaking through
Okay, so this doesn't mean 100 Mbit/s services fed by the cable operator are coming soon to a node near you, but at least the cable industry took a big step forward with Docsis 3.0 developments before the end of the year.

CableLabs awarded its first-ever Docsis 3.0 qualification stamps to three cable modem termination system vendors, taking the industry one step closer to a high-speed Internet platform that can compete with services piped in through fiber-to-the-home systems. (See Cisco, Arris & Casa Make the CableLabs Grade.) No cable modem vendors made the grade that round, but the cable industry would be served well if something breaks through by March.

No. 8 (Lesson): Don't mess with P2P traffic
Unless, of course, you don't much mind the Net Neutrality mob coming after you with pitchforks and sickles, not to mention lawsuits.

The cable industry, led by Comcast Corp. (Nasdaq: CMCSA, CMCSK), received a huge black eye over P2P traffic policies this year. While Comcast has denied blocking such traffic, it did get taken to the woodshed over claims that it undermines a customer's ability to host and serve P2P content for other users. (See Comcast's P2P Problem.)

A subset to this category is the use of byte caps. If you cap, cap carefully. The biggest complaint isn't that a capacity cap exists, but that some operators (again, Comcast) do not say where that threshold is, primarily to keep this small number of power users from abusing the policy. (See A Tip of the Broadband Cap.)

With Joost , Hulu, and a massive number of other over-the-top video services on the way, the P2P and cap battles will only grow wider. Among the two, expect plenty of activity next year with caps. We may soon see the days of the all-you-can-eat Internet go away in favor of services that charge by the pound.

No. 7 (Fable): Cablevision can handle it
Cablevision Systems Corp. (NYSE: CVC - message board) continued to lead the industry in digital penetration and assume the mantle as cable's maverick MSO, but it ran into a buzz saw this year trying to execute on two ambitious projects -- going private, and deploying its Remote Storage-Digital Video Recorder (RS-DVR).

In October, Cablevision failed yet again to go private and join the comfier ranks of fellow operators that did so recently -- Cox Communications Inc. and Insight Communications Co. Inc. Cablevision's major shareholders thought they deserved more than $36.26 per share, particularly as analysts pointed out that the operator's capital spending would soon be on the decline and the company was possibly worth twice the amount offered. With shares now trading in the neighborhood of $24, perhaps some of those shareholders are beginning to second-guess themselves.

Cablevision also got the studios and programmers all hot and bothered when the operator announced the development of the RS-DVR, a service, as the theory goes, that would allow customers to rent out network server space to record programs -- and remove some expensive set-tops with on-board DVRs partly from the equation. Because customers -- not the MSO -- would be making individual recordings and copies for only their viewing, Cablevision believes the RS-DVR is protected by the relatively ancient Sony Betamax case. The fate of the RS-DVR is now in the hands of an appeals court.

And that's just the cable stuff. The Dolans also have their hands full with the fiasco involving the Knicks and Isiah Thomas.

No. 6 (Fable): Nothing pays like a family business
The cable industry inducted a worthy class class to its Hall of Fame in October, but, soon after, two former members of cable's royalty -- Adelphia Communications founder and his son, Timothy -- cemented their spots in the Hall of Shame.

After being found guilty for fraud and pilfering the company piggy bank, father and son were later denied their quest for a fresh trial. Earlier in the year, 22 of 23 counts of a July 2004 fraud conviction were upheld, which sentenced John to 15 years in the slammer, and Timothy to 20.

While there are still people out there who knew the good side of both of these guys, the industry needed to get that ugly and painful chapter in its history behind it.

No. 5 (Fable): Don't upset grannies with toolbox access
Ah, yes. The cable feel-good story of 2007.

You'll remember this one. Mona Shaw of Northern Virginia took matters into her own hands when she had had enough of Comcast's customer service. She proceeded to wield the hammer to smash items in the MSO's payment center in Manassas, while asking, "Have I got your attention now?"

She got Comcast's attention. After her arrest and $345 fine, she became sort of a folk hero for the common Golden Girl. (See Comcast Gets Hammered .)

No. 4 (Lesson): Put 'fiber' in the lexicon. Somewhere
Cable operators have fiber -- lots of it -- in their networks, but you don't see them getting much credit for it. Hybrid Fiber/Coax, or HFC as it's known, is about as sexy as Ernest Borgnine in tights.

Verizon Communications Inc. (NYSE: VZ - message board), meanwhile, has FiOS and gets to be the fiber-to-the-premises (FTTP) poster child. The cable industry, however, is pushing ahead with a project that could produce standards for FTTP networks for greenfields. The working name for that is RF over Glass, or RFOG. (See RFOG Update .)

Not bad. But not great. Would it kill ya to put the word "fiber" in there somewhere, maybe front and center without pride getting in the way?

No. 3 (Lesson): Hitch your wagon to TiVo
First came the development of a "Tuning Resolver" -- a gizmo that will enable DVRs with CableCARD slots (like some models from TiVo) to access programs in an operator's "switched" tier. Then, the industry went as far as agreeing to tweak the OpenCable Platform enough to support two modes -- one for the TiVo interface and DVR service, and another for the operator's resident guide and applications. (See TiVo à la Mode .)

And let's not forget that Comcast and Cox are both porting TiVo for "premium" DVR services, so the relationship between cable and the DVR just continues to go deeper and deeper.

No. 2 (Lesson): Don't get on Kevin Martin's bad side
Cable wonders what bully stole the Federal Communications Commission (FCC) chairman's lunch money?

Cable's regulatory year was full of many more hits than misses as the FCC Chairman Martin continued in his campaign against cable. The first half of the year was spent preparing for the tortuous July 2007 ban on integrated security set-tops. While Verizon (and multiple scores of others) got a hall pass in the form of an omnibus waiver, Comcast did not. The MSO has since filed a lawsuit against the FCC. But the last time I saw Kevin Martin on CSPAN-3 he didn't exactly look frightened.

Martin also didn't get the votes for his 70/70 rule push, but the cable industry still has to provide some hard data... under threat of perjury no less. (See FCC Demands Cable Sub Data .)

But he did manage to push through the 30 percent ownership cap, though many expect that one to be overturned. (See FCC Caps Cable .)

Then there's the whole multiple-dwelling unit (MDU) ruling that cable's predictably upset about, so much so that the NCTA has threatened legal action. (See NCTA Seeks MDU Ruling Reversal .)

No. 1 (Lesson): Don't IPO; go private if you can
This goes for vendors and cable operators, which have both seen their valuations sink to the floor during the year.

Comcast shares got pummeled recently after the MSO reduced revenue generating unit (RGU) guidance and increased capex. (See Sliding Into Wednesday?)

On the vendor side, the poster child this year was BigBand Networks Inc. (Nasdaq: BBND - message board). After getting off to a promising start in March, shares have come back to Earth and buried themselves in the sand. It also didn't help that BigBand had to slash third quarter projections. Now that its dirty laundry is out for everyone to see, the company was also forced to exit the cable modem termination system biz.

Entropic Communications Inc. , a founder of the Multimedia over Coax Alliance (MoCA) and disparager of Docsis 3.0, also went public this year and the IPO hasn't exactly been a barnburner. (See IPO Flatliners.)

Cox? They're finding that it's good to be the king… of privacy. They can openly talk about investing in spectrum and upgrades and bidding for the 700 MHz auction without having Wall Street pelt it with rotten fruit. (See Cox Makes 1 GHz Moves and Cox Preps 700 MHz Spectrum Bid.)

We wonder, with all of 2007's misfires, if digital video upstart RGB Networks Inc. will have second thoughts about its IPO plans heading into 2008. (See RGB: Ripe for Aquisition? )

— Jeff Baumgartner, Site Editor, Cable Digital News