The Government facilitates it. Cable companies charge me and hundreds of millions of others for sports channels which we never watch, and even more likely never knew they had them. Just this month Cablevsion increased my basic cable rate some 4%, annualized at 8%, for another fee for one of those useless channels. If the Government enforced the Antitrust laws regarding tying arrangements we would not have this problem. So does Piketty understand this wealth creation mechanism, I doubt it, no French economists I know understand reality. But does the Justice Department, hardly, why they fear the CATV folks, especially those who control news outlets. They may lose votes.
But is there any hope on the horizon? In wireless there is a modicum of competition and an explosion of innovation. Cable is mired in a monopolistic structure supported by wealth transfers from its subscribers. This fact is clearly proven by the recent $2B buy of some sports team. There is a clear expectation of continuing rents providing a significant wealth based rate of return. But for how long?
There has been a long standing assumption that wireless has certain limitations that make it a non-viable competitor for cable or broadband. However, in the past few years, wireless technology has made dramatic strides in many areas that will enable it soon, if not actually now, to become a truly viable competitor to cable and provider of broadband. We present here a few salient points that should be considered when examining the potential of wireless over cable.
Spectrum, Bandwidth, and Capacity; An Explosion: Most
people do not understand the sea state change that has occurred in wireless
with the introduction of the 4G systems. First spectrum is measured in units of
Hz, and a typical allocation of spectrum would be 10 to 40 MHz, millions of Hz.
Second, capacity is measured in bps, bits per second. For example the broadband
world required capacity amounts well in excess of 1 Mbps, or millions of bps.
In the older generation of wireless one would get 1 Mbps of
data for every 1 MHz of bandwidth. The old “rule” was that each 1 Hz of
bandwidth could carry 1 bps of capacity. However, with the new 4G wireless
systems and the use of OFDM technology one obtains up to 10 Mbps of data for
every 1 MHz of bandwidth. That is a tenfold increase. Thus with no additional
bandwidth the wireless carriers have almost increased their capacity tenfold!
In the currently designed 5G systems, which to be deployed
in less than five years, the multiplier will become as high as 100 Mbps for
every 1 MHz of bandwidth. Thus we have the potential for a hundred fold
increase in capacity.
This same type of change is not taking place in Cable. In
fact, in many ways, Cable is mired in the past, with hubbed and sub-hubbed
systems, with coax, often twenty plus years old, buried in locations where now
the cost to rewire exceeds $3,500 per subscriber. Wireless can use the same
towers, the same backhaul fiber, and the same basic infrastructure. All they
need is new electronics at the cell site and new electronics at the user site.
Silicon and the Implosion of Data: As we see capacity
of wireless explode, we also see the need for capacity for carrying video
implode. Namely we see capacity required for an HDTV channel go from 200 Mbps
for uncompressed video down to 4-6 Mbps in compressed video. That is a 50:1
reduction in demand. Capacity is increasing while demand is reduced.
Silicon based data processing enables this change in demand
as well in supply. It had been argued before that one can see the concept;
“silicon is free”, namely the computer and processing chips that enable these
advances have continually dropped in price in a dramatic manner. What was
costly and unrealistic two decades ago is now inexpensive and ubiquitous. Every
computer terminal can now use a low cost HDTV camera and have the ability to
provide compressed video and then transmit it in real time amongst large groups
of participants. Likewise, the compressed HDTV can be deployed in real time
video-on-demand applications. Every iPhone is now a Telepresence system and
every laptop a sophisticated TV Studio!
Explosive Video Capacity on Wireless: As we see, when
you increase your capacity 100 fold and decrease your demand 50 fold, there is
a potential 5,000 fold change and that is the sea state change we envision in
wireless. Unfortunately there is no such change in Cable.
Optimum Spectrum Available: The only significant limitation
with wireless has been coverage limitations at higher frequencies, such as
1.8GHz. The 800 MHz bands are reasonably flexible, but the best propagation bands
are at 600 MHz, the old UHF bands. The FCC has announced the intention to
auction these off. If the major carriers can obtain them directly or even via a
secondary sale, which is a highly likely outcome, then the 600 MHz spectrum,
some 40 MHz, will allow 4 Gbps per cell site and at 4 Mbps per HDTV channel it
will have the capacity of 1,000 video channels simultaneously! The 600 MHz
spectrum can also provide excellent coverage since this spectrum “bends” around
corners and hills much better than the higher frequencies; after all it is just
the old UHF spectrum. This will put the wireless carriers potentially in a
directly competitive position to Cable.
End User Technology: Wireless has allowed end user
technology to flourish. Thus the iPhone the Android systems and other major
advances in technology and technology enable content have been a corner stone
of wireless. The wireless carriers merely enable an “air interface”, a small
element on a chip in any device and then let the device providers add whatever
they can to the units. This strategy has profited them quite well. Many
devices, services, and businesses have developed driving the wireless carriers
revenues and profits. The wireless carriers now sit on the threshold of being
both broadband and video content purveyors.
This is dramatically unlike cable systems which in many ways
are akin to the old Ma Bell world; namely, you must get their cable modem and
you must get their digital receiver, and it only comes in one color! Even more
so, you must purchase their content; whether you view it or not. Wireless is
playing a dramatically different game.CATV companies allow nothing at the end user interface. All we get is some old technology cable modem and cable converter. There is no Apple, Google, Qualcomm for CATV as there is in wireless. When did we ever hear of a new set of high tech start-ups for CATV tech?
The only thing keeping CATV in a position of continuing wealth generation is its monopoly. The only thing keeping the monopoly is the fear by politicians of what CATV channels can do. I suspect that the fear may soon backfire as we see continuing breakthroughs in wireless.
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