Analysis and Implications of Google's Proposed Web TV Service

Introduction:

A picture of scissors literally cutting a coaxial cable.
Cutting the Cord

The WSJ and NY Times reported that Google wants to offer live TV channels as well as pre-recorded TV shows (On Demand) using the public Internet.  The two newspapers indicated that the service would share a closer resemblance to cable TV than to streaming services like Hulu or Netfix, allowing customers to select channels online in real time, just as they do on cable, satellite or telco TV. The move would be a potential boon to the company’s struggling Google TV service.   Intel, Apple, and SONY are reported to be working on similar services.

Analysis:

The problem for those and any other new broadband TV provider will be in securing reasonable, nonrestrictive licensing deals from media companies that own the video content.  Many analysts believe those companies (Time Warner, Disney (which owns ESPN and ABC), Fox, CBS, NBC/Comcast, Viacom, etc)  are more likely to help out legacy program distributors (cable, satellite, telco TV providers) rather than broadband Internet newcomers.  Another question is whether both popular and unpopular channels will be bundled into various packages offered to consumers.

Bloomberg’s Kirsten Salyer asks “Can Google’s Online TV Kill Cable?”  Perhaps, but not right away she says:  “Can Google and others compete against the Time Warner’s in terms of price and content? Not immediately, but news they are trying is a warning that TV providers are going to have to be more innovative about how they adapt to the Web.”

Will Google offer live video in It’s proposed Broadband TV Service?  That’s really the key to differentiating a Google Web TV service from the video on demand streaming services now offered by Netflix, Amazon and Hulu.

As the WSJ article notes, Google has already financed original programming for YouTube and offers or plans to offer TV and Gigabit Internet service in cities with Google Fiberthe company’s  broadband, fiber optic Internet service .   

Unique Insight and Perspective:

Indeed, what this author finds most interesting is Google ability’s to offer live and recorded TV programming on Google Fiber, which is now sold in Kansas City, MO and Provo, Utah.  It will soon be available in Austin, TX, according to the Google Fiber website.

There’s another interesting angle which no one has yet identified till now: a further broadband Internet capacity crunch brought on by the web newbies streaming real-time and on -demand programming.   This will require new broadband Internet peering agreements between CDN providers and ISPs.    It became a critical issue when Netflix video streaming became popular a few years ago and that company contracted with Level 3 Communications for a Content Delivery Network (CDN) to deliver its streaming video.

In 2010, Level 3 Communications and Comcast (the largest broadband ISP in the U.S.) entered into a legal battle related to the costs of the former’s broadband data flowing into the cable company’s broadband Internet access network.  Level 3 complained that Comcast had begun charging a new fee to deliver Level 3 traffic (mostly Netflix streaming) to its own subscribers. Level 3 called the fees unreasonable. Comcast argued that Level 3 was trying to send heavy traffic across its network without bearing its fair share of the cost.

The dispute was settled yesterday with the details not disclosed. On July 16th, the two companies said  they had “resolved their prior interconnect dispute on mutually satisfactory terms.”    The agreement changes how Level 3 routes traffic across Comcast’s network, sharply cutting the fees the backbone provider must pay when traffic overwhelms certain connections, a person familiar with the matter told the WSJ.

One blogger at the Benton Foundation wrote that she “suspects the resolution of the Level 3 and Comcast dispute involved some sort of network re-engineering.”

The peering arrangement and any network re-engineering could help both companies (and serve as a model to others) to avoid the kind of standoffs and gridlock that will almost certainly occur as the volume of Internet video traffic soars.

What few pundits realize is that some form of CDN or equivalent will be needed to transport the high volumes of streaming video, in real time, to wireline broadband ISPs.  Hence, peering arrangements and billing agreements will need to be made between those two types of network operators.

Closing Comment:

We can expect a further explosion of broadband traffic resulting from new streaming video services from Google, Intel, Apple, and SONY joining Netflix, Amazon, and Hulu.  Are the network operators prepared for this?  This author doesn’t think so!

0 thoughts on “Analysis and Implications of Google's Proposed Web TV Service

  1. Thanks Alan for tying the Level 3/Comcast announcement together with the rumored OTT Google service.

    To your point about bandwidth, this sort of development, long-term, might force smaller operators to focus on bandwidth and focusing on peering solutions at the edge. Perhaps, we will see smaller operators get out of the business of offering video packages. Or, their offers may be in partnership with larger players.

    The delivery of live and on-demand video (which Google already offers through Google Play & YouTube) makes sense as part of its mission to make organize and make information accessible.

    Given that Google is already a provider of “cable TV services” in Kansas City, Google does bring a set of assets that a typical over-the-top provider doesn’t such as:

    – its reported headend in Council Bluffs that it uses for its Google Fiber networks. Ths could probably be used for transcoding as well.
    – its development of multi-room DVRs that are used for the aforementioned Google Fiber network
    – the content agreements it has in place for its “traditional” franchised offering.

    There has been speculation whether a cable operator might someday offer an over-the-top version of their service beyond its franchised borders. Google, as the new competitor with both resources and an established base, may scoop the incumbents.

    1. Ken, Do you think Google or Apple has a better chance of success in providing competitive real time & on demand OTT content? If Google offers OTT content over Google Fiber, what will happen to it’s existing Google Fiber TV service in KC?

      1. I don’t think anything happens to Google Fiber TV. Whether Over-The-Top or franchised, these video services are on one continuum. It is sort of like Chevrolet having a Spark compact car and a Yukon SUV. They both have the same basic functionality, but they serve different needs/price points.

        I still give the edge to Google over Apple, because they have been out there trying a bunch of different things. Not all of them will work, but they have got to be learning a great deal about what does work.

      2. I think Google has a better chance cause they are a facilities based carrier with Google Fiber. I hope they expand that service, but it doesn’t look like it’s going to come to Silicon Valley or anywhere in CA. U.S. needs more competition in high speed Internet and pay TV services!

  2. Thanks for a terrific article with keen insight and analysis.
    I think Google web TV offered over Google Fiber would effectively kill traditional pay TV services (cable, satellite, telco) because there would be no bandwidth bottlenecks in the access network.

    If Google web TV were to be offered over U-Verse, it’s a different story as there’s typically only 12 Mbps of downstream bandwidth- hardly sufficient for HD channels + other Internet access!

    Google already offers traditional TV (non Internet based) on its Google Fiber in KC. Here’s the channel lineup:
    https://fiber.google.com/plans/channels/
    Gigabit Internet +pay TV is offered at a very reasonable $120. You can add premium channels to this bundle for only $30 more OR subscribe to TV only for $40 more.

    1. Thanks for the comment Raj. Yes, the last mile may constrain things to some extent, but with new compression algorithms (H.265 HEVC) that may be less of an issue, particularly if much of the content can be streamed to a cache in the home (which is what Google’s whole home DVR could conceivably do).

  3. I think Google has a better shot at making this happen than does Intel or Apple, given Google’s experience as a “traditional” video provider. All hope to differentiate their services by improving the User Experience.

    It will be interesting to see how AT&T or Comcast react. What could be interesting is a consolidated response from the cable industry. I could see the potential for an overarching OTT service owned by the major MSOs, that would compete against themselves (as well as the Google-type offering), but each MSO would carve out revenue based on where the subscriber is. The question is whether it could be pulled together in time to compete with a Google.

    Foxtel seems to be taking this type of approach (competing against itself – really creating another level of service) with this announcement about a A$25/month “IPTV” (really over-the-top) service:

    http://advanced-television.com/2013/07/18/foxtel-launching-iptv-service-in-august/

    There is one other angle about Google that makes them more credible than Apple or Intel – they have a lot of transport fiber; could alleviate a lot of the bandwidth issues (e.g. they can use their own CDNs).

  4. This issue has a huge number of moving parts in the domains of “Content and Conduit” as we said in the 80s, Now we also have major toxicity of regulation. Net Neutrality anyone?

    I think there is no single best strategy nor a predictable “winner”. However, the situation is so complex, I think each big player will move forward by whatever steps it can to progress in their sense of the word.

    Example: VZ and T each need to get much more local wireless off-load for their cellular spectrum, irrespective of their particular content arrangements, if they really do want to stream video. But what if they give up control and just retain their current model of monetizing their capacity by cutting deals for various types of content?

    GOOG will of course have many deals to cut in every domain, as will AAPL.

    We can sure enjoy the spectacle from the sidelines!

  5. Regardless of content and programming, I hope everyone sees the fact that if implemented, this will further clog the internet providers. Remember that AT&T and Verizon want to move nearly everyone off of copper and onto their wireless networks for its higher profit margin. The wireless system capacity is already limited in many locations so if people begin watching TV via streaming then it will become seriously overloaded. Also imagine what the customers data usage and their monthly bills will look like.

    I also suspect that the wire and cable providers will try to put their competitors’ packets on a secondary low priority basis to give their own offerings preferential treatment.

    p.s. after reading Ken’s reply, I would GLADLY pay $70/month for true FTTH at gigabit speed. I am currently paying ATT $80/month for a measly 5MB actual speed.

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