Dancing With Digital Divas: Spectrum Dilemmas & Cross- Plattform Delivery Präsentation auf dem Medientreffpunkt Mitteldeutschland Hybride Netze - Wettbewerb um die Frequenzen i Dienstag, 08. 05. 2012 , 9.30-11.00 Uhr

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Gary Arlen
President
Arlen Communications LLC
Prepared for
"Medientreffpunkt Mitteldeutschland 2012”
8 May 2012

2. New Opportunities =
New Competition
Spectrum vs. Bandwidth:
Airwaves and the avalanche of content transmitted to viewers
Spectrum Dilemma Cross-platform Delivery
Wireless carriers demand “Over-the-Top” video,
spectrum for growing streaming, IPTV
mobile services Tablets, smart-
M2M systems proliferate phones as preferred viewing
64.7 Exabytes
Cisco Global Forecast (billion GB) devices
for bandwidth “Non-traditional” carriers
demand, 2010- 2015
(Google, Yahoo) aggregate
Video
content and customers
© 2012 Arlen Communications LLC 2

3. Lobbyists
Media Technology
A Star-Studded Array
of Powerful Providers
Have Major Financial
Stakes in Spectrum
and Multi-platform
Delivery Policies and
Economics
© 2012 Arlen Communications LLC 3

4. • FCC Spectrum Allocation *
 Proposed Incentive Auctions for TV stations
 Motivated by demand for mobile/wireless bandwidth
$25 billion income to Federal Government
$7 billion to emergency wireless network
$2 billion to broadcasters for channel repacking
$15 billion for jobs programs, etc.
 Voluntary Broadcaster Participation
• Theory: fast cash. Reality: insufficient value in small markets
• No timetable, but “soon” – target 2015, unlikely
• Related issues
– Spectrum repacking = transmitter changes
– White Spaces = avoid interference
• For use by unlicensed transmitters (e.g. wireless home networks)
– Demands of public safety, security
* “Spectrum Grab” to broadcasters
© 2012 Arlen Communications LLC 4

5. “Channel Sharing”
• Seeks to preserve local stations and
reclaim spectrum for wireless services
• Two channels would use same 6 MHz frequency
• Could limit HD or 3D broadcasts
• Raises Questions about:
• Must-Carry vs. Retransmission Consent
• Local availability
• Technical issues
• Independent management of FCC rules
 FCC opened rulemaking process in April
© 2012 Arlen Communications LLC 5

6. Policy Makers’ Dilemma
FCC Chairman
• Two-phase auction:
Julius Genachowski
– Reverse auction to reclaim TV channel space/determine supply
– Standard auction to allow wireless companies to acquire spectrum
• Spectrum Allocation issue also involves
• Relinquish government spectrum
• 500 MHz by 2020
• Reassign mobile satellite spectrum for terrestrial
wireless services
• Retransmission consent for cable carriage - uncertain
• Also confronting:
• Mobile DTV deployment
• Network neutrality (especially wireless broadband)
© 2012 Arlen Communications LLC 6

7. Marketplace Reality
• Big cable companies’ “SpectrumCo” un-built wireless
licenses sold to Verizon
$3.6 billion; needs FCC approval
• Verizon plans to launch wireless Others
video service by end-2012
o Would leverage FiOS wired broadband content connections
o Would add to spectrum congestion; require new data pricing
• Verizon will divest other spectrum (FCC spectrum caps)
• Google’s spectrum and landline ambitions
o Kansas City 1 GB to the home wireline pilot
• Lobbying juggernaut: House adopted FCC revision plan.
o Top 10 legislators got nearly $500, 000 in campaign contributions from
broadcasters, telcos, wireless lobbyists.
© 2012 Arlen Communications LLC 7

8. Internet/Online Advertising has exceeding all
other platforms except broadcast TV.
But the gap is closing.
U.S.
Broadcast TV
Internet
Source: Interactive Advertising Bureau, April 2012 : IAB Internet Advertising Revenue Report: An Industry
Survey Conducted by PwC and Sponsored by the Interactive Advertising Bureau (IAB) 2011 Full Year Results

9. And Also…
• Mobile video? Mobile Content Venture
Via broadcasting?
• Using existing TV stations
• Need wireless telco cooperation to put
receiver chips in subsidized handsets
… or wireless broadband?
25% of U.S. video viewing is on “other platforms”
including tablets (Source: Parks Associates, April 2012)
© 2012 Arlen Communications LLC 9

10. Speaking of tablets and 2-screen TV
Cross-platform and multi-platform deliver expands
• Smart TVs with hundreds of apps
• “TV Everywhere” (cable companies)
with authentication
• Ultraviolet
Studio control via the cloud
• YouTube’s $100 million original production fund +
studio deals
• Facebook studio deals
© 2012 Arlen Communications LLC 10

11. Again: the Divas are ready for marketplace battle
Trying Again
© 2012 Arlen Communications LLC 11

12. Facing the Era of Cord Cutting
• “Over-The-Top” delivery: relies on broadband
• “Cord Cutting” and “Cord Trimming”
• Reducing cable services: availability of online video
• 5% - 9% of cable churn now
• Streaming services carry TV shows: (owned by NBC, ABC, Fox)
• Will grow as more VOD rights are cleared
• Fueled by and
• Cable MSOs acknowledge: their core business may
become data, not video packaging
• Comcast introduces
• Time Warner Cable envisions “Pandora-like model”
• Wreaks havoc with core financials
• Hulu commercials generate 50% revenue of network advertising
© 2012 Arlen Communications LLC 12

13. OTT: Where the Shows Are
TV set-makers have deals with video aggregators to make their
programs available directly to ’Net-connected “Smart TVs”
    
   
      
   
      
     
Source: Parks Associates, Arlen Communications, companies, 2011
(c) 2012 Arlen Communications Inc. 13

14. As for “Hybrid TV”….
• Has not yet clicked in the U.S.
• Broadcast TV delivered via Internet facilities
o Some startups: Broadcaster
Approval
Proprietary hardware that lets TV stations stream
personalized TV to authenticated connected devices.
Investment from NAB and CEA. 50 initial markets. 
Tiny OTA antennas to pick up all local broadcast station,
transmit via IP to home or mobile devices $12.99/month.
Uses DVR copyright case to avoid retransmission

consent. Being sued by broadcasters.
And also: Broadcast TV via the Internet:
?
Even Comcast has patent to let set-top box surf the Web
© 2012 Arlen Communications LLC 14

15. Social TV and Simultaneous Viewing
• 80% of U.S. tablet and smartphone users have
the devices nearby while watching TV
• Social TV most popular during events
• 13 million during CBS Grammy (music) awards
• 12.2 million during Super Bowl
• 3.8 million during Academy Awards (older audience)
Source BlueFin Laboratories, March 2012
• Advertisers are developing games, T-commerce
• Enhanced pricing for commercials, with direct-
marketing implications
© 2012 Arlen Communications LLC 15

16. Simultaneous Use of Tablet
While Watching TV
Source: Nielsen April 2012
26%
Several times/day 12%
24%
15%
19%
Once a day 16%
17%
14%
24%
Several times/week 19%
23%
20%
Several 13% USA
15%
times/month 10% Germany
13%
7% UK
1/mo or less 9% Italy
7%
9%
12%
Never 29%
20%
29%
© 2012 Arlen Communications LLC 16

17. Identifying the Global Appeal of Interactivity
Consumer opinion about the ability to interact more personally with content
(rank “appealing” or “very appealing” in 5-level survey)
Source: IBM “Beyond Digital” report, April 2012; Data from 2011 Digital Consumer Survey
http://www-935.ibm.com/services/us/gbs/thoughtleadership/ibv-beyond-digital.html

18. Viewers of all ages are connected, multi-tasking
and comfortable with Internet-delivered video
Source: IBM “Beyond Digital” report, April 2012; Data from 2011 Digital Consumer Survey
http://www-935.ibm.com/services/us/gbs/thoughtleadership/ibv-beyond-digital.html

19. More Policy Factors
• Privacy and security
• U.S. standards are now weaker than in Europe
• Network neutrality
• Challenges as media/carrier companies have
more control of content on their infrastructure
• Bandwidth management
• Related to ‘net neutrality and competitive pricing
• © Copyright
• Antitrust
• Ownership caps, Spectrum caps
© 2012 Arlen Communications LLC 19

20. Digital Outlook
Different industries are finding new ways to
collaborate, but legacy turf-wars will persist
Technology providers are increasingly guiding
the process of delivering entertainment and
information
• Relying on “The Cloud”
• “TV Everywhere” is the mantra, especially for young
audiences
“Media malaise” persists:
What happens next?
© 2012 Arlen Communications LLC 20

21. Thank You
.
Gary Arlen
Arlen Communications Inc.
7315 Wisconsin Avenue Suite 805E
Bethesda, MD 20814 USA
www.arlencom.com
301 656 7940
GArlen@ArlenCom.com
© 2012 Arlen Communications LLC 21