Comcast Exec: We Need To Change Customer Behavior, Not Our Business Model

from the good-luck,-buddy dept

Brooks writes "Speaking at a cable broadcaster's summit, Steve Burke, Comcast's COO, said: "An entire generation is growing up, if we don't figure out how to change that behavior so it respects copyright and subscription revenue on the part of distributors, we're going to wake up and see cord cutting." How's that for cart before the horse?

His ultimate goal -- to maintain or increase revenue for Comcast -- makes perfect sense, and is positively what a cable COO should be focused on. From there on out, though, he's off in the weeds. How about offering this new generation new and innovative services that are worth paying for? That's challenging, of course... but how challenging will it be to change the next generation's behavior "to respect subscription revenue." Yikes.

How many consumers, in any market, are focused on "respecting" vendors' revenue streams? How, exactly, does he propose to effect this sea change? And why not just develop products that consumers will willingly pay for, rather than trying to change consumer behavior in such a fundamental way?"

The quotes really are quite stunning. Burke basically seems to be saying the focus needs to be on figuring out ways to get consumers to change, rather than changing to match what customers want. A business model based on going against what consumers want doesn't seem likely to last that long.

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Lawsuit Against Cable Companies For Not Offering A La Carte Channels Dismissed

from the choose-your-own-reason-why dept

Two years ago, a class action lawsuit was filed against the cable companies for not offering a la carte channels. This is an issue that gets people up in arms -- even as studies have suggested that mandated a la carte would cost consumers more (though, others dispute those findings). On the whole, I think that a la carte offerings that let people choose their own channels would certainly make consumers much happier (a good thing), but I have trouble believing that it should be mandated by the government.

So does the district court where the lawsuit was filed. It's now been dismissed, with the court saying that the plaintiffs failed to show the harm to the market. Of course, the case will be appealed, so this is a long way from over.

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Sports Fan Lobbying Group... Or Anti-Cable Lobbying Group?

from the how-lobbying-works dept

We've talked in the past about the sneaky nature of Washington DC lobbying, whereby the real lobbyists' goals are hidden as some sort of bogus grass roots campaign involving some random group of people. It looks like that's about to happen again, as a bunch of satellite TV and telcos have put together what is officially a "sports fan" lobbyist organization. However, it appears to really just be an anti-cable effort. The initial campaign is likely to be an attempt to stop the cable firms from their current effort to block competing television service providers from being able to carry cable-owned sports networks. The real fight is about who gets to control what TV sports content, but it sounds much nicer to pretend that it's "concerned sports fans" as a lobbying group, rather than "cable company competitors."

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Forget Piracy Or Boxee... Could Netflix Take Down Cable?

from the submarine-innovation dept

A bunch of folks have been sending in the recent Wired Magazine article talking about how Netflix's online streaming offering may be a disruptive innovation that takes down cable. The thinking is that, with Netflix service being built into lots of different settop devices, and the ability to watch various TV shows that are offered via DVD (and the Netflix streaming service, as well), why would people need cable any more? They can just wait until the "video" is out, and stream it via Netflix. The article may go a bit far in proclaiming Netflix as the winner of this battle right now, but it does suggest that (whether it's Netflix or some other provider) the model that cable television has relied on for so many years is certainly facing a pretty big disruption, one way or another.

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Limited Selection, Walled Gardens, Unskippable Ads... What's The Benefit Of TV Everywhere Again?

from the train-wreck-in-action dept

While Mark Cuban's insisting that TV Everywhere is brilliant, it's difficult to see what the benefit is for users. We already noted that the whole program seemed to be something of a mess with no one agreeing on standards, meaning that there might be a bunch of different ones. Oh, and then there's the whole plan to include way too many ads and not let users skip any of them. Meanwhile, Broadband Reports notes that the various players appear to be bickering with each other over who pays for what... and who gets compensated for what. The whole thing is a recipe for a disaster. As Broadband Reports summarizes, "bickering between broadcasters and TV operators, limited selection, walled gardens and unskippable ads" are the sort of things that drive people to other options, such as file sharing -- which is what TV Everywhere was supposed to prevent.

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Cable Companies Appear To Be Screwing Up TV Everywhere

from the what-a-surprise dept

Back in March, some cable companies announced plans for an offering called TV Everywhere, which was designed not to actually add value to your cable subscription plan, but to pressure TV networks to stop putting their content online for free, and offer it, instead, via cable authentication. For users, it would mean the ability to watch their cable subscriptions online, but only after they authenticate themselves, which seemed like a big hassle. It may be an even bigger hassle. Apparently, in this effort to take on things like Hulu (and, to a lesser extent, YouTube) no one at the cable companies got the message that simplicity is what made those sites work:

CBS Interactive president Quincy Smith this week proclaimed that there's no unified standard among cable companies for the project, and dozens of companies are all approaching back-end technology differently. There's also no real consensus between cable companies on how to proceed. One result? Users not having a central resource for video content.

Bowman suggested that projects like TV Everywhere may not yield a single site that will contain content from dozens of programmers. Instead, the authentication system the industry develops may be used to point pay-TV subscribers to several different sites to view their pay-TV content online.

Now that sounds like a winner.

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Cable Walled Garden TV Plans To Include Too Many Ads

from the of-course-they'd-screw-it-up... dept

We've already been incredibly skeptical of the plans by certain cable companies to get TV networks to limit their content such that it can only be accessed online if you have a cable TV subscription. The whole thing is based on setting up artificial barriers and artificial scarcity to hold back the inevitable. Such plans never do well. They piss off users and drive them to alternatives. And, of course, you just knew that the likes of Comcast and Time Warner Cable would like screw up the execution too. Many folks (myself included) have been surprised at how well (for the most part) Hulu executed, but just leave it to big cable companies not to learn from Hulu's success.

Reports are coming out claiming that when the shows are put online for this "TV Everywhere" program they'll include the full slate of ads seen during the regular TV version. Studies have shown that this is a bad, bad idea. Having so many commercials -- especially on a platform (the internet) with so many other options, simply drives people away. Hulu learned very quickly to limit the number of ads to just a few -- and it's discovered that (1) people actually pay attention to them and (2) they can charge higher rates. One more sign that this TV Everywhere program is a disaster in the making.

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Dear Comcast: The Idea When You Bundle Is That People Are Supposed To Get A Discount

from the just-saying... dept

When companies offer "bundles" of the various services they offer, part of the point is that if you're buying multiple packages together, you get some sort of "discount." It doesn't make much sense to go in the other direction, but apparently Comcast thinks it does. Reader Lucas points out that the company is currently offering the following "Digital Double Play" bundle, which consists of both the "Comcast High Speed Internet, with Powerboost" and the "Comcast Digital Starter Package" for the temporarily discounted bundle price of $69.99/month for six months (after which, the price jumps to $109.90/month).

Ok. But let's look up the components separately. It appears that the basic high speed internet with Powerboost is available separately as a promotion at $19.99/month for six months, after which it becomes $42.95/month. And then there's the Comcast Digital Starter Package. That appears to be offered as a promotion for $29.99/month for six months (after which it jumps to $59.95): So... at a first pass, it looks like you could order each package separately and pay $49.99/month for six months and $102.90... or you can buy the "bundle" and pay $69.99/month for six months and then $109.90/month afterwards. What a non-bargain! Of course, if you start to look closer, it's a little bit different. The digital TV package, even though it's described as the "Digital Starter Package" also includes the on-demand library. So if we dig deeper into Comcast's options, we find that the equivalent tier isn't actually the "Digital Starter Package" but the "Digital Preferred" package. Kind of odd that you'd sell the digital "preferred" package while claiming it's the starter package -- but that appears to be what Comcast is doing. So, with this package, the six month promotion is $44.99/month and then it jumps to $76.90/month: So, now, the "unbundled" combined offering is actually $64.99... Still $5/month cheaper than the "bundle" -- and without the bundle at least you get the satisfaction of knowing you have the "preferred" package, rather than the "starter" package (oh yeah, and of paying $5 less than the suckers who bought the bundle.). But then, finally, after six months, your price will jump to $119.85 -- or $10 more expensive than the bundle. So perhaps there is some method to the madness, but Comcast sure doesn't make that very clear.

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Cable Companies Aren't Immune From The Economy As More People Go Online-Only For TV

from the take-your-500-channels-and... dept

People are cutting back on lots of spending these days, but one area that was supposedly relatively safe was in-home entertainment expenditures. Things like cable and satellite TV and Netflix were thought to even thrive during economic downturns as people looked to limit going out, choosing instead to stay in and be entertained. While that seems to be working out for Netflix, cable companies are starting to feel the pinch as people drop their subscriptions and get their TV fix online. While it's a relatively small number of people that are making the move, it's the sort of thing that cable companies have been concerned about for a while. The WSJ story talks about some moves by the likes of Comcast and Time Warner to grab more online viewers, but if the cable companies continue to try and treat their online efforts in the same way as their traditional offerings, it's hard to see much success. It doesn't seem like a coincidence that this is happening as cable companies are looking to introduce caps on their broadband services. They say it's because some consumers are creating too much traffic, in part because of their online video viewing, and it's straining their networks. But perhaps it's just a way to try and capture lost TV revenue from cord-cutters? Of course, trying to get users who are going broadband-only for their TV to take on metered broadband seems like a good way to drive them to competitors with uncapped plans.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Mark Cuban Declares War On Free TV Online... But Misses Out On The Economics

from the protectionism-doesn't-work dept

There's a myth out there among some newspapers folks that "if only" the newspapers hadn't committed the "original sin" of putting content online for free, the newspapers wouldn't be facing difficulties these days. It's the kind of story that sounds good if you don't look too closely at the details. Plenty of newspapers did try to charge and almost all of them failed. People were never that interested in paying for news online, and plenty of new sources of news were popping up for free online anyway. Charging was a dead-end model from the beginning -- and to understand why, all you need to do is understand a little basic economics concerning the difference between infinite and scarce goods.

However, it looks like Mark Cuban believes in that "original sin" concept, and is posting a series of blog posts to try to prevent TV networks from making the same "mistake." It started with the claim that anyone who thinks TV is going a la carte online is crazy, because the "content companies" will never give up the fees they earn from the networks. After a bunch of folks challenged him on this, Cuban added a second post asking a bunch of questions, but which did little to actually answer his critics. He (like NBC Universal execs) laughs off the "threat" of people switching to all online access to TV content, noting that very few people have done so. This surprises me, since you'd think that Cuban would be familiar enough with Clayton Christensen's work to know that just because there are only a few early adopters (and the quality isn't as good) that it doesn't mean that it's not a potential threat. In fact, those questions are basically the de facto list of questions that an "incumbent" player tends to ask when facing a Christensen-style "innovator's dilemma" just before the upstart technology really begins to hurt the legacy business.

From there, however, it just gets silly. Cuban tries to stir up some sort of moral outrage among cable subscribers, exhorting them to call their cable companies and satellite providers demanding that they not allow any TV content online for free (as if it's their choice). His reasoning?

Those of us who enjoy this matter of life should be completely outraged that there are those who are leeching off the money we pay to enjoy tv. Our check goes to pay our bill. The money then goes to pay for the tv network, which in turn goes to pay for the content. Its a system that works.

Like any good system, there are those that want to have their cake and eat it to. The content we pay for ? They want it for free. We pay for it, they want it for free.

How is that fair ? Where is the justice ?

We pay for the content. We should be able to get it where we want it, and when we want it. Those who want it for free ? They should pay too.

Yes, and newspapers shouldn't be online for free. And music shouldn't be online for free. But they are and they will continue to be. Why? Because of those basic economics. As Saul Hansell at the NY Times points out, this is the nature of competition. Sure, everyone would love to keep getting paid, but some enterprising content company is going to recognize that getting more attention is a lot more valuable in the long run than keeping its content locked up on cable networks. Those content providers are going to realize that by breaking free and getting the content out there, they're able to stand out against those who lock up their content. They're going to be able to score more viewers and from that, more advertising dollars. And that will hurt those who keep their content locked up -- so, they'll be forced to free up their content as well. It's just basic economics.

Oh, and as for the whole "moral outrage" bit -- it's difficult to see how people who are already pretty pissed off about constantly rising cable TV prices are suddenly going to rise up and tell the cable companies to keep on charging them higher prices by locking up content. No. It seems likely that most of those folks are pretty excited about the idea that some of that content might go free, and can actually push down cable TV rates.

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Why Internet Companies And Content Companies Should Oppose Broadband Caps

from the it's-going-to-stifle-innovation dept

I've been on record for quite some time as being opposed to metered broadband caps by ISPs. Plenty of others -- including some of the other Techdirt writers -- disagree, insisting that they will work fine allowing ISPs to "differentiate" service levels. I find that to be quite optimistic, as most of the examples we've seen so far have really only involved ISPs putting in ridiculously low caps in order to squeeze excess money out of people. And, before anyone says it, there's no evidence that ISPs "need" to cap usage to avoid a bandwidth crunch. Such things have been disproved time and time again.

But, my biggest reason for opposing broadband caps is that it will stifle online innovation in a variety of ways. First, bandwidth caps don't give ISPs much real incentive to invest in more bandwidth (contrary to their claims). That's because the more "congested" they can show their network is, the more they can charge more for basic usage. It sets up incentives for the ISPs to want more congestion, rather than less. Second, it will greatly limit the adoption of new and innovative services. Suddenly there's an additional "bandwidth" cost to testing out certain types of apps. This makes people less willing to even bother, and basically knocks out any (relatively) high bandwidth service before it can even get started.

For example, look at Larry Lessig's recent experience while traveling in New Zealand. He's apparently "subscribed" to the TV show House via iTunes. So, at the hotel in New Zealand, he paid for expensive broadband service that mentioned, in the fine print, that his access was limited to a grand total of 1 gig. He logged in and started checking email. In the background, iTunes started downloading the latest (high def) episode of House which itself ran 1.5 gigs. So half an hour later, not only is his broadband cut off, but a message pops up telling him he's being fined for "violating ethical rules." It's troubling enough that the provider somehow thinks it's an ethical violation -- but this shows how bandwidth caps can easily stifle perfectly legitimate activities and aren't (as many have implied) about "stopping pirates."

And, it's for this reason that many entertainment companies should also reconsider their support of caps. Many in the entertainment business have supported caps as one (of many) ways to combat "piracy." But now, as more and more legitimate, authorized content services are available online, these caps are going to do serious harm to their online business as well. Now, perhaps some of them (stupidly) think that this is okay, because it will just drive people back to the "old way" of doing things, that's unlikely to happen. It's just going to piss people off. Once you've shown them that they can do something, people don't tend to like having that option taken away from them.

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Viacom, Time Warner Cable Fight Over Cost Of Comedy Central, MTV

from the and-so-it-goes dept

While this happens pretty frequently, you can bet that battles like the one going on between Viacom and Time Warner Cable are going to become more and more bitter in the next few years. Unless an agreement is reached (which is likely), Time Warner Cable customers may lose access to popular Viacom channels such as MTV, Nickelodian and Comedy Central. The issue is that Viacom wants to significantly raise the costs to TWC for those stations (between a 22% and 36% price increase). TWC would just pass those costs on to consumers, and the company accurately realizes that this would seriously piss off customers at a time when customers are increasingly realizing that they can drop cable TV and just go online for much of the programming they want.

And that, actually, is part of the issue. One of TWC's big complaints is that Viacom now offers most of the shows on those channels for free online -- where TWC isn't able to get any of the associated ad revenue. The real question is who is in a stronger bargaining position. If TWC dumps Viacom stations, and people start realizing they're fine with just being able to view the content online, both TWC and Viacom will likely lose out (the ad revenue that Viacom gets online won't come close to matching the carriage fees from TWC). The whole thing is a big game of chicken, but we're going to see it play out many more times, as the relative value of the cable provider as the exclusive delivery mechanism for television content starts to decrease. Of course, that only makes the content companies want to increase prices more to make up for the loss -- and the cycle actually accelerates. Both sides stand to lose out unless new arrangements are reached.

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Cable Companies Figuring Out Their Wireless Strategies: Add Value To The Core Offering

from the seems-smart dept

While the cable companies have long had trouble coming up with a good wireless strategy (including numerous false starts) it looks like some may be figuring this out, in setting up business models where the wireless acts as a free value-add that keeps customers tied to their core, profitable businesses. For example, the article discusses Cablevision:

As such, Moffett likes Cablevision's WiFi strategy because it serves as a value-added service for its customers, and it's cheap to roll out. Moreover, Cablevision is pitted against Verizon in New York, and Verizon can't match the free WiFi offering.

"Their model is to pay for the WiFi network by, well, giving it away," Moffett said. "The $300 million of capital spending required to build it, and the modest operating costs to run it, can be paid for with just a small uplift in market share--either gained or retained--in their wired broadband service. At an ARPU of $35 per month and 80 percent contribution margins for wired broadband, it would take only 160,000 incremental subscribers--just 3.6 percent share of their cable footprint--to earn a 10 percent return on investment."

This is interesting for a few reasons. First, it shows yet another case where a company realizes that even if the initial costs are huge, if the marginal costs are low, and the "free" product better ties customers to a scarce product, it can make sense to give the other product away. So, yes, once again, there can be a good ROI on a "free" product -- even one that costs $300 million to roll out.

Of course, what may be even more noteworthy is the comment about how "Verizon can't match the free WiFi offering." That's quite amusing, because, five years ago, Verizon started implementing a plan to... offer free WiFi to Verizon DSL customers in NY. And, the plan wasn't even that expensive, because it made use of all the Verizon telephone booths that were already installed. In fact, the plan was seen as a pretty big success, responsible for reducing customer churn in such a way that more than paid for the service (exactly as the analyst is predicting will happen with Cablevision's offering). Yet, the bigwigs at Verizon still decided to kill the program, because, for reasons that still escape us, some execs were worried that it would compete with Verizon Wireless' EV-DO cellular wireless offering. Wonder if they regret that decision now?

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Why Mandate A La Carte Cable When It's Happening Online Already?

from the just-let-it-go dept

We've been among those who think that the government shouldn't be forcing cable providers to offer a la carte channels. While people always insist that if they got a la carte cable, it would be cheaper, the facts are quite different. The economics of providing a la carte through existing systems would greatly increase overhead, and make it difficult to make things work. Most people would end up paying the same or more -- but for fewer channels. Those who are complaining might be better off recognizing that when they pay for cable they're effectively just paying for what they want -- and the other channels are freebies.

Or, they can just realize that a la carte TV is coming without the need for government interference. Adam Thierer notes that there's a growing movement of folks realizing that you can get an awful lot of television programming (legally) online these days. It's reaching the point where we're finally moving towards a world that we predicted years ago that shows are independent of channels or TV providers, and you can just get them directly online. That's already leading some people to ditch TV service entirely, knowing they can get plenty of shows they want online -- and all of this is happening without the government getting involved at all. So, can anyone explain why it still makes sense for the government to get involved here?

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Verizon Gets Smacked Down For Its VoIP Patent Suing Spree

from the so-much-for-whacking-cable-competitors dept

Verizon was one of the last players to the VoIP party. Cable companies had been offering VoIP for years, and then Vonage, AT&T and a variety of other startups really built the market before Verizon even bothered to enter the space with an overpriced, uninspiring "me too" product that the market made clear it didn't want. Yet, somehow, Verizon was able to get some patents on the technology, despite a ton of rather clear prior art that showed Verizon's patents should never have been granted.

So, with those patents, Verizon began suing -- and it started with the lame duck in the VoIP space: Vonage. The company has been struggling for a variety of reasons, and a bunch of patent holders swept in to sue the firm that actually made VoIP a viable product in the market. Vonage came under massive pressure from shareholders to get rid of these lawsuits, so it settled rather than deal with a lengthy court room battle.

Verizon interpreted this as a validation of its patents and set off to find others to sue. Its next target was Cox Cable for its digital telephony solution. The plan was clear. After beating Cox, it would turn its legal guns on the big boys like Comcast and Time Warner. Except, it appears the courts have tossed a wrench into those plans by siding with Cox in pointing out that the company doesn't violate Verizon's patents. While Verizon will most likely appeal, this should be seen as a pretty big win for Time Warner Cable and Comcast, who may not even have to defend themselves against Verizon's questionable patent claims at all.

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Yet Another Report On Why Forcing A La Carte Cable Is A Bad Idea

from the think-it-through dept

If there's one topic that we regularly discuss that many of our readers (even those who agree with us on most other things) disagree with us on, it would be mandatory a la carte cable. We've explained repeatedly why forcing cable companies to offer a la carte cable is a bad idea that would likely lead to higher prices and less choice. Yet people still argue against it, claiming (incorrectly) that they would just order a few channels and prices would decrease. Instead, those fewer channels would inevitably cost a lot more (if they were still available at all) because a la carte pricing for channels reduces demand for individual channels, resulting in higher (not lower) prices per channel. Jeff Eisenach and Adam Thierer have put together a short report looking at the problems of a la carte cable, and noting that even if the intentions of those supporting mandatory a la carte cable are strong, the end result isn't likely to be what they'd expect.

On top of that, it's probably worth pointing out that this debate may soon be moot anyway. As we move increasingly to a world where most TV programs are available online, the entire concept of the channel will go away. It won't matter what channel a particular program is on, because you'll just subscribe to that program, and it will get delivered over the internet. In the meantime, though, there's simply no reason to force cable companies into providing a la carte channel selections.

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When You Measure Broadband Caps In Terms Of How Many Emails, Something's Wrong

from the that's-not-broadband dept

We've already talked about how low it appears some ISPs are making broadband "caps." Doing so seriously destroys the value of a broadband connection and will likely backfire on the ISPs who provide it. But, for those companies that are putting in place such low broadband caps -- a small suggestion: when discussing how much the caps allow, listing out how many emails you can send or receive under the cap is probably a bad idea. If the cap is so low that the number of emails is even worth mentioning, you've got a serious problem.

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Advocates Of A La Carte Mandates Misunderstand Infinite Goods

from the bundling dept

Some minority organizations are making the case that a la carte mandates would destroy the market for niche channels. They point out that the market for minority programming like BET and Univision is relatively small, so they (and minority viewers) benefit from being able to tag along with channels that have broader interest. FCC chairman Kevin Martin disagrees, saying that "if a cable operator only wants to carry one channel, it should not be required to buy 10 or 20 channels in order to do so." Martin seems to be thinking of cable channels as tangible products like cars or toasters: if people are only "required" to buy the channels they really want, they'll save money because they won't be "forced" to waste money on other channels they're not interested in. But this argument ignores the fact that television content is an infinite good. The costs of delivering cable content is almost all fixed; once coax has been run to a customer's house, it costs almost exactly the same to provide a given customer with every channel on the cable network or with only one channel. As a result, bundling is economically efficient: throwing in additional channels increases the value of the cable service without imposing any extra costs on the system.

People imagine that an a la carte mandate would mean that if they're currently paying $50 per month for 50 channels, then they should be able to pay $1 per month for one channel. But that doesn't make any sense. Switching a given customer from 50 channels to 1 channel doesn't reduce costs (the other 49 channels would presumably still be produced for other viewers), so why should the customer expect a lower bill? If anything a switch to a la carte actually makes things more expensive because in some cases cable companies have to install new equipment and set up a more complicated ordering and billing system to keep track of who had signed up for which channels. In reality, what would happen is that the cost of each channel would go up a lot. Instead of $1/channel, cable companies might charge something like $8/channel, with each customer choosing 6 channels on average. The result would be that most people would pay about the same for a lot fewer channels.

It's a mistake to think of bundling as being "forced" to pay for channels we don't want. After all, non-sports fans don't get outraged about the fact that they're "forced" to take the sports section with their morning paper. The right way to think about it is that you're paying for the parts of the bundle that interest you, and the rest of the paper is a freebie that doesn't cost you anything extra. It would be silly to demand that newspapers price each section of their paper separately and let you do without the sections you don't want. It's equally silly to demand that cable companies not show you channels you're not interested in watching, since those aren't costing you anything either.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Cable Modem Patent Hoarder Accused Of Pretending To Enter The Market

from the sneaky,-sneaky,-sneaky dept

Rembrandt IP is a patent hoarding firm that we've written about a few times before. It buys up patents and then sues companies to get them to pay licensing fees. However, one thing that's been really interesting about Rembrandt is how it's been figuring out new and creative ways to skirt recent Supreme Court rulings that seek to lessen the impact of such non-practicing entities. Two years ago, in the landmark MercExchange case, the Supreme Court ruled that courts shouldn't automatically grant injunctions preventing the sale of products, even if they're found to have violated a patent.

This didn't get rid of injunctions entirely, but basically (reasonably) noted that the courts should take into account whether or not the product on the market was actually harming the market for the patent holder's products. Thus, if you were a non-practicing entity (patent hoarding firm), it didn't make sense to ban another company's products from being in the market -- it just made sense to fine them. After all, since the patent holder didn't have a product on the market, what harm was being done to the patent holding firm's market? Patent hoarding companies flipped out, because the threat of an injunction barring the sale of products was one of the biggest weapons they had (it's part of what made RIM pay $612 million to NTP, even though the USPTO had said that NTP's patents were invalid).

So, how is Rembrandt getting around this ruling that takes away the threat of injunction as a weapon? Well, earlier this year, we noted a sneaky trick where it sued two companies in a single market over the same patent, but gave each of them a choice: whoever settled first, would get to join the lawsuit against the other one. Then, since the side that joined was a practicing entity, it could push for an injunction against the other. Sneaky, right?

Well, now it gets better. Rembrandt also happens to hold some patents on cable modem technology. In this case, Rembrandt bought the patents from a former AT&T subsidiary that had an agreement with the cable companies to license the patents under reasonable terms. Rembrandt is now claiming that since it bought the patents, it no longer needs to abide by that earlier agreement (despite the fact that the FTC has already slammed other patent holders for claiming similar things). Rembrandt, however, is pushing ahead and has sued a ton of cable companies, broadcasters and cable modem makers over this patent -- but how can it get an injunction since it's not a practicing entity?

Well, how about pretending to be a practicing entity?

Broadband Reports points us to the news that Rembrandt has convinced a small Taiwanese cable modem manufacturer to make a batch of cable modems with Rembrandt's name on them, which have now been sold to a tiny ISP in Seattle Tacoma. So, now, Rembrandt can try to claim that it's really "in the market" (even though it has admitted publicly to being a non-practicing entity) and can push for an injunction against all the companies it's suing. Those companies are calling out this practice as a "sham," and it will be interesting to see how the court rules. If the court rules that this practice allows Rembrandt to ask for injunctions, we may start seeing other patent hoarding firms quickly finding "partners" who can white label a few products just for the sake of appearing to be a "practicing" entity rather than a non-practicing one.

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Time Warner Cable Tiered Broadband Test Begins

from the if-only-there-were-competitors dept

Earlier this year, the story came out that Time Warner Cable wanted to experiment with capping its "unlimited" broadband, trying to force the heavy users to pay more. Even worse, it appeared to want to use exceptionally low caps that would discourage innovation. Despite all of the concerns, Time Warner Cable is moving forward with the test as planned.

The end result will be taking away value from customers -- not just in limiting how much bandwidth they get, but by adding a huge mental transaction cost. Basically, what Time Warner is doing, is adding a huge overhead in terms of whether or not users are willing to actually use the bandwidth they signed up for. Just the fact that people need to think about how much they're using will decrease usage significantly. While that may be what TWC wants, what it really does is annoy customers. This would never actually happen if there were real competition, but with very little competition out there, TWC can try out this plan. Any other broadband provider competing against TWC in areas where this test is going on should be hitting on the limits in any advertising campaign. TWC is free to do whatever it wants, of course, but it's never a good business move to take away features from customers -- especially if in doing so you add an annoying mental transaction fee.

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