Cable TV vs Telephone Companies

The questions

5. In the coming years Cable TV will face very real competition from the telephone companies for customers. Give the competitive advantages of each industry and the efforts both have made in Congress and at the FCC to deal with perceived inequities in the competitive landscape.

Comprehensive Examination Question #5
Andrea P. Fuller

I. Cable Industry

A. Competitive Advantages

1. Due to the competition from satellite companies and more recent the telephone companies (mainly AT&T and Verizon Communications), cable companies (Comcast and Time Warner Cable-the two dominant companies) have to increase their services offered to their customers.
a. According to statistics, 90% of US cable systems currently offer HD video services as of January 2008 (Anonymous, In-Stat: Increased Competition Pushes US Cable Operators to Continue Investing, Business Wire, Jan 2, 2008)

2. Cable companies have limited competitive advantages due to their competing companies offering the same services. As a result, many cable companies are exploring offering improved services to keep customers.
a. Conversion of analog to digital (If customers have cable, on analog television, they don’t have to worry about the conversion from analog to digital on February 2009).
b. Increasing spectrum that increases the capacity of the networks
c. Capacity sharing through switched digital video
d. Node splitting, which improves
e. MPEG-4 provides capacity sharing (Anonymous, US Cable-New Strategies for a Competitive World, Business Wire, April 10, 2008)

3. Cable companies are now offering bundles to customers which includes cable, internet, and land-line phones

4. Cable is targeting small and medium business in offering commercial phone services (voice and data services)
a. Comcast is investing $3 billion over the next five years
b. Time Warner Cable is investing $6-7.5 billion for commercial phone

5. Time Warner plans to cut prices of telephone services 10-15% (Jon Hemingway, New Front in Cable-Teleco War: B2B, Broadcasting and Cable, October 1, 2007)

B. FCC/Congress vs. Cable Companies.

1. 70/70 rule
a. Under the Communications Act of 1984-which gives the FCC power to regulate cable companies when they feel they are too big.
b. FCC must use the 70/70 Test: cable must pass through 70% of households, and 70% of those households must be subscribed to a cable services.
c. State Representatives including Marsh Blackburn (R-Tenn.), Edolphus Towns (D-NY) and Joe Barton (R-Texas) a bill to challenge the 70/70 Test.
a. Bill call for stripping FCC powers to reregulate the cable industry
b. Bill getting support from NCTA, Rainbow/PUSH Coalition ad America for Tax Reform (John Eggerton, Blackburn’s 70/70 Bill a Reality, Broadcasting and Cable, December 6, 2007).

2. November 2007: FCC Chairman Kevin Martin introduced a 30% percent cap on cable companies prevent large companies such as Comcast and Time Warner from growing or making acquisitions after its conclusion that cable
a. States that no company can own no more than 30% in a market
b. FCC goal of rule is to promote “diversity of information sources”
c. Cap opens cable market to independent programmers and telephone companies (Stephen Labaton, FCC Planning Rules to Open Cable Market, New York Times, November 10, 2007)
d. In 2001, the FCC tried to establish a cap for cable companies, but it was struck down by the US Court of Appeal on First Amendment grounds. (John Eggerton, FCC Releases 30% Cable-Subscriber Cap Order, Broadcasting and Cable, February 11, 2008).
e. In March 2008, Comcast sued the FCC over the 30% cap
i. Company is at 27% of 30% cap
ii. Claims that the FCC has no evidence for a horizontal cap especially with numerous competitions among other cable companies, independent programmers, phone and satellite companies.
iii. Comcast also accuses the FCC of playing favorites with telephone companies (John Eggerton, Comcast Sues FCC over 30% Cap, Broadcasting and Cable, March 13, 2008).

3. FCC End Cable Deals for Apartments
a. October 2008: FCC ban cable deals/contracts giving cable companies the right to provide services to apartments
b. AT&T and Verizon benefit the most after lobbying for the new rules.
c. Can lower cable prices
a. Keven Martin, chair of FCC: cable prices risen 93% within the last decade.
b. New competition = lower prices (Stephen Labaton, FCC Set to End Sole Cable Deals for Apartments, The New York Times, October 29, 2007).

4. States creating laws creating franchises for telephone companies
a. Cable companies filing lawsuits claiming that cable will lose revenue, damage of reputation, and unfair competition (John Eggerton, Telecos Celebrate Franchise Wins, Broadcasting and Cable, September 29, 2006).

II. Telephone Companies

A. Competitive Advantages
1. 2006: FCC passed a reform video franchised legislative reform that made it easier for telephone companies to get into video through national franchising (John Eggerton, House Passes Video Franchise Reform, Broadcasting and Cable, June 8, 2006).

2. AT&T and Verizon offer new technology that has advantage over cable
a. Both companies have IPTV services
a. Unlimited number of channels
b. 2-way interactive services (Anonymous, US Cable-New Strategies for a Competitive World, Business Wire, April 10, 2008)
c. AT&T offers U-Verse in limited areas
i. Features includes 300+ channels, high-speed internet, phone services, DVR specialties, streaming live video from cell phone to tv, and games
ii. Criticism: U-Verse only targets affluent and avoid minority, low-income (Rick Barrett, AT&T U-Verse access debated: City’s low-income areas often lack cable alternative, McClatchy-Tribune Business News, December 11, 2007).
d. Verizon offers FiOS TV

3. Incentives
a. Verizon conducts Retention-Marketing
a. Provide incentives for their current customers for not switching to another cable company.
i. FCC refuse to intervene after cable companies pressured them to stop stating Verizon is violating law (John Eggerton, FCC Won’t Stop Verizon Communications’ Retention-Marketing Effort, Broadcasting and Cable, April 1, 2008 )
ii. Also offer incentives for new customers
1. Offered 19-inch HD TVs, camcorders and camcorders in December 2007
a. Cable companies only relied, promotional prices and good services (Toni Whitt, Cable war could be proving ground; Analysts watch Verizon’s use of incentives in effort to entice local consumers, Sarasota Herald Tribune, December 20, 2007)
b. Offering bundles (phone, cable, internet)

4. States are recognizing phone companies as video providers, and granting them licenses to compete with cable companies

B. FCC/Congress vs. Telephone Companies
1. One problem that telephone companies may endure is still being recognized by states as video service providers such as in November 2007 it was reported that AT&T spent $11.2 million lobbying for a franchise bill in TN.
a. Most money spent on public persuasion, and advertising between October 1, 2006 to September 2007.
b. Cable companies are claiming AT&T is trying to get an unfair advantage and cable will continue to fight (Andy Sher, AT&T, cable fight nears $11 million, McClatchy-Tribune Business News, November 20, 2008).

2. FCC bans phone deals for apartments
a. Unfair competitive advantage
b. Hurts consumers
a. Prevents residents from purchasing bundled services

Tell Me what you think

This is an experiment…

1. Review the theoretical underpinnings of persuasive messages in relation to specific audiences, taking into account at least three of the following constructs: agenda setting, diffusion of innovation, central and peripheral processing, cognitive dissonance, source credibility, reasoned action, two-step flow, selectivity, expectancy-value and fear appeals.  As a writer/producer, which basic model would you use in developing political advertising for your candidate targeted at the general public.  Justify your selection.

 

2. The media landscape has certainly changed in the last few years. A dramatic example of this is the way non-fiction films are distributed.  Ten years ago there were only a few places where independent producers might sell their documentaries. Today there are many more outlets.  What are these new opportunities? Describe at least three case studies of non-fiction films that have profited from these new avenues of distribution.

 

3. Programming is what attracts audiences to television but advertising is the primary means of revenue generation for most networks and stations.  In a situation when 1) specific broadcast programming is attacked for containing too much “skin and sin” by traditional family values groups, 2) advertisers are inundated with thousands of email, letters and telephone calls to stop buying commercial time by concerned family group followers and 3) some advertisers withdraw, is this a triumph for the television audience, a chilling effect on broadcast TV creativity, or a step towards censorship and bland programming?   Assume each of these perspectives and cite evidence from previous program histories to explicate how these electronic media issues evolved, were resolved and continue to coexist.

 

4. In November 2007, the Writers Guild of America went on strike after its members and the Alliance of Motion Picture and Television Producers failed to negotiate a deal.  What are (were) the issues at stake in this conflict?  Trace the history of this conflict between these two groups and the consequent effects on television viewing audiences and new programming development.  How will this strike inform the future of new media and old media, and how will it affect you as someone who will be working in the industry as a) a writer, and b) a studio or network executive?

 

5.  In the coming years Cable TV will face very real competition from the telephone companies for customers. Give the competitive advantages of each industry and the efforts both have made in Congress and at the FCC to deal with perceived inequities in the competitive landscape.

 

6. The utilization of new and different media platforms — web streaming, mobiphones and the like — to deliver television programming has given rise to “anytime, anywhere, media measurement.” This system purports to track in-home and out-of-home viewing, Internet and phone TV usage, as well as traditional television viewing.  In addition, commercial ratings or audience viewership levels during the commercial breaks are now available to advertisers.

A)    What improvements does this system of audience measurement represent over the traditional ratings system?  

B)    How would producers, programmers and advertisers benefit from the new audience measurements?

C)    What are some of the concerns critics have raised and how can these be addressed?

 

7.  “American TV is dangerous to our children’s health.”   Scientific studies have shown that children who spend the most time with television are also those who are more likely to be overweight.  Children who watch television violence are more likely to behave in harmful ways towards others and become less empathetic.  You are testifying on behalf of television writers and producers before a congressional subcommittee intent on refining policy to protect the health of our nation’s children.  How would you address these findings in the face of existing legislation and offer solutions to parents, assurances to policy makers as well as a sound bite for the next news cycle?

 

8.  Screenwriter William Goldman, a two-time Academy Award winner, has long preached that “screenplays are structure.” What is he talking about? 

A) If he’s referring to a particular story-telling model, describe that in detail.

B) If there are multiple models, what are the most influential ones and how do they differ?

C) And how has story structure evolved through the centuries?

Use examples from the 2008 Oscar nominees to illustrate your points.

 

9.  Think about this: Today you can watch movies on your video iPod.  You can also watch TV on your cell phone.  Through global marketing you can catch the release of the latest big studio film in Shanghai, China the same day as in Syracuse, New York (probably a few days earlier).  The social media network, Facebook on which you used to post pictures for your friends is now valued at $15 billion. 

 

During your year at Newhouse, the media environment will continue to change dramatically. These changes may come from some new technology or an economic or policy shift. For example, if you’re reading the papers and the trades, you know that ABC News and Facebook have teamed up to develop a new tool to facilitate political debate coverage and interactivity on the social networking site;  the major TV networks continue to offer streaming video of their programs, and advertisers are using “skins,” “overlays” or “bugs” to promote their products and services online.

 

If you’re bright, flexible and entrepreneurial, you’ll find ways to make your career in any number of these future transformations. Even better, you should be smart enough to anticipate and take advantage of such changes before they (or you) are history. This is your chance to begin the birth of a future transformation that will bear your name.

 

Write a proposal for your new concept. What is it? What makes it unique? How does it take advantage of existing or new technologies, economies and/or policies? Specify what research you will do to determine if there is an audience and market. What legal and regulatory issues will you have to be aware of? Who are the people or institutions you need to convince this is the greatest thing since the iPod? Who are the people or institutions you don’t want to know about your idea until it’s a reality and why? Describe how this concept will ripple through the media environment or how it might have an impact on only a specialized niche.

 

An important part of your answer will be a personal inventory assessment: what talents, skills, knowledge, etc. that you possess make it possible for you to actuate this concept? Be realistic; if you’re not Steve Wozniak, recognize that and plan to hire him as a consultant. But if your idea is “television for housebound cats”, be-up front about your special understanding of the feline spirit.

 

10. In the book “The World is Flat” by Thomas Friedman, referring to a program called “Higglytown Heroes” being produced for the Disney Channel by Wild Brain, an animation studio in San Francisco, Wild Brain CEO Scott Hyten remarked about how the all-American show was being produced by an all-world supply chain —  The recording session is located near the artist, usually in New York or L.A., the design and direction is done in San Francisco, the writers network in from their homes (Florida, London, New York, Chicago, L.A., and San Francisco), and the animation of the characters is done in Bangalore 

(India).  These interactive recording/writing/animation sessions allow us to record an artist for an entire show in less than half a day, including unlimited takes and rewrites.

            Given the increasing trend in production toward on-line collaboration using work flow software, discuss the impact of such a trend on established television production methods and financing.

 

 

 

 

 

 

 

The answers will come after a time.

-Alex