The Future of the Set-Top Box

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The average consumer has benefited from the incredible pace of innovation over the last decade.  In the consumer electronics space, the past ten years have given us the smartphone, the smartwatch, and even the smarthome.  Heck, for a little over $1000, you can purchase your own portable pilotless drone that can film you doing all those things that get you “stoked.”  Oh, and that drone is compatible with a $400 off-the-shelf camera that weighs a little more than one pound that takes professional quality 4K video.  Business models are evolving too, as reflected by how viewers now consume content.  Not only have the amount of over-the-top (OTT) video offerings available exploded, but companies like Netflix and Amazon are producing their own original programming; and winning awards for it too.  

Unfortunately for consumers, one market that has been relatively immune to the innovation bug is the set-top box (STB) space.  Why is it that in the age of self-driving cars and 3D printers that consumers still have basically the same video navigational device they had in their homes a decade ago?  If preteens can print their own prosthetic limbs with hardware purchased at the local computer store, why can’t we easily purchase and activate a device that seamlessly integrates our cable and OTT video content in a user-friendly interface?

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Over-the-top: let’s not kill the goose that laid the golden egg

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The European Commission would like to see a more digital Europe and more telecoms network investment, but the term “level playing field” sends mixed messages.  For some it means more regulation of internet services, potentially killing demand for enhanced networks — and thereby killing the goose that laid the golden egg.

Some telecoms network operators have argued that over-the-top services have undermined service revenues, jeopardised investment and play by unfair rules.  Other operators see it differently, welcoming increased demand for network access.  For example, the chief executive of UK mobile operator EE has said the growth of mobile-messaging services like WhatsApp isn’t a threat as the sector’s growth is driven by data-hungry consumers.

Put simply, is demand good or bad, and should we regulate more or less in response to competition from over-the-top services?

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Sailing on the Information Super Highseas

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It’s about five thousand years since various civilizations around the Mediterranean began attaching sails to boats, and about five days since my last sailing trip. Over summer, Brussels, London and Washington all slow down: what better excuse for a Project DisCo summer holiday special about the internet and sailing.

Having discussed last time how every holiday experience can be rated, discussed and enhanced online, it’s worth having a look at sailing separately, because getting on the sea is bit more complicated than just booking an all-inclusive resort and staring at it. It’s also, in my opinion, a lot more fun — and the internet helps simplify that process. Forget the preconception that you have to be rich, or know someone with a boat — you can do everything from looking up a taster day via the Royal Yachting Association to chartering the luxury yacht of your dreams online.

“Without the internet, we wouldn’t have a business,” says Adam Purser, who set up Classic Sailing with partner Debbie in 1996 and went online in 1998. It turns out the best way to market voyages on 18th-century tall ships is the 21st-century internet. When they started out, they spent £600 on one newspaper advert, and got one enquiry. “If we spend the same on Google or Facebook, we’d expect 100 enquiries,” he says. Not only are online ads better targeted, sailing is highly visual, so a selection of beautiful shots of majestic ships on the high seas is the ideal marketing tool: Classic Sailing’s Facebook page has 16,000 likes.
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Why is the Media Talking About SOPA Again: An Explainer

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A number of recent news articles ([1] [2] [3]) have mentioned a controversial 2011-12 legislative effort known as “SOPA” (which was short for the Stop Online Piracy Act bill introduced in the House, along with its Senate counterpart the PROTECT IP Act).

Folks may have thought that SOPA ended after the massive Internet uprising on January 18, 2012 and mass Congressional rejection of the effort.  But as media coverage of the Sony leak showed, rightsholder constituencies have just moved from the relatively transparent halls of Congress to less public fora, like courts and federal agencies.

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Competition, Regulation, and Market-Based Prices in Copyright Rate Setting

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When it comes to the nexus between competition and regulation, competition is all too often cursed with fair-weather friends.  For today’s example, we’ll take a trip down the copyright regulation rabbit hole.

It begins with a Copyright Royalty Board (CRB) proceeding for setting webcaster rates under a statutory license in Section 114 of the Copyright Act.  The process, called “Web IV” because it is the fourth such proceeding under this section of the Copyright Act,[1] was announced late last year and should conclude by the end of 2015.  By mid-December, non-interactive webcasters like Pandora and iHeartMedia will know how much they must pay to stream (or “publicly perform”) recorded music to listeners from 2016-2020.[2]

These statutory license rates, part of a complex multi-tiered system that, as we’ve noted in the past, legally requires discrimination against new technologies, are set for 5-year periods and are paid to an entity called SoundExchange.  SoundExchange is designated to collect royalties under the statutory license for certain uses of sound recordings, including Internet radio play of music.

(Perhaps you’re thinking, “wait, I thought radio stations didn’t pay royalties to play records on the air?”  You would be right: traditional terrestrial radio does not pay royalties for playing sound recordings – which has historically been defended with the argument that radio play provides valuable promotion for sound recording owners.  But in another example of copyright law discriminating against new entrants, while conventional terrestrial radio is not compelled to pay for the public performance of sound recordings, Internet radio must pay to do the same, under Section 106(6) of the Copyright Act.)

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Five Disruptive Trends From Trump, Fox and the Internet in This Presidential Election

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Between Donald Trump’s unexpected surge to Bernie Sanders’ surprising poll lead in New Hampshire, the politics of the 2016 U.S. presidential election are proving to be nothing like what we were told to expect. The dynastic Clinton versus Bush contest that was preordained by traditional media and the establishment wings of the major parties is looking anything but certain. This can be explained, at least partially, by Internet-powered disruption of traditional political kingmakers (i.e., media and party elders) as another DisCo commentator, Matt Schruers, has cogently observed.   

I am not talking here of disrupting the two-party system itself or making Congress a less polarized and more efficient forum, nor about red states and blue states. Instead, I will focus on five more subtle trends that are emerging in this election cycle, beginning with the rather remarkable Republican presidential debate on Fox last week.

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The White House Chimes In On Occupational Licensing

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Consumers may reasonably expect that their doctors and teachers are appropriately licensed. But do they expect the same for their florists? Apparently that is the case in Louisiana, which requires budding flower shop owners to pay $125 in fees and pass a written exam before obtaining a license. This is just one example of the huge growth in occupational licensing since the 1950’s. Now, more than one-quarter of U.S. workers require some government licensing to do their jobs.

Assessing the consequences of this growth in occupational licensing on the economy is the purpose of a recent White House report. The report notes that licensing is valuable in certain fields to protect public health and maintain service quality, but overly burdensome licensing (and its inconsistent regulation across states) can hinder economic growth and innovation. Workers face tougher barriers to earning higher wage jobs or moving across states to best utilize their skills. The requirements they need to meet to be licensed may not even be germane to their occupation.

Entrepreneurs and consumers also suffer from the consequences of inefficient licensing.  Entrepreneurs are hindered in developing solutions—for example, websites offering legal services may be illegal if they are seen to offer “legal advice” instead of “legal information”.   Immigrants who may want to set up their own businesses in services like nail care may be prohibited from doing so by state regulations mandating certain levels of general education. Consumers, on the other hand, almost always pay higher prices to use services requiring strict licensing requirements. The report cites quantitative studies showing that more restrictive state-level licensing of nurse practitioners raised the price of certain medical exams by 3 to 16 percent.MORE »

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Quote of the Day: ‘There’s Nothing On’ Edition

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According to media analyst Rich Greenfield, Cablevision CEO Jim Dolan apparently stated on an earnings call today that he is not threatened by the rise of over-the-top (OTT) video because:

“There is not enough content on the Internet to interest a mainstream audience”

DisCo, of course, has disagreed.  We’ve covered the launch of OTT services from major brands like HBO and CBS, and the rising media consensus that OTT isn’t going anywhere.

But it’s not just about studio-produced video content being made available via the Internet.  Competition for people’s attention involves more than streaming television and movies.  The sky is rising, with more content being created and consumed than ever before.  There are blogs and podcasts and playlists and vines and online communities, which all provide endless ways to stay entertained and informed, and most cost far less than a cable subscription, if they cost anything at all.  By empowering more people to be involved in the creative process, it’s pretty clear that the Internet is a disruptive threat to traditional cable TV and middlemen in general.  And with cord-cutting on the rise, it’s apparent that more people view content available on the Internet as a legitimate replacement for the cable bundle.  As one cable industry analyst noted: “It’s too soon to panic. But it’s not too soon to be genuinely worried.”

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Facial Recognition: Identifying Friends and Foes

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There’s been a lot of buzz lately around facial recognition and what exactly that means to consumers. When the average consumer thinks of facial recognition technology, a Jason Bourne-esque scenario probably comes to mind, with high-tech devices constantly scanning crowds, identifying individuals, accessing vast databases, and using that recognition information to some nefarious end. Present use of facial recognition technology is far more benign and useful to consumers than some would have you think. The emergence of new photo sharing and storage apps like Google Photos and Facebook’s Moments demonstrates that current facial recognition tools are better suited to helping users categorize and share their photos, rather than populating an ominous law enforcement or commercial database. As such innocuous uses of facial recognition become more and more common, consumers’ comfort with and understanding of the technology will grow correspondingly. The next step is ensuring that privacy-focused regulators and legislators are able to develop frameworks that enable this growth and adapt as consumer expectations and facial recognition technology change.

The Google Photos app was recently released as a tool to streamline the photo backup and sharing process. It boasts free and unlimited photo storage and aims not only to keep similar events grouped together, but also to scan, identify, and easily share different photo subjects with others. Part of the identification process involves scanning and recognizing people, places, and things. However, the app doesn’t see faces in the same way humans do. Humans see faces and recognize specific people, whereas a computer scans an image and recognizes colors, patterns, and shapes. This process is called facial detection. Facial recognition is one step above facial detection in that it compares “known faces” or patterns to newly uploaded faces to see if there is a probable match.

Facebook’s Moments utilizes similar technology. Moments is a recent app that was launched to help organize and share photos with frequently photographed friends. When photos are uploaded to the app, Facebook’s technology scans for a face in the photo. If there is a face, then the app compares features and patterns of your profile picture and other tagged pictures to the newly uploaded photo. Like Google Photos, Moments looks for unique characteristics and patterns, such as the shape of your face or distance between facial features, to recognize and connect profiles. In essence, both apps use algorithms to create a system of recognizable models or templates for comparison, rather than referring to an on-file photograph. This pattern of connecting and “recognizing” faces creates tag suggestions of the subjects of the uploaded photo—but only if the photo uploader and picture subjects are friends.

Both apps are a win for consumers. The idea is that quick recognition helps streamline the social sharing process for group events. Whereas people once might have followed a social event like a wedding or reunion with an endless email chain of shared pictures (or exchanged CDs or flash drives), users can instead allow Google Photos or Moments to group and categorize photos into events based on the subjects of the photos and additional metadata. Given that social networking sites and mobile devices are already the chief digital photo curation tools used by consumers, extending their existing functions via facial recognition-based apps seems like the sort of harmless, pro-consumer innovation that ought to be encouraged.

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Finger on the Trigger: The FCC Needs to Get Spectrum Auction Rules Right

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The FCC is set to vote on the final rules for the upcoming 600 MHz incentive spectrum auction tomorrow, in accordance with the goals of the National Broadband Plan that were reiterated by Congress. Chairman Wheeler and the rest of the FCC’s commissioners are about to take a very important step to free up valuable low-band spectrum, a necessary input for the provision of wireless broadband coverage.  As the FCC has repeatedly said, this auction is a “once-in-a-generation” opportunity to feed the fast-growing demand for high-quality spectrum.

Given that these auctions are rare, the 600 MHz incentive auction presents the FCC with a unique opportunity to foster competition and innovation in wireless markets.  As the FCC’s decision to block the T-Mobile-AT&T merger and the FCC’s most recent “Mobile Wireless Competition Report” illustrate, the mobile broadband marketplace faces key competitive challenges.  The two biggest network providers, AT&T and Verizon, command nearly 70% of the industry profits and control nearly three-fourths of the high-quality, low-band spectrum.  To his credit, the FCC Chairman acknowledges these issues.  In a 2014 blog post on the 600 Mhz spectrum auction, Chairman Wheeler stated:

Today, however, two national carriers control the vast majority of that low-band spectrum.  This disparity makes it difficult for rural consumers to have access to the competition and choice that would be available if more wireless competitors also had access to low-band spectrum.  It also creates challenges for consumers in urban environments who sometimes have difficulty using their mobile phones at home or in their offices.

This is why the Commission has proposed creating a 30 MHz block of “reserve spectrum”, eligible only to non-dominant carriers.  According to the Chairman, the point of the reserve is to prevent the dominant carriers from sweeping the auction and to maintain a “vibrant and competitive” auction.MORE »

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