BULLPEN: CableB2B, CableHome, Canoe?

Cable has engaged in a number of efforts through the industry consortium CableLabs to standardize various aspects of its infrastructure, services and business relationships. The industry’s marquis success is the DOCSIS initiative.
   
One of its latest efforts is known as Canoe. While many details of Canoe remain confidential, Comcast CEO Brian Roberts has pitched this to Wall Street, comparing cable’s vision for interactive advertising to Google‘s Internet search business in its ability to match advertising messages with a relevant audience across an aggregated set of content.
   
Business, technology and competitive drivers may combine to make Canoe a grand success. Or they may not. After all, not every CableLabs’ initiative hits the mark. Consider CableB2B or CableHome, two comparable CableLabs projects that failed. Back paddling up cable’s past CableB2B specifications sought to cover portions of the business interface between cable operators and providers of services deliverable over the cable plant through cable modems, advanced set-top boxes and other technologies. CableB2B was also a convenient project for the cable industry to undertake during a time when federal regulations were teetering on whether to require all cable operators to open their networks to Internet service providers (ISPs) whose dialup customers were rapidly migrating to the now widely available cable modem service.
   
Eventually, as federal regulations eased, the CableB2B program quietly went away. In the aftermath, vendors who put time and money into supporting the program began to ask questions. The answers indicated that cable operators involved in the program were unable to agree on business and technical aspects required to make CableB2B successful. These struggles suggest that when it comes to having multiple cable operators agree to similar business models or even similar interface functionality, mutual agreement is difficult to reach.
   
Shortly after the swirl of CableB2B blended into the stream, CableHome surfaced to mix things up. Touted as cable’s foundation for future home services, CableHome built upon entry-level features of residential gateways to offer zero customer configuration and support for advanced quality of service (QoS)-sensitive PacketCable services.
   
While the cable industry tried to capture the interest in some vendors to build, certify, and deploy CableHome devices, noticeably absent from the program’s inception was the full support and involvement of the consumer electronics (CE) industry. CE already had other plans in the works—namely Universal Plug and Play (UPnP) and Digital Living Network Alliance (DLNA)—and as a result was less than enthusiastic to follow through with building custom devices that would only work within cable systems. In the end, it wasn’t the concept of CableHome that failed, but rather the cable industry’s inability to rally CE to build devices that supported this vision.
   
CableHome also raised the question of whether the days of cable’s blockbuster standards (DOCSIS, early versions of PacketCable) were coming to an end. In fact, many of CableHome’s zero customer configuration features were already part of a much more comprehensive standard (TR-069) championed by the telecommunications industry. Similar developments in PacketCable and even DOCSIS are taking place as CableLabs increasingly taps into international telecommunications standards, such as the Third Generation Partnership Project. Challenges Given that national advertising agencies would prefer universal interfaces across several industries, Canoe could also face a strong, external standards current.
   
Television market share has also drastically changed in the past 10 years for cable. DirecTV and Dish Network have surpassed individual cable companies in terms of numbers of digital TV subscribers, and Verizon has climbed to a respectable level in just a couple years.
   
Today only eight operators in the United States serve 1 million or more digital TV subscribers: DirecTV with 16.3 million, Comcast with 14.7 million, Dish with 13 million, Time Warner with 7.7 million, Cox with 2.9 million, Charter with 2.8 million, Cablevision with 2.55 million, and Verizon with 1 million. Cable operators provide digital TV services to 50 percent of the subscribers in the country, followed by satellite operators with 48 percent, and lastly by the lone telephone operator (Verizon) with 1.6 percent.
   
While cable’s command of 50 percent of digital TV subscribers in the United States is more than Google’s 43 percent of online search, the big difference is that Google has that share all by itself, rather than spread across five different companies. Google doesn’t need to orchestrate a business and interface agreement among five different cable operators to present a compelling package to advertisers. Instead, Google is truly a one-stop shop for online advertising with unprecedented nationwide (and global) reach. Forward or backward stroke? Cable’s foray into standardizing something other than cable infrastructure is not a new concept, and while there are examples of successes (such as Go2Broadband), there seems to be a narrow margin of error between success and failure. Go2Broadband was a success because of its simplicity and the mutual benefit it provided for all active members.
   
From a technical standards perspective, much of the groundwork for advanced advertising already is being laid by the SCTE Digital Video Subcommittee’s Working Group Five on digital program insertion (DPI). Canoe arguably has these internal cable industry developments in its favor.
   
From a national advertising perspective, the consensus is that there is already plenty of opportunity in cable to advertise on that level, and it’s generally cheaper than other outlets. At the local and regional levels, however, opportunities are much more expensive and less efficient. So if the industry can string together multiple operators to reduce those costs, that would make advertising in cable more competitive.
   
Regardless of whether Canoe’s objective is to reduce costs, the initiative still faces the challenges of reaching mutual agreements on sensitive matters of business, operations and technology. Added to those challenges is cable’s declining market share. Canoe’s prospects Can Canoe succeed? The prospects for multifaceted agreements across vastly different companies to achieve a unified interactive advertising front seem poor—especially if such agreements are required to battle an enemy that does not face any of these obstacles.
   
At the same time, the relative independence of cable operators traditionally has been one of the industry’s assets, one that cable’s rising competition is still hard-pressed to meet. Would Canoe undercut that advantage?
   
The cable industry gets kudos for endeavoring to carve out a market for itself in the national interactive advertising marketplace. At this point, however, one thing is clear: Canoe faces multiple challenges and carries no guarantee of success.

Bruce Bahlmann is a research analyst who has worked in several capacities for both cable operators and vendors. Reach him at [email protected].