Media Wonk

From Cablevision to AT&T - June 19, 2007

Did the district court’s decision in the Cablevision virtual-DVR case influence AT&T’s decision to try to filter unauthorized copyrighted content from its network?

Who knows? But you can certainly hear echoes between the two events.

One lesson a would-be video service provider might draw from the case is that the studios and networks are prepared to challenge innovative new functionalities that allow content to be manipulated in ways that are not strictly licensed. Especially if the technology in question is deployed at the service-provider level rather than the set-top.

The Cablevision decision is being appealed but any reversal, should it ever happen, is months if not years away. In the meantime, the studios’ grounds for challenging new functionalities have the support of a federal court.

If you’re AT&T, new functionality is critical to your video-service business plan.

The partially re-hydrated Ma Bell has made a major strategic and financial bet on its U-verse video service based on Microsoft’s newly rechristened MediaRoom IPTV platform. Like all service providers, AT&T sees big potential in various double-, triple- and quadruple-play offerings bundling some combination of voice, data, video and wireless service. And for AT&T the most critical missing (or lagging) piece is video.

To be able to compete in video against incumbent cable and satellite providers, however, AT&T needs two things:

• A more compelling platform for consumers based on enhanced functionality; and
• Content.

The key is getting the second without giving up the first.

AT&T has made a big bet on functionality by partnering with Microsoft. Gates & Co.’s IPTV platform—assuming they can get it to work—is designed to support any number of new applications, promising new ways for consumers to store, access and share content.

But not if the content owners are going to challenge every new use. Or, worse yet, refuse to license the content you need in the first place.

If AT&T were to face a protracted legal battle every time it tries to outflank cable and satellite providers with new functionality its U-verse strategy could be imperiled. Ditto if it doesn’t have the content viewers want.

What to do? You could try to fight it out in Congress and the courts, assuming you had the luxury of time.

Or, you could cut a deal: Give me the content and let me have my functionality and I’ll be your filter.

Did it actually go down that way? I have no idea. But I can imagine how each party’s perceived business interests would align that way.

Whether those interests are truly aligned with the customers’ is another question.

UPDATE: Speaking of Cablevision and AT&T, Content Agenda sister site Broadcasting&Cable is reporting today, ironically enough, that AT&T has filed a complaint with the FCC against Cablevision claiming its video-service rival is denying it access to Fox Sports Network content in the Connecticut market. Cablevision has a 50% interests in the regional sports net through its subsidiary Rainbow Media.In response to the complaint, a Rainbow media spokesperson told B&C that the networks have lingering questions regarding "AT&T's violation of prior distribution agreements and about certain aspects of AT&T's technology and the protection of our programming."

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