Broadband Cable Association of Pennsylvania


September 27, 2013

- From and "PBS Newshour" - Today's technology lets consumers watch shows without a cable connection or even a television. What's next for broadcast networks, cable providers and their places in the media market? Hari Sreenivasan talks to Brian Roberts of Comcast about staying competitive and the legal battles with companies who stream TV for free.

JUDY WOODRUFF: Broadcast TV networks, no surprise, are clamoring for new viewers this fall. But beyond the traditional scramble for ads and ratings, the networks and the companies that own them are also preparing in to do battle with an entirely new set of competitors. Hari Sreenivasan gets the perspective from one of the industry's biggest players tonight, part of our occasional series on the future of TV.

HARI SREENIVASAN: With all the new ways to consume media, phones, tablets, laptops, you can now watch TV shows without a television set or a cable connection. But established companies are reluctant to give up their hold on the media industry, among them, cable giant and owner of NBC, Comcast. It's the largest cable company in the U.S., and one of the biggest broadband Internet and home phone service providers. In 2011, it acquired NBC Universal, making it a major content player in the market.

NARRATOR: We can't wait to show you what's next.

HARI SREENIVASAN: But new companies are starting to threaten media veterans like Comcast and their service models. One of those is Aereo, which allows customers to stream live free TV to phones and computers for a monthly subscription fee, but without paying a cable bill. The CEO and founder of Aereo, Chet Kanojia, says that there is a transformation under way in the media industry.

CHET KANOJIA, Aereo: The goal of Aereo was to create an alternative, to create a parallel system almost, if you will, because the current system in which you get television is a highly integrated, monopoly-based sort of system.

HARI SREENIVASAN: But companies like Comcast and other broadcasters have taken Aereo to court, saying it's stealing content. So far, Aereo has prevailed in two decisions in federal court. The battle over Aereo is not the only clash of late. Earlier this month, Time Warner and CBS reached a deal over how much that cable company would pay the network for the right to transmit CBS' content. During the summer, CBS was temporarily blacked out for a month for Time Warner systems in eight markets totaling three million viewers. You have said multiple times that TV will change more in the next five years than possibly ever before. Explain that.

BRIAN ROBERTS, Comcast Corporation: Well, you have this fantastic moment in time with all the technologies progressing so quickly by iPads or tablets that the last foot may be wireless. You have Wi-Fi getting better and more ubiquitous. In the case of Comcast, we're taking a lot of our technology into the cloud, so you don't need a new box every time you want to innovate. And it's all speeding up. And so it's an exciting, invigorating time for the industry and for the consumer.

HARI SREENIVASAN: So, is the definition of television kind of changing back into that of an appliance? It's just a bigger screen to view this content?

BRIAN ROBERTS: I think the definition of television may be that, but I think the definition of what the consumer gets and what the consumer expects to get is every piece of content whenever and wherever they so choose to have it. Sometimes, it's -- quote -- "free." Sometimes, it's part of a bundle. Sometimes, it's pay-per-view. Sometimes, it's all about advertising or search. But one way or the other on whatever device you want, we like to get as much access as possible. And that's what I think Comcast's strategy has been all about for about five years.

HARI SREENIVASAN: We're seeing a general decline in cable subscribers, but we're seeing an increase in broadband subscribership. So, do you see a tipping point, where the economics of cable television as we know it today are challenged because more people just want the pipe? They don't necessarily want to pay for...


BRIAN ROBERTS: I think that's a bit overblown. I think we still have as many customers basically as we started the year. So, I think the consumer is still saying, I want live sports, I want all those channels. Some customers say, I don't need that. But most customers do. And it's really important we stay in touch with our customers and try to over time have more packages and flexibility than perhaps we have historically offered. And that's part of that tension that is healthy that is going on in the marketplace.

HARI SREENIVASAN: So, I recently moved to New York, and I had to sign up for cable. And it was one of those scenarios where I actually don't watch the other 52 channels the you're selling me. I just want these six. Is unbundling ever going to happen?

BRIAN ROBERTS: Well, I look at PBS. If you had to pay separately for just PBS, probably, sadly, not a majority of Americans would do that. So there's many channels, whether it's Discovery Channel or C-SPAN or many, many others, that just aren't viable. You can't just buy the sports section of The New York Times. You take the whole paper. So, that's been the historic model. That's what advertisers have wanted. And that's made it the best deal for consumers. And every study that -- most every study I have seen supports that economic rationale. But there are some things that are getting very expensive. And if there's a way to say to some of our customers, you don't have to take everything, here's a different package, we are trying to do that. We have been experimenting with that. Other companies are as well.

HARI SREENIVASAN: One of the significant disruptions that's on the horizon is this tiny startup called Aereo. And, essentially, they say, listen, we're the extension of an antenna, that we are not in violation of the spirit of the law. And, obviously, content producers, distributors, including, in one lawsuit, PBS here in the New York market, all say that's not the case. But why are they wrong?

BRIAN ROBERTS: There is a law that says you have to get the consent of that broadcaster before you can retransmit their signal. And that's what CBS Time Warner was all about that, that CBS retransmission fee. So here comes a company that says, I don't want to pay that fee. Well, I understand that, but I don't think that's the law of the land.

HARI SREENIVASAN: So, let's say we have this conversation 10 years from now. What does the television landscape look like?

BRIAN ROBERTS: You know, I wish I had the perfect crystal ball, but I think for the last 30 years, we -- nobody's ever been able to say quite what's next. So if I had to guess, there's going to be a lot cheaper device, tablets if you will, whether it's eyeglasses or watches or a little bit of everything. I think personalization is clearly a trend. I want what I want. It's my TV, my device, my phone, so we're doing a lot of that. Speeds are mind-boggling. The capacity of storage is mind-boggling. So our bet as a company is to try to be part of broadband, be part of Wi-Fi, have a wireless relationship, have a content relationship, and trying to touch as many parts of that changing landscape as possible. But I think it's going to be very exciting. Consumers are going to love it. And I can't wait.

HARI SREENIVASAN: All right, this is from the Internet audience. A lawyer in Seattle asks, "Can Mr. Roberts see a day where there are no traditional networks and merely streaming options?"

BRIAN ROBERTS: Well, anything's possible, but will there be a lot of choices that don't involve networks? Absolutely. But even you're starting to see on the Internet, if you look at YouTube channels, there's themes and there's ways to get to content that in effect is some of the function of a network. And I think that there's -- it's hard for me to imagine a world with no networks in 10 years.

HARI SREENIVASAN: Do you think the Internet will become a utility, just like power and water?

BRIAN ROBERTS: You know, I hope not. I don't think regulation is the answer and the government setting standards. I think it's a race to innovate. And if you look at the last 10 years, it wasn't -- one of this -- innovation, whether it was a tablet or whether it's our cable box getting smaller and more powerful, and now taking the DVR and putting in the cloud, so you can have it on any device, these things are all changing because there's less making it like a utility and more a competitive industry, where you're on edge, you're excited, but you're racing.

HARI SREENIVASAN: Brian Roberts, thanks so much for your time.

BRIAN ROBERTS: My pleasure.

The television studio on the ninth floor of the (Pittsburgh) City-County Building is a relic of its former glory. A receptionist's desk sits vacant. A large studio space is cluttered with defunct equipment, and much of the machinery that is functional is about a quarter-century old. Today, the studio is so old "it has a museum-like quality," said David Finer, an editor and videographer with the cable bureau. Its programming is a haphazard mix of city announcements, re-runs of city events like proclamations, and old footage of city neighborhoods set to music. (Thursday evening, Kiss's "I Want to Rock'n'Roll" played along with advertisements encouraging residents to be environmentally responsible.) "It's like a Rick Sebak episode of things that are no longer there," said Councilwoman Natalia Rudiak, lamenting that the photo and video montages that often play between programs haven't been updated in years.

But the city has, in recent years, attempted to find funding to upgrade the cable bureau, whose main task is to broadcast city council meetings and public hearings, so it could produce better-quality programming. The city has signed franchise agreements that permitted Verizon and Comcast to run cable operations in the city for a fee. As part of those contracts, the two companies also agreed to give the city grants and money collected from a per-subscriber fee to operate the cable bureau and public access channels, which are currently administered through the nonprofit Pittsburgh Community Television (PCTV). In total, around a million dollars in grants was supposed to be given to the city over five years, mostly to be used for capital improvements like equipment purchases.

But on Wednesday, as council voted to reallocate the funds coming from Verizon and Comcast, some members raised questions as to where that grant funding had gone. If the cable bureau had been allocated funds for capital upgrades, why had the cable bureau spent only around $140,000? "[It] makes me wonder where the other [money] went," Councilman Bill Peduto said during Wednesday's meeting. The agreements signed in 2009 and 2010 called for the cable bureau to receive all of the grant money. But in early 2011, when the city renewed its agreement with PCTV, it radically altered the allocation of the funds. This resulted in PCTV receiving well over a million dollars in city money, while the resource-starved cable bureau got just $280,000 to be used for capital improvements. It's unclear why the bureau has spent only about half that money.

Council members said they never approved the new allocation of the funds and were largely unaware of the change. Frustrating them further, the city had set up an agreement to allow Comcast and Verizon to pay PCTV directly, bypassing the city. That practice was ended in July at the request of concerned members of council. But city solicitor Dan Regan said council clearly authorized the agreement. In 2009, a resolution passed by council charged the Pittsburgh Cable Communications Advisory Committee to formulate a strategic plan for PCTV, which gets about 85 percent of its funding from the city. And, according to the resolution, "funds shall be allocated pursuant to the strategic plan."

The strategic plan called for the cable bureau to get just $140,000 of the grant money -- which totaled over a million dollars -- and to continue to receive a tiny portion of the per-subsriber fee. PCTV would get the remainder of the grant money and the lion's share of the per-subscriber fee. But the resolution given preliminary approval Wednesday rectifies the imbalance, splitting the remainder of the grant funds 50/50 between the cable bureau and PCTV. It also gives the cable bureau a fluctuating amount -- between $165,000 and $200,000 -- of the per-subscriber fees a year, while the remainder will go to PCTV. All of the money will flow through the city, and Controller Michael Lamb will have the ability to audit the city funds that go to PCTV. Ms. Rudiak said the cable bureau's plight should be taken seriously and believes it plays an important role in the city, even if city council meetings and public hearings -- which constitute the bulk of the original programming -- aren't always the most exciting thing on television. "Some of the meetings are really boring and some are really high stakes," she said. "It's really about strengthening democracy."

Netflix, the world's largest subscription-streaming service, wants to attract more customers by adding its Web-based movies and television shows to U.S. cable systems, Chief Financial Officer David Wells said. U.S. cable operators have had an "open offer" to add Netflix for two years, Wells said Wednesday in an interview at the Goldman Sachs Communacopia Conference in New York. The company is still willing to forge partnerships, he said. "We would love to reduce the friction to the end consumer, and to be available via the existing device in the home, which is the set-top box," Wells said from the stage.

Newer set-top boxes blend Internet-based programming with traditional pay television, a development that can fuel expansion if Netflix reaches accords with cable providers. The company, with 35.6 million paying subscribers globally as of June, has signed two European cable systems after relying on game consoles, Blu-ray players, smartphones and Web-TV devices like Roku for growth. Los Gatos-based Netflix reached a deal with Virgin Media in the U.K. this month, and Wednesday said it will become available in December on Com Hem, Sweden's biggest cable-TV system with 606,000 video customers. Netflix has a goal of 60 million to 90 million subscribers, Wells said.

Cable operators have to decide whether they view Netflix as a competitor or potentially complementary, Wells said. Pay-TV services have struggled to adapt to a shift by viewers to watching watching more shows on laptops, tablets and smartphones. With Virgin Media and Com Hem, Netflix will be included as an app on TiVo Inc. digital video recorders. Newer set-top boxes are capable of loading Web-based content more quickly, and combining Web-delivered programming with regular TV guides. In the U.S., Comcast, the largest U.S. cable provider, has begun replacing its boxes with the X1, a DVR that delivers information from servers in the so-called cloud. Netflix rose 2 percent to $313.13 in Thursday's trading. The shares have more than tripled this year, to lead the S&P 500 Index. Tivo, based in San Jose, fell 1.3 percent to $12.43. Bloomberg

Is the Pennsylvania Democratic Party the one thing Gov. Corbett has going for him in his bid for a second term next year?

Corbett, a Republican, is routinely listed as one of the nation's most vulnerable incumbents for 2014. And he is under constant attack from his party's right wing. (We're looking at you, state Rep. Daryl Metcalfe, a Butler County pol who clearly despises the government that has issued him a paycheck for the past 14 years.) Smelling blood in the water, eight Democrats have declared their candidacy for the 2014 primary election for governor. That last bit is the good news.

State Treasurer Rob McCord this week became the latest hopeful to enter the race. McCord said "the competitive process will be good for us" when asked about the potential for a slash-and-burn primary. He doesn't think a push by party leaders for a single strong and endorsed candidate is the right way to go here, even if the Republicans use that strategy. "Unlike Republicans, we're not members of an organized party," he said. "We're Democrats." McCord, who has twice won statewide elections, joins at least three candidates who can tap serious resources.

Former state Revenue Secretary Tom Wolf has pledged $10 million of his own money. U.S. Rep. Allyson Schwartz moved $3.1 million from her federal account to kick off her run. Former state Environmental Protection Secretary Katie McGinty is also raking in cash.

Best case for Corbett: The top-tier Democrats use that money to slam one another, leaving the eventual nominee bruised and depleted of resources. Larry Sabato, director of the Center for Politics at the University of Virginia, in June listed Corbett as the top candidate for a headline defeat in 2014, calling him a "particularly maladroit politician," with bad polling numbers and a propensity for gaffes. Sabato says Corbett is "rooting for a brawl" in the Democratic primary and predicts the incumbent will get his wish as the candidates "beat the daylights out of one another" for the nomination. "Some Democratic leaders will probably call on the candidates to keep their eye on the Corbett ball and not viciously attack one another," Sabato said. "That plea will fall on deaf ears. This may be the one and only chance for these contenders to become governor. They'll worry about the general election if they get there." Philadelphia Daily News