The connected television debate in OECD countries

A stakeholder interacting with her radio-TV set
A stakeholder interacting with her radio-TV

Today’s post is from Rudolf Van der Berg of the OECD’s Science, Technology and Industry Directorate.

Thirty years ago last week, a US Supreme Court decision in the “Betamax case” clarified that even though a video cassette recorder (VCR) could be used for copyright infringement, the manufacturer was not liable for infringement by the purchasers. The decision was by the narrowest of margins – 5-4 – but it stands to this day. Nonetheless, despite widespread take-up of VCR’s in all OECD countries, their legal status often remained unclear. The copyright law of Australia, for example, deemed recordings of broadcasted content for personal use to be illegal until 2006, when the law was amended to reflect common use over many years.

Today, many similar cases are making their way through courts in OECD economies. A new report “Connected televisions: convergence and emerging business models” describes some of the debates taking place regarding new equipment and services that change how television is delivered. The report describes the influence of connected television on the telecommunication market and the interaction between various stakeholders, including actions taken by governments.

Today, anything connected to a screen can serve as a television and it is a network connection that makes it connected.  The report looks into the impact these new devices and services have on telecommunications networks. For example, some have expressed the opinion that online television and video-on-demand (VOD) services are either challenging for network management or that telecommunications networks are not fairly compensated for carrying this traffic.

Digital Video Recorders

Digital Video Recorders (DVRs), sometimes integrated in digital television set-top boxes have added the ability to pause content while watching and fast-forwarding later on through parts of the broadcast. The DVR is currently facing challenges in and outside courts across the OECD.

In Belgium, public and commercial broadcasters requested compensation from cable and IPTV companies for the use of DVRs. The reasons given were that the new technologies enabled users to skip commercials and that pay-per-view catch-up television services saw less than expected take-up from consumers.

In the United States, Dish Networks, introduced two features that are currently being challenged in courts. PrimeTime Anytime would automatically record the four major broadcast channels during primetime hours, store eight days of recordings, and hop over advertising in content recorded on previous days. The other feature was to enable its DVR users access via the Internet to content received over their home satellite dish and on their DVR.

Also in the United States, Cablevision introduced a cloud DVR for its customers. Instead of requiring a DVR in the home, the recording was done in a datacentre. This was challenged in the courts, but after an initial defeat, was upheld to be legal, because it was under the control of the user.

In Australia, in a similar case, a cloud DVR service offered by Optus was ruled against by the court. The outcome also led to the closure of similar over-the-top cloud services in Australia, such as MyTVR and

French television service providers cannot introduce a cloud DVR service, unless with prior authorisation of the copyright holders.

There are also less contentious services, such as the ability to Tweet screenshots of viewed content via Numericable’s DVR in France, access to catch-up television such as BBC iPlayer, and the ability to download apps and games to the set-top box.

Live television online

A number of services have sprung up that allow consumers to access live television via the Internet. One of the best known examples is Aereo in the United States. It gives each individual user an antenna and then streams the content via the Internet. It has been challenged in court, by broadcasters and cable companies, such as Cablevision. However the earlier Cablevision cloud DVR ruling was significant for Aero, with two courts ruling it was not in violation of the law. FilmOn offers a similar service to Aereo from Switzerland for European channels. They take the position that under Swiss law reception and distribution of any receivable free-to-air signal is allowed. Magine, a Swedish company, offers licensed live online television and cloud DVR services in Sweden, Germany and Spain. It therefore resembles more traditional cable television. One of its distinguishing features is that it allows users to go to the start a programme when they switch channels and a programme has already started.

Implications for telecommunication networks.

Catch-up television, such as BBC iPlayer has proven to be very popular with viewers. Viewing is happening increasingly through non-traditional devices, such as mobile phones and tablets.

The report finds that all broadband networks in principle support connected television and online television services. The effect of increasing video traffic over networks has been described by the terms “data tsunami” and “exaflood”. The terms suggest that networks will succumb in a dramatic manner to the amount of data sent. There are, however, few independent sources for data on traffic growth over networks. Those sources that are available show robust growth but offer data that enable a more considered view of network capabilities and traffic growth. Data from European Internet exchanges and Cisco’s  Visual Networking Index show a year on year reduction in the pace of growth for Internet traffic. For example where Cisco saw an eight fold growth in traffic from 2007-2012, it only expects a threefold growth between 2012 and 2017 (see also the OECD Communications Outlook 2013).

ISP’s have different views on connected television and the potential effects on their networks and business models. Some networks such as Swisscom openly welcome online television services and increased use of video services. It has stated that it will stimulate consumers to use the higher-speed access services that the company sells. Many ISPs, however, have flagged and adopted a range of different strategies to deal with traffic increases in an endeavour to strengthen revenue:

Differentiating on quality of service: Some ISPs have proposed to differentiate between classes of Internet traffic (gold, silver bronze) or by dedicating broadband for certain applications. So far networks appear to have been mostly unsuccessful in selling such services. Some reasons put forward by content providers for not purchasing these services is, that their impact is mostly unknown as the ISP controls only part of the network. Furthermore in a competitive market content providers may judge that ISPs will upgrade their networks when quality degrades to remain competitive with other ISPs.

Internet traffic exchange: In Korea, Samsung introduced a VOD-service integrated into its television sets, that made use of the consumer’s broadband connection. For a short period access to this service was blocked by Korea Telecom in a dispute over interconnection. In Norway, Nextgentel, the largest ISP, decided to significantly reduce capacity to the national public broadcaster NRK. The broadcaster had reportedly declined to pay for the additional capacity needed. Capacity was later reinstated. The report contains submissions from both countries on the background of these cases and how it was dealt with. It further explains how Internet traffic exchange, also known as peering and transit, functions and how large content providers such as Netflix implement peering. In addition it describes some notable peering disputes in Australia, France and New Zealand. (See also this OECD report on Internet traffic exchange)

The use of CDN’s and caches. Content Delivery Networks (CDN) and caches reduce the costs of traffic for both content providers as well as ISPs, while at the same time increasing quality. Though Akamai is perhaps the best known, serving up to 9 Terabit/s in 2011, there are a great number of competing services, including those offered by ISPs. This has created a very dynamic market. Content providers may use multiple CDNs at the same time, choosing the best one for a customer based on costs and performance. Some large content providers such as Google and Netflix however have opted to deploy their own CDNs also known as caches instead of purchasing from ISPs or third-party CDN providers, because for them this is the most cost effective and efficient solution.

Download limits: Until recently, the use of download limits (data caps) on fixed networks was decreasing in the OECD area due to competitive pressure. There has been a slight uptake, however, in some countries, whereas other countries have witnessed an increase in caps. Some state that caps allow the network to be shared more equally amongst users. Others, such as the president of the United States National Cable and Telecommunication Association have stated that limits are not about network capacity but that discriminatory rates provide a way of meeting costs of broadband roll-out. Critics of limits note that at peak times, those that go over caps, are not using the network significantly more than other users in a way that incurs costs to the network. Those that exceed their cap use the network more during off-peak hours. Content providers have reacted by offering customers to choose lower quality video streams that use less of the available download limit.

Useful links

OECD Policy Roundtable: Competition Issues in Television and Broadcasting 2013

Cows, calves and codes: e-books and the future of publishing

Storage capacity was more of an issue than battery life with the first tablets

 The Fifty Shades of Grey series started out on Twilight fan fiction websites and has since sold over 40 million copies in various formats. I thought I’d read it to see what all the fuss was about, but it costs over $7, even on Kindle, and I’m not that interested, so I used the free preview instead. This starts with somebody who looks “gamine and gorgeous, strawberry blond hair in place and green eyes bright…”. I’m hooked already, dying to find out where the strawberry blond hair goes when it isn’t in place, but you don’t buy this for tales of wandering wigs, do you? Sure enough, a few lines later, we’re in the thick of the action. “Get back to bed.” Oh my, whatever are they going to do now? “I made you some soup to heat up later”.

Right, that’s enough eroticism for one day, thank you, now let’s talk about the digital revolution in publishing. Actually, despite all the hype, it’s not much of a revolution yet. According to a new OECD report, eBooks: Developments and policy considerations (now there’s a title that leaves nothing to the imagination!) e-books accounted for only around 1% of book sales in most OECD countries in 2010, the exceptions being the US at 8% and the UK at 2 or 3%. E-book sales are rising rapidly however: up 29.4% in 2009 and 38.9% in 2010, with Amazon now selling more e-books than print. This has prompted speculation that the printed book could suffer the same digital death as the CD and, pretty soon, the DVD, with customers preferring to download a file rather than buy the physical object.

That speculation seems unfounded, for the time being anyway. In fact e-books seem to be helping print sales. Total estimated revenue for all publishers rose 3.1% in 2010, to $27.9 billion, with $1.6 billion from e-books, following a 2.5% increase in 2009.

Another argument against the death of print is the nature of the work itself. Music downloads are so successful because you still listen to the final product the same way whatever the technology, but you don’t have to buy a whole album just to share one song on your mobile phone with everybody else on the bus. But if you’re interested in Moby Dick, say, you’re unlikely to want just the bit where the whale bites off Ahab’s leg, and reading a whole book is a far more pleasant experience with print for most readers.

That said, digital is likely to replace print to a large extent for some types of publication, such as reference. It’s already happened with the Encyclopaedia Britannica and is increasingly the case in scholarly publishing. At the other end of the market, digital is also promising for pulp fiction, comics and anything else the reader would be unlikely to keep for long in printed format. (Be careful though: a copy of the first comic featuring Superman sold for $2.2 million last year.)

There’s also the fact that you can add lots of content such as audio or web links to e-books, but one thing you can’t do with many of them is share it with a friend. Digital rights management (DRM) means that you’re not buying ownership of the publication, just acquiring a license to use it within certain limits. Governments could oblige sellers to be more transparent about what you can and can’t do with a book before you pay for it.

Another annoyance for e-book buyers is interoperability of the hardware. An e-reader bought from one retailer won’t read books purchased from another. A common DRM standard would help to address this, but sellers seem to prefer a business model that locks in clients to their product, so although e-readers could give unlimited access to the world’s literature in theory, in practice they limit choice to one particular catalogue.

For publishers and booksellers, piracy and copyright infringement are the big worries. The report talks about the “tradition of sharing books that has existed since time immemorial”, but since time memorial at least this tradition has been bound by law. The first known copyright ruling dates from 6th century Ireland, when St Finian of Clonard brought a case against St Columba to stop him copying books (another monk buried his library in an orchard when he heard that Columba was on his way). Diarmaid, High King of Ireland, ruled against Columba on the precedent that a calf belonged to its mother, no matter where the two happened to be: “As to every Cow its Calf, so to every Book its Copy”.

At the time a copy had to be made by hand (on calfskin), but as technology evolved, so did the law, with the introduction of printing being closely followed by laws governing what could be printed, sold and read and by whom. Many of these laws are still in place, but digital publishing raises new issues, not all linked to how easy copying has become. For example should e-books pay the same tax as print? Should libraries have special rights?  Should governments introduce obligations to make digital content available to the visually impaired or those with other reading difficulties? What are the implications of projects to digitise everything ever printed?

eBooks: Developments and policy considerations discusses all of these questions, and hopefully there will be a sequel addressing what the authors call “relevant subject matter not covered in this report” – the future of book shops, the trends affecting different categories of e-publishing, and technical issues such as the metadata used to describe a book in a digital distribution chain (title, author, subject category, price and so on).

But more of that another day, I’ve still got 49 and half shades of grey to get through.

Useful links

OECD work on the Internet economy

OECD iLibrary