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Cable service will reportedly role out in the Kansas City area, will not deploy nationally

Google Inc. (GOOG) is already on top of the lucrative smartphone, advertising, and internet search markets.  It has diversified into other ventures including electric powermusic, and personal computer operating systems, as well.  But there are only two directions to go in the world of business -- up or down -- so the pressure is on Google to continue to diversify into new markets.

I.  Google Takes to the Television -- Again

The company's latest plot, according to a report in The Wall Street Journal, is to sell a subscription cable offering.  To develop these plans Google has snared Jeremy Stern, a respected cable executive, whose experience included a stint at U.S. West, Inc. (USW) subsidiary Continental Cablevision.

Led by Mr. Stern, Google is reportedly in talks with major cable channel providers like The Walt Disney Comp. (DIS), Time Warner Inc. (TWX), and Discovery Communications Inc. (DISCA).  All of these companies and Google declined to comment on the rumored talks.

To those unfamiliar with Google's latest efforts, television may seem a bit of a puzzling market for Google to be diving into.  But given Google's project to test a trial deployment of high speed internet and digital phone service to Kansas City, Kansas television seems a natural fit, as most veteran firms bundle the three services -- television, cable, and phone -- together.  Plus there's the small temptation of cracking what amounts to what is expected in 2011 to be a $150B USD market.

Kansas City Wide
Kansas City is getting Google phone and internet service, so why not cable? [Source: Ron Saari]

Standing in Google's way are the veteran cable and satellite firms, who are actively working to get exclusivity contracts, which would lock would-be entrants like Google out of the mix.  Keval Desai, a venture capital analyst with InterWest Partners LLC, "TV is built on a closed system, which is why traditional cable and satellite operators are the only place where consumers can get ESPN and other channels."
Google Cable graphic

But Google is one of the few who might have the financial power and reputation to potentially break into the closed market.  It's not entirely unfeasible that Google could gain access.  Historically, according to the WSJ, cable companies are willing to license channels to other companies like satellite firms and phone companies, assuming they're willing to pay much more than the standard rate.  And the fact that Google thus far claims no intentions of rolling out national service could assuage the concerns of wary companies like Time Warner, whose sister companies sell cable themselves in some markets.

III. Could Google Cable go Nationwide?

For those lucky individuals in the Montana or Missouri in the regions covered by Google, the promise of cable should excite.  Some believe Google could offer cable at better rates than local competitors, even paying a higher price per channel.  Ostensibly it would be cable of carrying out such a feat through its industry-leading advertising prowess.  States Mr. Desai, "Internet companies like Google will be able to give you that same high-quality content [possibly at lower prices]."

As for the rest of the country, one possibility is that Google could eventually try to offer a "virtual" paid cable service inside of its ultra-popular video sharing site YouTube.  However, the WSJ's source on the possible K.C. deployment says that is "not on the table right now" in terms of the current talks.  Still the source says they believe preliminary discussion on that possibility are in the works.

YouTube Movies
Cable subscriptions could be the next addition to YouTube.

Of course, that kind of approach would only work if internet companies don't block YouTube to promote their own cable TV offerings, as some have done with internet channels on Google TV.

Source: WSJ



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I have never understood...
By espaghetti on 11/4/2011 6:30:44 PM , Rating: 2
OK, I have suddenlink internet/cable. The company hangs com line on telephone or power poles.
I'm sure there is a fee of some sort for doing this.
How does comcast or some other cable company have the right to tap into suddenlink's lines and provide service over their lines?
I would love competition to drive down the never end rate increases, but doesn't suddenlink own the freakin lines?




RE: I have never understood...
By espaghetti on 11/4/2011 6:35:13 PM , Rating: 2
btw....Where's my super dooper wireless internet? Didn't google buy the spectrum from the government to bring this to us?


RE: I have never understood...
By tsivillain on 11/4/2011 7:00:44 PM , Rating: 2
NO! Google was outbid by Verizon, I wish Google did win the spectrum. It would of been all over for stupid cable companies.


RE: I have never understood...
By sigmatau on 11/4/2011 8:06:34 PM , Rating: 2
Of course Verizon won so they can continue to rape Americans of as much as they can take.


RE: I have never understood...
By augiem on 11/6/2011 1:58:03 PM , Rating: 2
And google doesn't/wouldn't do the same? Don't be evil is just marketing.


RE: I have never understood...
By mcnabney on 11/7/2011 10:01:18 AM , Rating: 2
You don't know what you are talking about. Google made one bid, Verizon raised them, Google bailed.

Google was never serious about building a coast to coast wireless network. That would cost an idiotic amount of cash, $50-80 billion just to start. If they wanted to enter the wireless market they would just buy Sprint.


RE: I have never understood...
By cjohnson2136 on 11/7/2011 10:08:25 AM , Rating: 1
quote:
NO! Google was outbid by Verizon


quote:
You don't know what you are talking about. Google made one bid, Verizon raised them, Google bailed.


Ummm you just confirmed what he said. He never said anything about them staying in to bid more just simply that Verizon outbid them which is exactly what you said while trying to say he doesn't know what he is talking about.


By StinkyWhizzleTeeth on 11/5/2011 5:56:27 AM , Rating: 2
It's called White Space, and 2011 was a year for testing it. I think 2012 will be the year it begins to roll out. Hopefully in 2013 it will dominate and provide enough competition to bring Internet service prices down.


RE: I have never understood...
By Solandri on 11/6/2011 12:24:54 PM , Rating: 2
Things like phone and power (and gas and sewer) lines have to cross private property. In order to prevent a single luddite property owner (e.g. the crusty senile geezer with the shotgun) from disrupting everyone's phone/power service, the government has the power (via eminent domain) to declare an easement through private property. This is a small strip of land cutting through private property, which the government controls, and is just wide enough for the lines/pipes.

Without an easement, a cable TV company would have to negotiate with each private property owner for rights to string their cable from pole to pole across each property lot. In exchange for the right to string their cable through the easement, the government (today) usually requires some concessions, like allowing competitors to transmit data over the lines at a certain regulated price. In the past though, a lot of cities rolled over and gave cable/phone companies full use of the such easements and granted them a monopoly on the particular type of service.


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