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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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RE: Yes please!
By Solandri on 11/6/2011 12:14:03 PM , Rating: 1
quote:
We don't have a free market in the US. We have conniving companies that limit competition. I'd rather the government sell me my internet.

Your political axe to grind is showing. Both business and government are complicit in this. It was the government that gave those companies exclusivity deals thus limiting competition. That's why in most places in the U.S. you have a "choice" of one local phone company and one cable TV company.

If the government truly wanted competition, all they had to do was refuse to grant an exclusivity deal. No need for them to start their own ISP.

Exclusivity deals sort of made sense in the 1970s, when different media and different companies used different transmission standards. You didn't want to clutter up your telephone poles with wires from a dozen phone companies and half dozen cable TV companies. But today, almost all networks are packet switched, meaning you can transmit any type of data over the same network.

If the government is going to get into anything, they should create a network utility company which simply lays down fiber network lines to each home but does not offer service. Then they should allow anyone to sell you phone, TV, and/or internet service over that fiber at a fixed price. The company that owns the fiber should never be allowed to offer service, and vice versa.


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