On Friday, Doug Kass posted a simple question over at RealMoney Pro/Street Insight, asking what the impact of products like Slingbox would be on Cable TV and other media providers. His question was whether such a device, which allows you to transmit signals from your cable TV box to a PC anywhere in the world using the internet, would perhaps allow people to avoid having multiple cable TV accounts – say one for the home and one for a second home, or perhaps an office.
My answer was that while the product works, there are key issues in the consumer internet infrastructure that would place roadblocks in the face of that kind of use. I listed four issues I could see. Mr. Kass replied that he thought it was just the first generation of the product and that improvements could come quickly.
I was going to reply to him directly but I thought this would be a good issue to explore further here. It’s a great illustration of how a great product also needs to fit well into it’s environment, both in terms of the technology and the business sense. This is a problem that is often overlooked by people developing or investing in new technologies.
Many of the inventors and investors of the internet bubble period failed to take such issues into account. George Gilder -- who was regarded by many as a prophet of those gilded years -– made this mistake for himself and the investors who followed his every word and prediction. When it was all over and he had lost everything for himself and his followers, his excuse was that he failed to anticipate that legislators, regulators and all sorts of other “obstructionists” had artificially slowed the spread of broadband internet and that his visions of a future “telecosm” had been predicated on the presumption that the technology would spread as quickly as possible. To this day, Gilder and his followers still blame others for the failure of things to work out as they “should have.”
The fact is that Gilder didn’t live in the real world. In the real world, technologies don’t spread as quickly as they might. All those other business interests tend to get in the way when a new and disruptive technology comes along. That Gilder failed to anticipate such things is a reflection on his naivete, not on the evil state of the world.
So let’s look at Slingbox in that context.
Slingbox rebroadcasts a cable TV signal (or potentially any video, but it’s really designed for cable TV) across a broadband IP network, where it can be viewed on a PC using Slingbox software. The software also allows you to control the cable box at the originating location, effectively creating a really long – potentially wireless – extension cord from your cable box to a PC or multiple PCs anywhere in the world.
Nice idea. Lots of TV doesn’t require much more than a PC-sized screen to view it anyway.
So what’s the environment it needs to fit into?
From a technical point of view, what it needs is a high speed network that is configured to allow the Slingbox to be addressed from anywhere you might want to. Within a home network or a business LAN or WAN, that’s pretty easy. Across the commercial internet it gets tougher.
The vast majority of retail high speed ISPs have configured themselves for asynchronous speeds (The “A” in ADSL is for asynchronous), which means that the maximum upload speed is much slower than the maximum download speed. This makes sense because most home internet users download a lot more than they upload. Typical communication includes a quick request for a specific page, then a much longer response in which the page is transmitted to the requesting computer. So you typically need more download speed than upload speed.
Most DSL services I’ve seen lately tend to allow download speeds of .7-1.5Mbps and upload speeds of 128-256Kbps. Cable internet speeds are a bit higher. The upload speeds from my home/office top out at 384K.
That’s not enough to transmit full-motion video with much quality, no matter how good a compression algorithm you have.
Not only that, but often there are other restrictions. Comcast – my high speed provider – is known to have quotas for upload volume for each user each month. These have the been the topic of many messageboard conversations on sites like DSL reports, and the clear message is that while there is no hard quota, there is a formula in place to cut you off if you’re uploading “too much.” Other services use hard quotas. And everybody is particularly concerned about high upload volume because often that’s a sign of significant (and usually illegal) file sharing.
To take this a step further, most residential ISPs explicity prohibit running any kind of internet server on their lines. The definition is loose enough that a Slingbox device might qualify as a server under their terms.
Finally, most home networks aren’t easily accessible from the outside. Business and internet servers use a static (non-changing) IP address which the internet maps to, allowing these computers and the websites they host to be easily accessed from the outside in a consistent manner. Virtually all residential and some business services use a dynamic IP address: the ISP simply assigns one to you when you connect and takes it back when you disconnect. It can change frequently, and sometimes it does. There’s no consistent access mechanism from the outside to a residential customer. Having a static IP address is usually only possible by purchasing much more expensive “business” internet services. While there’s a workaround for this called DDNS, it’s still fairly technical and not consumer-friendly.
Here’s what’s important. None of these problems are a shortcoming of the Slingbox device, they’re problems that are inherent to the internet environment in which the device must be used and in which it must work. You could make the most fantastic internet-connected device, but if it depends on an easily accessed residential network, with high upload speeds and unlimited internet traffic volume, it is in trouble in today’s internet.
And these are not technological problems. The technology to address these has existed for years. Businesses have networks and internet connections with none of these issues. The decision to provide this set of services to home users was and continues to be a business decision. We’re not waiting for some new version to be developed, we’re waiting for the infrastructure it needs to be widely available.
Next point, what’s the likelihood of the environment being upgraded? When might we have SDSL and synchronous cable internet services that allow uploads as quickly as they currently allow downloads?
This is where the technology intersects with the business reality, and that’s where a clue about the answer might be found. Supporting fully synchronous services means another multi-billion dollar upgrade to the networks providing internet services to most home and small business users. That’s a lot of money even for the large cable companies and telcos that provide these services. And as was the case in Gilder’s gilded age, it’s hard to see their incentive for moving particularly quickly.
The providers of broadband to the home tend to be two groups: Cable companies and large telcos. I’ll start with the cable companies. What’s their incentive for allowing you to rebroadcast their content to another location, a location where you otherwise would need to purchase another cable subscription? Obviously, they have none. Even if they had some other reason for providing you the upload capacity you need, they’d be trying to block you from using your cable subscription outside the home. Read you cable TV’s terms of use and I think you’ll see that your use is contractually limited to the home. I think it’s pretty reasonable to presume that if you start making the content accessible over the internet -- even if it's only accessible to you and your family -- they’ll be looking for ways to stop you.
The phone companies have a less clear incentive for stopping your re-transmission of the cable TV material, but they’re also much further behind in terms of providing bandwidth. Also, the telcos may have some concerns with your ability to rebroadcast to mobile devices, which Slingbox and others plan to make possible. They’d like to be the content provider of choice to your cellphone and aren’t likely to support a technology that puts them squarely in the role of undifferentiated wireless bandwidth provider.
Finally, I think it’s pretty unlikely that either of these groups of companies is going to provide easy addressability to home networks, either via DDNS or static IP addresses. They charge fairly large markups for “business” internet services the primary benefit to which is the static IP address which allows running servers and other externally addressable devices.
The bottom line then, is that I fail to see any of the large ISPs providing the kind of bandwidth and traffic volume that Slingbox requires in order to be widely used by home users to retransmit their cable TV signals at any significant quality level. At least not anytime in the next five years. I could be wrong, of course, but it’s not a bet I’d care to make.
But that doesn’t kill the possibilities for Slingbox and the others. Corporate, and even home networks are quite capable of carrying that kind of traffic internally via wired and WiFi connections. That could have an impact on how home and business users deploy their cable connections. For myself, for example, it might mean eliminating one cable box which is costing me an extra $5 each month. I currently have two cable boxes, though I never actually have two TVs going at one time. In fact, I no longer actually have two TVs. The one in my office was replaced with a TV image displayed in the corner of one of my three computer screens. I don’t need much more than that for CNBC and Bloomberg. It would be a logical progression for me to eliminate the extra cable box as well and transmit the image from my box upstairs directly to my PC using the home network. This kind of thing could make even more sense in a larger business environment.
And sure, for those people who are OK with receiving occasional lower quality transmissions of stuff from their home TVs -- travelers who want to keep track of their local news or sports for example -- it'll work.
And the bottom line? I think devices like the Slingbox as well as similar capabilities built into some of the newer Media Center PCs are somewhat interesting. But they’re mostly useful for giving consumers greater flexibility in their homes. For the foreseeable future, that’s where they primary impact will be and that’s where the companies are likely to focus their marketing. I seriously doubt they’ll have a noticeable impact on Cable TV providers in the foreseeable future. In fact, cable companies might choose to duplicate the technology within their cable boxes. Charge me a couple of bucks a month extra for a network-accessible cable box and save me the trouble of having two. It won’t be all that appealing to households where two or three sets are in use simultaneously, but could be a compelling option to give you that one extra set, or a set in a mobile location limited only by the range of your WiFi connection. I’ll continue to watch the business carefully.
