I love listening to interviews in The Cable Center’s oral history archive. One of my favorites is a two-hour conversation that former Time Warner Cable CTO Jim Chiddix had in 1999 with reporter Rex Porter. Chiddix shares his life story, describing how he went from teaching classes on the Nike-Hercules Missile system at the U.S. Army’s Air Defense Command School to working with a friend who had a charter sailboat business in Hawaii, and later joining what became Oceanic Cablevision.
Hearing Chiddix describe his work on Time Warner Cable’s Full Service Network and the industry’s first experiments with fiber optics was riveting. But what struck me the most was what Chiddix said 16 years ago about the future of broadband, just as cable modems were beginning to take off.
“If we’re really successful and it becomes THE way to do things in the future we’ll probably be turned into a common carrier, which is the ultimate vote of confidence, I guess. If it’s decided that we’re a natural monopoly because our technology is so good, that’s an interesting thing. If that happens it will change the culture of our companies, and that’s already happening,” Chiddix said.
As Chiddix foreshadowed, FCC chairman Tom Wheeler said earlier this month that the commission will attempt to introduce new rules that would classify cable as a common carrier.
I was also blown away by what Chiddix said in 1999 about how the industry should approach new competition that it could face one day from online video providers.
“The trap we need to avoid most is not trying to defend our old business and thereby miss new opportunities, and the obvious thing is to worry about video delivery over the Internet and try to fight that because we want to save our video delivery business on our traditional MPEG network and our analog network. That would be a terrible mistake. If people want that kind of service we need to embrace it, we need to do it well. We can do it better than anybody else. And we need to be willing, if necessary, to cannibalize our old business to open up new business opportunities,” Chiddix said.
Cable operators chose not to risk cannibalizing their core pay TV business by distributing video over the Internet. Netflix didn’t launch its streaming video business until 2007. Now, there are several pay TV distributors looking to use the Internet to deliver virtual subscription video services to viewers using connected TVs and mobile devices, including Dish Network and Verizon.
Chiddix, who was CEO of OpenTV Corp. after his 15-year stint as Time Warner Cable’s CTO, told me in an interview last week that competition from virtual MVPDs is something cable leaders were concerned about when TWC introduced cable modems in the mid-1990s. “One of the first questions my boss [former Time Warner Cable CEO] Joe Collins asked me was, ‘Does this mean someone can come along and build a cable system over the top of us using thee modems?’ And my answer was, ‘technically, sure, but there are lots of barriers there’.”
The biggest barrier for over-the-top MVPDs remains obtaining programming rights from major networks that allow for distributing both live and on-demand content over the Internet. But Dish has managed to land carriage deals with several major programmers for the launch of Sling TV. And Verizon CEO Lowell McAdam told analysts earlier this month that the telco has made progress in its talks with programmers for the OnCue-powered service that Verizon plans to launch later this year.
Chiddix said he believes the cable industry can handle competition from virtual MVPDs. But he wonders whether “cable operators will incorporate [online video providers] into their interface the way TiVo and Apple TV have done.”
Could cable operators grow their businesses by selling packages that include a broadband Internet connection and Internet video content? Alticast U.S. President John Carlucci, who is also a TWC veteran, told me recently that he could see some cable operators embracing that business model.
“Say I’m a cable operator running a small system and I’ve got some live services being delivered today, and that’s an OK business for me and customers are happy with it. But increasingly customers are attracted to on-demand content, and I want to retain them. I might make an offering of an Amazon Prime or Netflix in a conventional way so they can access that,” Carlucci said.
Will cable operators embrace a “dumb pipe” model, and profit from supplying a broadband connection that allows another provider to sell programming to their customers?
“I think the pipes continue to be smart. But that said, I can see where cable operators would allow other to provide the service across that smart pipe,” Carlucci said.