The concept of an open home gateway is one of the least noticed and most important of the components of a national broadband plan, and I believe the US is at a critical crossroads. On one path is an incredible opportunity: *to help close the digital divide, *to create an entire ecosystem of connected TV that allow a freedom of communication that can quickly reach virtually all citizens, *to create entire new industries ...more »
The concept of an open home gateway is one of the least noticed and most important of the components of a national broadband plan, and I believe the US is at a critical crossroads.
On one path is an incredible opportunity:
*to help close the digital divide,
*to create an entire ecosystem of connected TV that allow a freedom of communication that can quickly reach virtually all citizens,
*to create entire new industries for the US to pioneer
On the other:
*a widening of the digital divide that can undermine many, if not all, of the other national broadband efforts
*a real risk that the US falls behind other nations in the development of these new industries
TV sets have already reached the vast majority of homes that the national broadband plan hopes to reach. What is not yet clear is how the open home gateway provides the mechanisms to leverage those TVs into interactive devices that bring the richness of the Internet to those homes.
To understand this crossroads, it is instructive to look at the current situation of the connected TV. To the casual observer, it may appear that things are already moving along nicely and, indeed, my company, along with other numerous startups, major Internet companies and virtually every major electronics and computer brand has products and services for connecting the Internet to the TV. Likewise every major cable operator has initiatives to bring some form of the Internet, albeit typically limited, to the television.
But a closer look shows numerous signs of trouble. The most obvious is that despite years of numerous rosy projections, clear consumer interest, and media declarations that “this is the year of the connected TV” overall penetration of Internet connected TVs remain astoundingly low. Also important is that the penetration of these devices remains almost exclusively in affluent, sophisticated homes where PCs and broadband connections have already reached. For many years these boxes have been trapped in the early adopter segment of the population . The conventional wisdom is that no device manufacturer has achieved the ease of use required to gain mainstream adoption, or that there is not yet a critical mass of content available. While this explanation may seem plausible when viewing individual efforts, it fails to explain, why, on a macro basis all of these efforts have failed to produce a true “breakthrough device”, particularly when one considers that the failures in this category are from the same players that have had broad success in penetrating markets with mp3 players, smartphones, netbooks and a host of other devices and services.
The reason for this failure is clear: these devices have been locked out of the predominant content delivery ecosystem, putting them at a tremendous disadvantage. Boxee, a moderate success story in the category, is illustrative of this point. Boxee has developed Set-top box software that presents Internet TV content ranging from studio-produced to user-generated in ways that work well for an interactive experience on the TV. Their open system has allowed hundreds of applications to experiment with interactivity and even integration with social networking services. This software has been downloaded by hundreds of thousands of users and received accolades and won awards for its innovation and ease of use. Yet it remains hard to sell a Boxee device to a mainstream audience for a few reasons:
1) Hulu.com, a primary source of studio content for Boxee has repeatedly blocked Boxee's access to Hulu's content. Obviously, this creates a real nuisance for Boxee's users and has a particularly chilling effect on purchase interest on a device that commits them to Boxee.
2) The cost of the device remains high, $200-$300
3) The device is not integrated with another content source (ie cable or satellite) so its cost (or complexity) cannot be shared with another service, leading to yet another device and remote for users to deal with.
While the details may be different for each company, being locked out of the dominant content delivery system has created a chicken and egg situation that has marginalized everybody trying to penetrate this space. Because Hulu.com, or more accurately, the studios backing Hulu, are not willing to make a bet on Boxee or the like, they remain beholden to the conventional distribution mechanisms, which one can only assume have induced Hulu to block Boxee. Because the devices have been relegated to mostly niche status, they cannot leverage the necessary economies of scale to reduce selling price. Again, while the above described manifestations involving Hulu may be specific to Boxee, one can investigate virtually any other attempt to bring the Internet to the TV and they’ll find manifestations of being locked out of the dominant television distribution mechanism.
To test this, simply imagine your favorite Internet TV device if it was integrated into your cable system and could fully act as your set-top box. -- not a limited subset of what your cable set-top box does, and not some scaled back, proprietary version of itself integrated with your set-top box, but a fully functional version of Internet TV with access to all the content and capabilities of your set-top box. If you are like most, you no longer see a niche product, but one with plenty of mainstream potential.
All that being said, it would be only natural for the reader to wonder why the FCC would force one industry to open to another simply so one product category can flourish (presumably at the expense of another). The case for FCC involvement is that important benefits to US citizens as a whole hang in the balance.
To understand this, imagine two scenarios: In the first, things stay the way they are. The products and services surrounding the connected TV continue to advance at their current pace and remain isolated from operator distribution systems. Penetration of such devices will continue to inch along, perpetually appearing “near a breakthrough” but never actually achieving that breakthrough. Small teams of entrepreneurs will make incremental improvements to products and a small number of affluent, sophisticated households will get to enjoy the rich benefits of bringing Internet Television to their televisions.
In addition to what is lost by consumers, there is very real danger that the U.S. competitiveness in this vital and burgeoning space will be forfeited to other countries who do embrace a more open TV ecosystem. The early initiative has been seized by the UK, where the bulk of citizens receive Television via open, over-the-air signals and where the BBC is driving towards an open standard to unite Internet television and Internet television.
Even more compelling is to consider what US citizens will gain if we do have the foresight to move from the status quo to an open system. In this scenario, we can imagine a rush of activity among participants from every corner of the supply chain. We can imagine activity among manufacturers likely mirroring what happened with the set-top box converters as the government announced the digital cut over and corresponding subsidies for set-top boxes. The result was that previously expensive digital set-top boxes that were previously expensive became so cheap that many consumers were able to receive them basically for free with the subsidy. The impact to applications and services are likely to be even more profound. It’s easy to imagine a path as dramatic as the era ushered in by the Carterphone rulings which produced fax machines, modems and ultimately consumer adoption of the bulletin boards and ultimately the Internet.
Perhaps most important of all, though, is the potential for penetration into areas where US broadband has failed to reach thus far: homes on the wrong side of the digital divide. These are the lower-income, less sophisticated households that we risk further leaving behind if they cannot participate in the connectivity of a broadband Internet. An audience member at an FCC workshop I recently attended asked how he, a local small business owner, could reach his potential customer base when penetration of broadband Internet and even PCs were relatively low in his area. It struck me that there is no better tool for breaking out of the vicious cycle of digital poverty than by bringing the Internet to the television, a device they already have and use.
What may start out simply as improved, more efficient entertainment options, will inevitably lead to increasing participation in our connected world. With an open standard, innovators from community groups, businesses and governments will no doubt pull disconnected and isolated citizens into the participatory democracy in ways we can only imagine.
We urge the leadership of the FCC to make this happen by implementing a standard for the open home gateway that allow participation by all the stakeholders poised to make great use of a connected television.