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'Software Chiclets': NCTA Head Says OTT Makes Cable Look Good

Should traditional pay TV companies welcome the OTT video age? Speaking at today's Next TV Summit in New York City, Michael K. Powell, president and CEO of NCTA, the principal trade association for the U.S. broadband and pay TV industries, said the danger of streaming services is that they'll multiply and turn into an assortment of "software Chiclets," with consumers needing 10 or 20 services to replace what they used to get from one cable subscription. When the over-the-top app-based market gets that fragmented, "suddenly tired old cable looks compelling again."

Examining the current wave of consolidation engulfing publishers and networks, Powell sees it not as an attempt to corner market power, but rather to achieve the kind of scale needed to take risks. In order to compete in a tech-centered ecosystem, TV providers need software engineers, IP-based infrastructure, data scientists, and much more—all things that traditionally haven't been part of their business. In this new world they need to get bigger just to be competitive. They need to be able to take big risks without fear that one failure will capsize them, because most new offering don't find an audience.

As established networks cast about for a successful online business model, many are following Netflix's path. While that's compelling, Powell sees the reasoning as flawed. There are too many question marks around Netflix, he believes, and the high burn rate needed to create original content won't be sustainable for all players.

Powell also looked at the inevitable regulations coming to the area, which will address problems such as data privacy and network neutrality. While legislation will happen, he doesn't believe it will come soon or that the road will be easy. "There's going to be a lot more hand-wringing," he said, followed by yelling, complaining, public forums, and eventually a better understanding of the harms. Public interest groups will demand a response, and politicians will move to satisfy those constituents. While the first wave of bills they introduce won't pass, those bills will signal to the industry what needs to change. Companies will respond to that pressure by claiming to uphold certain principles. Finally, politicians will introduce bills that have a chance of passing. Powell predicts the first regulation to pass will be an internet bill of rights, offering protections for privacy, data, and net neutrality.

That works for Powell, because he believes having a patchwork of state laws is a bad idea. He also thinks fighting for or against net neutrality is wasted energy, as ISPs have no economic incentive to create an internet fast lane or block access. ISPs want to fill their networks with as much traffic as possible, he said, and have never shown a desire to block or prioritize traffic.

Michael K. Powell, president and CEO of NCTA, speaking to Mark Robichaux of Broadcasting & Cable 

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