Jessell | Keep An Eye On Wireless Cable 3.0
Providing a multichannel pay TV service using TV stations seems like a smart, competitive way of delivering the best of broadcasting and cable to homes weary of the ever-rising cost of cable or beyond the reach of it.
But wireless cable has been tried twice since the turn of the century and twice it has badly flopped.
The first to try it in 2003 was USDTV, which had the backing of major station groups looking for a way to monetize the multicasting capabilities of the new digital ATSC 1.0 standard. For $20 a month, it offered, in addition to the major broadcast networks, Fox News, ESPN, Discovery and several other popular cable nets.
But it fizzled out after a four-year run in 2007, stranding subscribers in Salt Lake City, Dallas, Albuquerque and Las Vegas.
Undeterred by that example, another startup called Sezmi decided to give it a go. Sezmi thought it could succeed where USDTV failed by adding an on-demand streaming component and a set-top box with a DVR capable of recording more than 1,000 hours of programming.
The service was priced at $20 a month with subscribers picking up the cost of the box ($150). It put together a nice package of basic cable programming, although it never had ESPN.
It launched in Los Angeles in early 2010, but never got far, pulling the plug in September 2011 after burning through tens of millions of dollars.
If you are interested in learning more about Sezmi, you can ask CBS CTO Phil Wiser. He was co-founder and president of the enterprise.
Now comes another upstart, Edge Networks, based in Boise, Idaho. Its Evoca service is similar to Sezmi. It, too, is a hybrid of broadcasting and streaming so subscribers will not only need a good antenna, but also a decent broadband connection.
It figures on charging subscribers $50 a month for an 80-channel service that will include the local broadcast channels, the major basic cable channels and streamed on-demand programming. The $100 set-top box will also provide access to unaffiliated streaming services like Netflix.
That promise of 80 channels in a bit misleading as it includes local broadcast channels that are freely available to everybody. The Evoca box is designed to integrate the local signals with the imported programming into a single user interface and remote.
The plan is to launch the service in Boise this summer using two low-power TV stations (KBSE-LD and KCBB-LD) that Edge Networks is leasing from well-known LPTV operator Gary Cocola. The stations are already on the air in test mode.
The entrepreneur behind Evoca is Todd Achilles, who comes from the mobile industry, where he worked on both the network and device sides of the business for T-Mobile, HTC and Hewlett-Packard.
I spoke to Achilles last week and he seemed confident that from his small start in Boise (DMA 102), he can roll out the service market-by-market as he proves the concept and brings in enough investors to make the venture self-sustaining and profitable. From Boise, he will move on to other markets in Idaho and Montana. His ultimate goal: 50 million homes.
My big question for Achilles was what’s different? In light of USDTV and Sezmi, what makes you think you can make a business out of broadcasting cable?
ATSC 3.0, he says: “If there is one takeaway I would leave with you, it’s that 3.0 really does change the rules.”
According to Achilles, the new standard has more capacity than the ATSC 1.0 standard that his wireless cable predecessors were stuck with, generates a more robust and reliable signal and is broadband friendly.
“Because 3.0 is effectively the same streaming protocols that you have over the internet, you can put them together in a way where the end user or the customer has no idea what they are watching, how it got to their TV,” Achilles says. “That is exactly what we are trying to do.”
To get to 80-plus channels, Achilles says he intends to squeeze 20 HD programming channels into each of his two 6 MHz broadcast channels.
That seems like mighty aggressive channel packing to me, but I have been told by broadcasters deep in the 3.0 weeds that it can be done if you are willing to trade off much of the robustness of the signals – in other words, if you are willing to sacrifice some of the quality of reception and coverage.
Achilles understands the tradeoff. “So, we don’t aspire to sell – and we won’t sell – our service in areas where we don’t have strong, reliable robust signals,” he says. “We have identified specific zip codes where we know we have got great signal strength either on indoor or an attic antenna. That is where we offer the service.”
Achilles says he knows he can deliver 40 channels of HD to enough Boise homes because he has been doing it during the test phase. He invites anybody with a 3.0 receiver to come to Boise and see for themselves.
Evoca’s basic pitch is that it is, at $50 per month for the service and $100 for the box, a low-cost alternative to cable, satellite and virtual MVPDs like YouTube TV and AT&T TV Now. Achilles says he expects the price of vMVPDs to rise steadily, creating a widening price gap that Evoca will be able to exploit.
Achilles says he enjoys other important advantages over the vMVPDs. To subscribe to Evoca, you need a basic broadband service, he says, but you don’t need a costly premium service with large or unlimited data plans as you do with the vMVPDs.
And by putting a 1.0 tuner in its set top, Evoca can pack in the local Big Four affiliates without having to pay retrans for them. That is a big — and perhaps decisive — savings in programming.
The extra tuner will also allow Evoca to include the many Spanish-language, religious and ‘classic” entertainment channels that make up the free over-the-air world these days.
The only thing I see missing is a DVR in the box. I get that it would add a lot to its cost, but for me and a lot of other TV viewers it has become indispensable. Achilles says he understands the value of the DVR, but says it “is relatively less now in a world with all these VOD services.”
In Boise, Achilles has the ideal market to test and showcase his service for investors. According to him, it’s a fast-growing market with some 300,000 homes; the big local cable operator, Sparklight, is losing interest in video and focusing on broadband; and, with most homes tucked in a valley, broadcast signals propagate well.
Unfortunately, the rest of America is not Boise. Even if Evoca succeeds there and in similar small and medium markets, it has no guarantee it will make it in markets with fiercer competition, more challenging broadcasting topography or higher cost of leasing spectrum. The 50-million-home target may be more aspirational than real.
I didn’t get all my questions answered by Achilles. He’s not saying what his break-even number of subs is in Boise, what cable networks he has lined up or how much money he has raised or will have to raise to sustain the operation in its early years. That makes it hard to pass any judgment on its prospects.
So, let’s see what happens this summer. Let’s see if those signals have sufficient reach, if the package contains all the “must” cable networks and if consumers find it a better value than the established multichannel pay players.
The major broadcast networks and their affiliates may not want to root for Evoca because it will pay no retrans and it may erode the sub base of MVPDs and vMVPDs that do pay. But they should pay close attention to the service. It may become the first to generate a buck from ATSC 3.0 by tapping its power in an unconventional way.