billso.com

Reuters reports that Netflix has teamed up with LG and three other manufacturers to offer set-top boxes for online movie delivery. If this new service is implemented properly, Netflix could sell subscriptions to millions of potential customers who do not use a computer at home.

Netflix already offers online movie viewing, but the feature requires a computer that runs Windows Media Player 11 or better. A set top box would eliminate the computer requirement. No word on whether the boxes will let users browse and order movies through the television, but Apple already supports these features with its set top box.

The new boxes will arrive in stores by the end of 2008. Consumers will need a Netflix account and a high-speed Internet connection. Cable and telecom companies might see new broadband subscribers who don’t have a computer, but some customers might drop their premium TV channels to afford Netflix.

The biggest losers will be the US Postal Service and Netflix depot employees. USPS gets a nice chunk of revenue from Netflix mailers, and the depot employees receive, sort and stuff mailers in over 30 locations, including Honolulu. Online movie delivery would make the mailers obsolete.

Related posts on billso.com

• 17 January 2008: Netflix lifts limits as Apple enters online movie rental market
• 12 November 2007: I want a better television - but it’s not ready yet
• 8 June 2007: Amazon may buy Netflix

Yesterday, the Honolulu Advertiser published an article about digital TV conversion. On 17 February 2009, US television stations will stop broadcasting analog television signals. On that date, anyone in the US who uses an antenna to receive their television signal on their analog television will need a digital converter box to receive broadcast signals. Cable and satellite subscribers have or will get converter boxes as part of their service agreement. All televisions manufactured for sale in the US after 1 March 2007 are required to have a digital tuner, so these models don’t need a converter box. The AP has an article with additional details.

I’ve discussed the FCC’s 700 mHz auction on 18 March 2008 and 30 January 2008. When the analog television channels are abandoned, AT&T, Verizon and other companies will use those frequencies for mobile phone and data services.

The US Department of Commerce has a web site with information on the DTV conversion, as does the FCC. Government regulators and consumer activists fear that cable and satellite companies will use digital television to scare up new subscribers. Another AP article states that Hispanics are the ethnic group most likely to lose television service after the conversion, even as the Federal government gives away several million coupons for digital converter boxes. Hawaii has a diverse population, and getting the message out in multiple languages will be challenging. I expect to see more articles in the local papers, especially in early 2009, even though the Advertiser claims that only 5.5% of the state’s television viewers rely on broadcast signals.

Digital TV converter boxes won’t turn an old analog set into a higher-definition TV, of course. These boxes have a digital TV tuner that passes its output to an analog TV on channel 3 or 4, like a video game console would do.

Yahoo reports that broadcasters will be required to run public service advertising, in an effort to notify viewers well before the cutover. The coupon request page uses reCAPTCHA – the same system I use to screen out spam comments on this blog.

The New York Times published an article yesterday about an mtvU television series called Professors Strike Back. MTV purchased RateMyProfessors.com last year, and has been offering professors a chance to respond to their anonymous online critics.

Universities have become more transparent and accessible in the last 10 years, and the Internet has been a primary force in these changes. Blogging and social networks are two tools that faculty have used to develop an online presence.

It is possible for faculty to take their blogging too far. Rate Your Students is a site where anonymous moderates post snarky comments from anonymous faculty members and the occasional student. Some of the articles on that site make me cringe, because I don’t see any need to strike back or retaliate. I teach, but it’s just a job. It’s not my life.

On the other hand, I never thought I’d see the day when professors were the focus of a reality television program. Teaching and entertainment have some parallels, but they are not the same thing.

As reported by the Associated Press, Reuters and two articles in today’s New York Times, the FCC’s auction for the 700 mHz spectrum has ended. The auction started in January, as I discussed in my 30 January 2008 article. The winners bid a combined total of US$19.59 billion.

The FCC is not dumb - buyers must pay in full. Their names will be released within the next 10 days.

Many other blogs are discussing this topic, including VentureBeat, CrunchGear, DailyWireless and PhoneScoop.

One strategy that telecommunications companies have adopted is bundling, or selling a combination of services at a reduced price. The goal is customer lock-in, a situation in which the buyer is more or less trapped in their purchase. In many cases, lock-in happens when the customer satisfices or compromises to gain value or convenience. Customers might grow dissatisfied over time, but they are unlikely to leave because alternative services are not available, or their perceived switching costs are too high.

A variety of US cable television and telecommunication companies have offered bundling programs. The usual items include television service and broadband Internet.

Companies that offer cable modems usually offer these services through the same “pipe” or connection – the coaxial cable drop found in many homes.

Local exchange carriers (LECs) offer POTS (traditional or “plain old telephone service”), and the final connection to the home is the familiar RJ-11 modular phone jack found in most US homes. Some LECs also offer mobile phone plans in their bundles.

Landline connections may be offered through VoIP or POTS, depending upon the carrier’s technology.

Agonizing over savings

Alina Tugend of the New York Times provided a great example of this decision-making process in her article last week. Customers sometimes obsess over lock-in when their friends brag about how much they saved by switching. Yes, lock-in also works well for insurance companies, too!

In Honolulu, Oceanic Time Warner, Clearwire and Hawaiian Telcom each offer bundles. Oceanic has a standard cable television package that includes cable modem service, long distance calling and VoIP calling plans. Oceanic staff can connect the customer’s RJ-11 telephone jacks to the company’s network, so customers can continue to use their existing landline handsets and equipment.

Clearwire offers broadband Internet service, long distance calling and VoIP telephone numbers through its WiMax network. Customers can hook their landline phone into Clearwire’s modem. The Clearwire service does not require an installation visit, but the coverage areas are somewhat limited. This article at DailyWireless.org has several interesting diagrams of business telephone systems.

Hawaiian Telcom keeps struggling

The HawTel package includes a POTS landline, long distance calling and DSL. HawTel is still working on its IPTV offering, which has been delayed by implementation problems. IPTV would let HawTel offer television service through the same RJ-11 telephone drop used by its landline and DSL offerings.

As a side note, I hated HawTel’s obnoxious “Savers Unite” advertising campaign, and am glad that it has been replaced. Was the tagline a call to action or an insult? It was hard for me to tell. The radio and television ads reinforced a stereotype of the “thrifty local” who clips coupons, hoards travel-size toiletries and wears old clothes to pay the “price of paradise”. Then again, telecom marketing campaigns usually strive for the “common touch”, in an effort to hold the average customer.

Telecom bundles are subject to a host of Federal, state and local regulations. Pricing is often controlled by government agencies and franchise agreements. On 18 August 2007, I discussed HawTel’s naked DSL option, which let consumers order DSL service without a voice landline. HawTel was late to act, as thousands of subscribers adopted mobile phones and dropped their landlines. These customers switched to Oceanic, Clearwire, or other broadband Internet services.

Customer lock-in is difficult to achieve when companies fail to implement their industries’ key success factors well. On 16 November 2006, I discussed HawTel’s billing problems after the company was purchased from Verizon. Mike Ruley never overcame these earlier issues and lost his post as HawTel’s CEO earlier this month, as I mentioned on 5 February 2008.