Transcripts For CSPAN FCC Chair Tom Wheeler On Net Neutralit

CSPAN FCC Chair Tom Wheeler On Net Neutrality May 10, 2014

I know ive talked many times about consolidation in the industry. Time warner cable and comcast only heard yesterday comcast will be offloading almost 4 million to charter. Is are you a buyer or a seller here . You dont waste time, do you . I will tell you if i am a buyer or seller. Are you actively looking . We are always looking for acquisitions that are strategic and add value to the company. It is a unique time in the business. There is a lot of consolidation. There is a lot of geometric changes in technology that is causing some shifts. Interest rates are a relatively alltime lows. It is a great time to buy. We kiss a lot of frogs before we find the right prince. Outside of internet consolidation, in my view, are in the big threats really coming from down the pipe with google . Those are really the big threats right now. There are several threats to the business. We have a programming cost structure that is growing at doubledigit rates per customer. That is not sustainable. There is emerging competition from a number of companies that seem intent on getting into this crazy video business. , there is aed significant geometric change and new technology. Those are the three risks. We are trying to navigate through them. Very videonk this centric view of the world that causes people to think of over the top providers exclusively as threats, and i have a somewhat counterintuitive view in that clearly overthetop video is one of the things that highlights the value of the highspeed data connections that Time Warner Cable and other Cable Providers offer our customers. So, the speeds, the robustness of our hd offering is made special by the fact that there is creative people delivering that content over the pipes. On the video side, there is the potential for competition, which is not bad. It drives us to be better than we were, but there is more that makes our offering more value. I would echo that. Clearly, social and video platforms are competing for dollars, advertising but we have a better product than they do, and when you hear yahoo announced they want to Commission Comedy series, they want to get into our business. Yes, they are competitive, but shame on us if we do not affect our turf and Work Together to sell the value because we have a better product with more value that is cheaper on a per hour basis with those companies and we are allowing them, in some ways, to accept the tone of the set the tone of the conversation. We should be setting the tone. We have the better project. It is easy for you to say that. You have a great job. You program sports, second of all, live sports. You are sitting pretty these days. I appreciate that. I do find that many people would like to have my job, and almost all of those people are willing to tell me what i could be doing better as well. [laughter] there is no question we sit in a certain catbird seat. Live sports is ascendant, and it is the most powerful form of programming on the planet. Again, it is part of what we all do together. I make the same point. We need to be selling that. We have tried to use that to buttress the underlying power of this product to compete against those companies, and i think we need to continue to do that. Even beyond line live sport, if you are in programmatic services, and nancy is in, and turner, the explosion of speed is dramatically increasing distribution. Us,cost Companies Like it is fantastic. I think it will explode demand, and it will provide us opportunities to get products and services to more people in more ways, in ways that they want to consume them, which we think will cement the Value Proposition of content. Yeah. We do have a great offering today. I think all of the companies here are in incumbent skill positions to exploit those opportunities, and i think it is great for consumers. I think they are the ones that will win in all of this. One senior Media Executive had said to me one time, and i am quoting him because i do not want to offend anyone on this look,but he said netflix is a perfect poster child of the failure of the cable industry to innovate. What do you say to that . I am highly skeptical of that comment. I am not sure that i get it. The fact that someone cap with an interesting technique of aggregating and reselling other peoples content over the cable infrastructure is in no way, in my opinion, a failure of the cable industry. You are seeing consumers use both. That is missing here. We would all like to be in a business where we do not have to report our numbers, two, so you are dealing with a netflix and amazon that is not sharing their viewership. Anecdotally, there is a lot you are hearing a lot less about house of cards season two than season one. How do you work to renegotiate future seasons if nobody has metrics to base anything on . When you have a sony, to you and say look at our platform, look at what we can do with your content, what do you say . Everyone has heard the pitch. They probably saw it last year at the cable show. It is a beautifullooking platform. I do wish that our Cable Partners would take a closer look at how do we make the Consumer Experience better and better. That is where the partnership between, i think, the programmers and the operators, needs to be solidified. Lets get out of the way of the negotiations, and in front of, you know, putting the consumer first, and putting the experience first, or a lot of competitors and Technology Companies will pass us by. Can i take a different view . I do not know who mentioned that about netflix as a failure of the cable industry. Are you trying to get me to name names . I am the gray hair on the panel, literally and figuratively, and what i remember is netflix would not even exist if it were not for the cable industry that developed the dialogue internet dialup internet to the cable system with the fastest speed than most capacity. So, there are a lot of companies that are in existence simply because we as an industry spent a lot of time in Capital Building the internet is this. They are actually existing on the infrastructure that you built, and on the content that we produce. It is ok. Competition is not a bad thing. We have to do is respond, and figure out ways to innovate. I agree with nancy. One of the things were doing that is important is figure out how to make authenticated television work, and allow people to get their content on every device in an easy mechanism because we could compete there. We have superior content. We have to have superior Delivery Systems to distribute the material error i have to amplify that one point material. I have to amplify that one point if there is a call to action in this convention or gathering, i think it is this for programmers and should bidders to Work Together to continually improve the Consumer Experience consumers to Work Together to continually improve the consumer expense. Authentic content is a barrier to usage, and if you polled the majority of the people sitting in the audience, and asked them what is the username and theword given to them by platform provider, the overwhelming majority of you all in the industry probably do not know i have three homes with three Cable Providers and i do not know anywhere any of them, so i do not have television everywhere because i cannot figure out how to use it. We have to make it easy, consistent, and the idea of dramatically improving the availability and robustness of videoondemand is the single biggest opportunity that we, together, can create, which would create value for the district understand the programmers. The consumers wanted. In one short year of our tv offered,e app being they have been downloaded more than 11 million times, but the is not great, and that means it is too difficult to do. 2010 world cup, one out of every three hours of viewing was on a device outside of additional television. That was 2010. We are getting ready to the world cup in june, and my guess is it will be north of that. What is the biggest challenge for you, john, when you see that . The Biggest Challenges i to committed by john martin here, we need an easier process of authentication. The people in Silicon Valley, they do this by simplification. Once they have something, they can sniff it out and deliver you the content. I could give you that have perspective, for our part we are making Great Strides , available on a platforms, and the most recently we announced on fantv. Smarton android, samsung tvs. The video offering is available everywhere. Usage has been impressive and growing quickly. Ofgree that the process authentication used to be easier, but the early returns are quite good when you think about the fact that this way of viewing video did not even exist several years ago. The fact that last month we had one million unique users accessing our video product via something other than a set top box is significant. Rob, when you hear the programmers say there is more than just authentication as an issue, but lets say you take that one issue as a cable industry. The operators are working on that, and as john martin says, working together, but you have Silicon Valley and the Tech Companies figuring out in that time, in the space of a few months, they are able to figure out yes, but without content, the Tech Companies are just building platforms. They can build away most Tech Companies are creating content too, now. We like the dual model, a dual revenue stream, and do not want to go away. By the way, it is not either or. I do the opportunity to collaborate with that Tech Companies as being part of the openness that time warner has demonstrated had the factor we are making video available on devices and unit user notrfaces that we do control is something that gives customers more choice. This contentng up providers versus Cable Providers is a false split. About provide a better customer experience. Look, our customers are going to go to a netflix and two others, and we want to make it easy for our customers because we want to be the provider of choice because as rob indicated, the more and more content that you view online, the more youre going to want to come to the cable, highspeed service, because it is the best out there. So, john skipper, when a line rob and jerry. G doubting them . Gouging. I do not doubt the more gouge them. That got some applauses. Is to createhe job value and work with distributors to sell their products in the market, and theres no question we greater the product with the most value, and it is the most expensive product in the market to create and to sell, and nobody doubted. Ofry year they do a survey what is the most valuable network, and it is always espn. We worked very hard with our partners, with you guys to create value. We were the first in the market with authentication. We were the first in the market with an hd channel. We were the first in the market with a 3d channel. We are open for business to do things that create value, and i do not think there is any doubt that in this market that the single greatest buttress her of the buttress of the pay espn. S i hear this a lot. I am respectful of you asking the question, but we need to be working together because we are providing something of great value that people want. There is another canard in the market, the notion that only a few people are watching sports and other people are paying for product they do not watch. 150 Million People consume espn every week. 86 of people do consume espn in a corner. It is not the case, no matter how may times barry diller says it, that a few people are watching sports and a bunch of grandmothers are paying for it. It is not the case. My mother loves it. Theres a grandmother in a house that was a lot of espn. I do not know many people that do not have someone in the household not watching espn. Is a nice rhetorical device, but not effect. Your predecessor has been vocal about the fact that programming costs are getting out of hand. There is no question where a model where your cost of goods sold is growing at a rate that exceeds that the market will bear at retail is problematic for the sustainability of our overall ecosystem. John has his own problem. When he goes to negotiate with teams and leagues and conferences about the next round of licensing deals, he has costs that are also accelerating. So, there is a fundamental problem in the ecosystem. At the end of the day, we have to figure out a Business Model to pay forillingness these elements of content, whether it is john or a distributor, are more responsive to what customers are actually willing to pay. You have a disconnect now which is that for the most part john is not going directly to enduser customers, so he does not have the feedback loop to guide what he is willing to pay for product. We are stuck in the middle. That is a problematic element of the model. We have to figure out how we introduce a greater degree of flexibility that gives us more consumer feedback, that ultimately drives cost profit. Our products are sold at the same rate, so we are making discrete choices about how to make investments to make our networkbranded environment as valuable as possible to each industry bidders as well as consumers. I do not want to be cavalier, but rob is right. There is pressure on prices. It is a 70 billion business, and we are making money, but since all of us have pressure to grow, were not going to all grow and make more money, unless we can figure out a way, which is why i was advocating we have sub becausepaytv if you have a stagnant market, we will have pressure, and we will find we are discussing who is getting a larger or smaller share. There was not this discussion when there was a growing pie, going from 70 million households with paytv, 280 million, two 90 million. We have to find a way to grow the pie. We are always following the trap of focusing on this are cost problem, which is a real , but it is a list important to all of us to tout the value that we deliver to the customer every day. It depends on the calculation, but it is not unreasonable to assume that roughly that we essentially charge customers . 20 an hour of video viewing. That is a staggeringly good value by any measure, and sometimes you said . 20 an hour. . 20 a viewing hour, which i think is well worth the price of admission, and very often in the context of these conversations, what we do have to grapple with a programming cost issue, we loose track of the fact that we are still delivering tremendous value. Are consumers at a breaking point . There are some segments of the population where affordability is a real issue. Yes. We have to figure out ways to design products that accommodate the more budgetconscious customers. We have light video, light hd products that are designed to not necessarily deliver all of the capabilities of the full products, but that meet certain customers budgetary needs, and it is essential that we be able to do that. I am concerned that were going to reach a Tipping Point where we are going to start pricing some households, ethically those with distressed Household Incomes, out of the market particularly those with distressed Household Incomes out of the market. We need to have the flexibility, working with program partners, to be able to offer less expensive tears. a la cart pricing . Not necessarily a la cart, because i do not know how you do that. And what they say here are 300 channels, go through each one and tell me if you want it or not . But more affordable types of packages what people have more choice rather than putting everything in an expanded basic until. Unless we do that, one of three things is going to happen. Cable operators are going to have to continue to raise prices, which is not consumerfriendly. The government is going to get involved, like they are in canada. They are starting to take steps to doing mandated a la carte. Or, operators are going to have to make tough decisions about what programmers i am going to carry, and which ones am i not going to carry. Some consumers are given a la carte already through netflix, amazon it might not be a la carte in the way we thought it could arrive, but the customers have choice, and they are still overwhelmingly choosing cable. Because they want to watch espn. [laughter] channel, or cnn, or tbs, but i hear a lot of talk about it what would create the action with the entire industry starts to pull trend that way . As some operators this discovered they will not carry certain programmers because it is too expensive, or we continue to see prices rise and some people start disconnecting from cable altogether. That will put a lot of pressure on all of us if we hit that point. Speaking about programs and content, i want to ask programmers, clearly, you are looking for the big hit shows. Youre looking for the next big duck dynasty, right, or the next big show on cnn. How do you find that . Is it getting harder to find that . Absolutely. The demand for content has never been greater, and the competition for creative talent has never been greater. It is probably the most commonly asked question in the turner eoup, and certainly in the a group. There is not a single machine. It is a tastedriven, instinctual art of the business. I think it is about having ipeccable relationships with creators, show runners, directors, writers, and we spent a lot of time in our company focused on that, and we get it wrong a lot, but we get it right more. Those are the odds that we are playing. I worry a lot about where the next generation of creators is going to come from. Why . I look around and i see a lot of smaller Production Companies selling for astronomical prices, and people cashing out, and the is optingof creators to go to youtube, opting to go , different avenues. How do we attract them to our platforms and our storytelling, and our systems . I worry a lot about that. As do we. I think we have an advantage position in that ecosystem, though, because it really is about brands and scale. I think in order to stay relevant, we are going to need to try to find those tastemakers, or those indi

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