A Missive to Telcos on DVRs

Todd Chanko | February 02, 2007, 09:14 AM

What’s a telco to do? Pay TV is a mature market, with limited upside in subscriber growth. Content providers have zero incentive to provide any meaningful exclusivity, so telcos can’t distinguish their content offerings significantly. Price and bundles may motivate some subscribers to leave their incumbent providers but not nearly enough to transform telcos into Pay TV providers-of-choice. So Verizon & ATT need to focus on features that improve functionality for subscribers and reduce costs.

Reduce costs? While adding features? How is this possible?

Enter NDS. Majority owned by News Corporation, this leading provider of conditional access, middleware and DVRs is introducing DVRs that have no hard drive. We’re not talking about Network PVRs – that’s so 2006 – but rather a “Distributed DVR” which leverages disk space on a subscriber’s network. NDS recently acquired Jungo, which supplies Residential Gateway software that seeks suitable external hard disk space for DVR TV storage. Consumers can add as much storage as they like without waiting for the latest set top box upgrade, while the Pay TV provider would pay less than it would for a conventional DVR. Perhaps telcos could make a bold move: boost subscriber acquisitions by passing these savings on to consumers, either by reducing DVR subscription fees or, as DISH is doing right now, abandoning them all together. Such a tactic would translate into larger SAC but telcos’ sub numbers might really perk up.

Of course, a “Distributed DVR” essentially shifts the burden of storage cost onto the consumer – which could conceivably depress demand for a device already facing challenges in consumer adoption. Will average consumers really be induced to explore the arcane world of gigabytes and research how to supplement the storage they already have? Do most consumers even know how large their hard drive is – or what that means in terms of hours of TV content storage potential?

Even more provocative, though, is ShareTV, NDS’ P2P solution that allows subscribers to share content with other subscribers. Unlike copyright issues posed by an operator’s storing content on a network PVR – such as Cablevision faced regarding a proposed deployment of Arroyo’s technology last year – ShareTV’s solution may encounter fewer legal objections. It should be noted that content would remain encrypted and could only be viewed from the DVR. “Desperate Housewives” so obtained could never make its way to Kazaa. So telcos can promote DVR features that accommodate subscriber’s over-subscribed lives – without worrying ABC, et al.

Moreover, since the providers would manage the exchange of programming so recorded, they can provide measurement of which programs are downloaded and shared. This would a new dimension to non-TiVo DVRs, providing additional insights into users’ DVR behaviors and which shows are being recorded and traded.

A boon for advertisers and providers alike.