Two industries find themselves in different directions after yesterday’s election. The Internet/tech industry is on the way up. The big content companies are at a crossroads, stuck in neutral while being buffeted by lots of competing forces.
The Internet/tech industry won two important votes on Tuesday. The election of Barak Obama puts into play an ambitious and progressive technology policy agenda that starts off with “protect the openness of the Internet.” The platform is perfectly clear: “A key reason the Internet has been such a success is because it is the most open network in history. It needs to stay that way. Barack Obama strongly supports the principle of network neutrality to preserve the benefits of open competition on the Internet.”
The Obama/Biden plan also includes a goal of leading the world in broadband deployment through use of the Universal Service Fund, tax and loan incentives. There is also the much-discussed promise to appoint a Chief Technology Officer for the government. It’s uncertain at this point what the job will entail, but it’s a good bet that the Internet/tech sector will have some say in how it’s shaped. That job may be one of the toughest in the Administration, herding all the federal agency “cats” in the same direction to make their technology more uniform.
Tech Agenda Fits With Obama’s
From top to bottom, the Obama/Biden plan has just about everything the tech/Internet industry could ask for. And now they have some political muscle to try to make it happen. Did we mention that Google Chairman Eric Schmidt appeared in Obama’s successful infomercial? That kind of visible support speaks volumes, overshadowing even Vint Cerf’s endorsement of Obama.
Coincidentally, earlier on Election Day, the Federal Communications Commission (FCC) gave the tech/Internet industry (along with its public-interest allies) another significant victory. The Commission overrode the protests of the broadcasting industry, Broadway, the National Football League and Dolly Parton to allow parts of the public’s airwaves that exist between TV channels to be used for unlicensed purposes. These “white spaces” are not used, but the broadcasters put up their normal fuss about interference, as did the theatre and other interests, who were concerned that devices in the white spaces might interfere with wireless microphones, many of which operate illegally.
Google, Microsoft, Dell, Motorola and the Information Technology Industry Council led the business side of the campaign. Significantly, groups like Public Knowledge, Free Press and the Media Access Project were major contributors in an effort that brought together a diverse group of supporters into an alliance to push for a platform for new services and choices for consumers.
Beating the broadcasters in a spectrum issue is always a big deal, because most of what the National Association of Broadcasters (NAB) does is defend spectrum against perceived interlopers. Make no mistake – simply because the FCC has decided something doesn’t mean it’s the end of the battle. The NAB will push for further administrative proceedings, probably a court challenge and some flak from Capitol Hill. On the other hand, the momentum is with the tech side, with the FCC’s decision in its pocket and an Administration committed to advancing a comprehensive agenda.
Big Media Is Fighting the Tide
Then there is the predicament of the big media companies. Hollywood is at a crossroads in the policy world as it decides how to leverage its usual influence within a Democratic Administration. In one direction is the traditional path of taking the offensive on perceived copyright wrongs. Hollywood will always push for tougher and tougher laws and usually gets what it wants. The Obama Administration will appoint an Intellectual Property “czar” as authorized by the Pro-IP bill earlier this year, and the chances are good that Hollywood will have a big voice in who gets picked.
But all of that activity is dedicated to preserving what they already have. It’s consolidating and playing defense. The alternative path is to try to look toward the future of the industry, and they aren’t doing that very well at all.
Dan Glickman, the president of the Motion Picture Association of America (MPAA), earlier this year came out squarely against Net Neutrality. He called it “regulating the Internet.” This is not “regulating the Internet.” It is restoring the principle of non-discrimination to the telecommunications network. Obama clearly sees the need to preserve that principle, and he’s got the backing of those who agree. The MPAA is on the other side of the argument now, going up against the resurgent Internet/tech industry and public interest groups.
Hollywood’s other major initiative is to search for copyrighted material online by having AT&T and other willing Internet Service Providers peek at everyone’s data packets. Perhaps MPAA should take a look at this part of the Obama platform: “Safeguard our Right to Privacy: The open information platforms of the 21st century can also tempt institutions to violate the privacy of citizens. As president, Barack Obama will strengthen privacy protections for the digital age and will harness the power of technology to hold government and business accountable for violations of personal privacy.”
So far, Hollywood has come out against an open, non-discriminatory Internet while favoring allowing telephone and cable companies to violate everyone’s privacy by searching for copyrighted content online. Neither of those policies is going to help the movie industry expand its audience or meet the demands of movie-goers. (Note: this applies to the big companies. Independent filmmakers have figured out they need an open Internet to survive.)
AT&T Sabotaging MPAA?
Ah, but Hollywood’s partners in crime have other ideas. AT&T recently announced it started a “trial” of bandwidth caps with its customers in Reno on Nov. 1. New customers will have a cap ranging from 20 GB per month to 150 GB per month, depending on the level of service to which they subscribe, while existing customer will have the 150 GB cap. Customers will be charged $1 for every GB over their allotment, and will get a warning when they approach the limit.
Those caps cause quite the dilemma for the big media companies. There’s every bit of evidence that consumers like the flexibility of watching movies and catching up on TV online. For example, in only a few months, Hulu, owned by NBC and Fox, has emerged as the sixth-largest video site, breaking the 105-million play stream in July, and serving 142 million in September, according to the Nielsen VideoCensus ratings. This is a site that has only been open to the public for business since March this year. Obviously, there is a market for high-quality, commercial entertainment video that can be monetized with ads and which has the capacity to screw up even more the TV ratings system. Netflix allows customers to stream movies, as does Amazon, Vuze, and dozens of other sites.
The question in the next few months is how many Americans are going to get to enjoy this new video source – and other video they may create. That’s because prior to AT&T making its announcement, Time Warner cable, and Comcast said they would implement bandwidth caps and another provider, Frontier Communications, said it might do so as well.
What, pray tell, will be the effect of these caps on the ability of movie companies to push their video to the Web? Comcast’s 250 GB cap won’t do anything to squelch video use in the near future, but only if the cap remains high and the data complexity of the video doesn’t increase appreciably. With the others, it’s not so certain. Let’s just say it probably won’t be helpful.
If the big media companies were smart, they would engage in telecommunications policy in a different way than they are now. They would back off of their opposition to Net Neutrality, ditch their alliance with AT&T. Instead, they would push for policies that would increase broadband deployment while increasing consumer choice. Those policies would help everyone, including big media. It would be nice, but we’re not counting on it.
Unfortunately, the “net
Unfortunately, the “net neutrality” activists’ agenda goes far beyond “protecting the openness” of the Internet. (That openness is not under any threat, nor has it ever been.) Nor does it mean protecting against “discrimination” (which, again, has never occurred.) It amounts to extremely heavy regulation of the Internet and Internet service providers. It will kill competition, increase prices to consumers, and degrade the quality of service that users receive. Under this regime, ISPs could not stop spam. They could not stop bandwidth hogging. They could not prioritize VoIP to make sure that calls were clear. They couldn’t shape traffic so as to conserve bandwidth, and therefore would have to raise prices.
Traffic caps (they’re not, as the piece above erroneously claims, “bandwidth caps”) are a last ditch resort by providers to avoid having to meter connections by the bit, raise prices, or both.
ISP, thanks for your
ISP, thanks for your comments. However, as a person who defends ISPs, you might want to bone-up a little on some telecom history or reread the news over the past few months. ISPs have said they intend to discriminate and some have indeed discriminated:
Comcast indeed blocked / degraded users of bittorrent swarms and were slapped down by the FCC, and have now disclosed their actions and plans to manage their network.
Madison River: The FCC Fined a local ISP $15,000 for blocking VoIP provider Vonage (see footnote 21 on here)
Former CEO of AT&T Ed Whiteacre said of his intentions to create new revenue streams based on discrimination: “What (Internet companies) would like to do is use my pipes for free, but I ain’t going to let them do that.”
VP at Verizon John Thorn along the same lines as Whiteacre said: “The network builders are spending a fortune constructing and maintaining the networks that Google intends to ride on with nothing but cheap servers…It is enjoying a free lunch that should, by any rational account, be the lunch of the facilities providers.”
We cite other examples in our paper, Principles for an Open Broadband Future.
The network management argument is a red herring. As the FCC’s most recent actions and Comcast’s responses have shown, ISPs can manage their networks to combat against viruses, spam, and short term traffic congestion without having to block services and applications—especially ones that compete with services from which the ISP derives revenue. I believe everything PK has written on this topic says that reasonable network management is ok, but discrimination is not.
And I believe it’s right to shine a light on the bandwidth caps as another form of discrimination. If bandwidth caps had a more direct impact on short-term traffic congestion, we might be alright with calling them “traffic caps,” but they really don’t directly address short term scarcity of bandwidth. They may cause people to use less bandwidth in the long term or on a monthly basis, but bandwidth caps won’t likely make a dent in the temporary traffic congestion when a number of people in a locale are all Bittorrenting the latest WoW update. What’s more likely is that users of online video services, which compete with an increasing number of ISPs’ services, will be afraid to use the online services because of the bandwidth caps. ISPs’ move to set monthly bandwidth caps will hurt providers of video streams and downloads, especially HD video, while at the same time reserving bandwidth for ISPs’ own video delivery. This is especially true for ISPs like AT&T who’s video service shares the same “tube” as the Internet service, and now they’re testing caps.
If competition in broadband
If competition in broadband is to be encouraged, you can submit comments on two major policy initiatives before the government now.
First, it’s rumored that Verizon may feel compelled to sell most of the Alltel licenses it must divest, to AT&T. AT&T is likely to have the deep pockets that will produce the highest bids, which Verizon must accept. This is just going to result in a cellular duopoly of huge nationwide companies, which is particularly powerful in rural areas. That’s bad news for consumers. Cellular spectrum is very good for signal propagation, so the identity of the two cellular companies in each area is important to healthy market competition.
A duopoly can be almost as bad as a monopoly, resulting in higher prices, lower quality of service and fewer service offerings (including future broadband services). Here’s a great reminder from history, written by an erstwhile head of the Antitrust Division at the Department of Justice: http://www.usdoj.gov/atr/public/testimony/0460.htm If you hear me about the problems of duopoly, you can take action: submit comments on the Verizon/Alltel merger proceeding at the Department of Justice (instructions are in Part V of this statement: http://www.usdoj.gov/atr/cases/f238900/238947.htm ), or in public forums or media, encourage Verizon to sell its licenses to small and regional companies that are less likely than enormous AT&T to unify with Verizon to deny services or pricing to device makers. If there are a healthy number of buyers of Alltel’s licenses, across various geographic regions, there will be more competitive broadband options, than if Verizon sells most or all of the Alltel rural cellular to AT&T.
A second note is that the FCC just opened a proceeding for comments on various reverse-auction proposals that are designed to immediately or gradually stop providing universal service support for competitive services (read: CLECs and wireless). This means incumbent wireline providers will be the only ones getting funding for rural broadband. Wireless broadband deployment will slow or stop. Talk about rolling back competition!
Your readers, particularly customers who are hoping to receive rural broadband, might want to call their Senators or the media. The new FCC items seem to be on a fast track. If there’s going to be fair competition, the FCC should not adopt rules that would result in funding for rural broadband only for one company: the incumbent landline in each area.