Just weeks after the FCC adopted new Net Neutrality rules, those rules could soon face their first test. The Wall Street Journal reports today that several content providers planning new subscription video streaming offerings have talked to major broadband providers about having their streaming services treated as “managed services.” Content providers involved in the talks include HBO, Showtime and Sony, according to the article, which quotes unnamed sources.
According to the WSJ, the content providers want to avoid Internet congestion and make their services exempt from monthly data-usage caps. Broadband providers likely would not charge the content providers for the managed service but instead might be able to package web-TV services with broadband plans or get a cut of web-TV subscription revenue. Alternatively broadband providers might view such agreements as simply a means of getting consumers to sign up for higher-speed data plans.
Internet Fast Lanes
What the content providers are asking for sounds a lot like the Internet fast lanes that Net Neutrality rules were established to prevent. And even if the broadband providers avoid charging for prioritization but instead monetize the service in some other manner such as getting a cut of video revenues, it would appear that the providers could run afoul of Net Neutrality rules, which prevent favoring some Internet traffic over other Internet traffic in exchange for consideration.
At least one financial analyst firm specializing in telecom believes it might be possible for content and broadband providers to come to some sort of agreement that would appease the FCC, however. Net Neutrality rules don’t apply to non-broadband Internet access “specialized services” such as cable voice and U-verse video, noted Bernstein Research analysts in a March 16 research note. The researchers added, however, that the FCC pledged to “vigorously monitor” such services to make sure they aren’t used to undermine Net Neutrality rules.
The question, then, could boil down to whether or not a broadband provider delivering HBO or another video streaming subscription service is akin to AT&T offering its own U-verse service. Could AT&T not simply argue that it is adding the streaming options from HBO, Sony or whomever to its U-verse lineup?
The WSJ author also raises another issue that could play a role in the success of what the content and broadband providers are exploring. According to the WSJ’s sources, Comcast told the content providers that it wasn’t willing to do anything for any individual content provider that it couldn’t offer to every other company. But if a broadband provider’s access line capacity tops out at 25 Mbps, for example, can the provider reasonably offer a fast lane to all comers?
Where Were They Before?
Broadband providers likely are wishing that interest in fast lanes on the part of companies like Sony, HBO and Showtime had been made public prior to the Net Neutrality ruling. With only companies like Netflix and Etsy speaking out, it may have appeared that no content providers wanted a fast lane. But companies like HBO and Showtime may have kept quiet because they believed that stronger Net Neutrality rules would enable them to negotiate better deals with broadband providers.
Will it be a case of “Be careful what you wish for?” Or will industry players find a satisfactory middle ground?
I’d like to hear what readers think.
From a very small ISP and IPTV provider business perspective:
We'd heard anecdotal reports from an ISP in a neighboring rural state that Netflix was over 50% of their ISP backhaul content – 4 years ago.
If an online content provider is causing our backhaul pipe to peak out and cause us to purchase more wholesale broadband for backhaul, "someone" will pay for it. So the question is whether it should be customers, or the online content provider such as a Netflix.
Seems to me that consumers lost out when the FCC voted for Net Neutrality because the FCC made it more difficult for an ISP to try and charge a content provider. And so naturally then the burden shifts to the consumer who ultimately pays for it anyway – either through ISP rates or content provider subscription rates.
Maybe profit-sharing with an online content provider might work, but I envision the small rural ISPs losing out again because we are insignificant to them because of our small size…similar to small IPTV providers paying much higher rates for content than a satellite provider pays for content.
Spot on mikeyb. Everything gets pushed down to the end customer and then they complain to us. I guess it does really roll down hill!