Have you been following the political battle on “net neutrality?” This is the legislative battle in Congress over whether or not to force broadband Internet service providers to provide equal quality for any service, no matter how much bandwidth it hogs or how much (or little...indeed, typically now nothing) it pays the ISP.
Telcos and cable operators are somewhat unusually on the same side here, and are mostly allied with Republicans in arguing that no laws are needed, and that ISPs should be free to charge content providers for a little QoS. Hollywood is somewhat oddly aligned with Silicon Valley and TV broadcasters, and with the Democrats, in arguing for protection.
If you have been following this battle, you’re probably on the side of “we need a law.” I know I was, as a knee-jerk supporter of the video content business and the little guy. I certainly wouldn’t want my ISP, Verizon, to exact tribute from anybody who wanted to supply me video over the net. This would probably be a tax on my Google or YouTube usage—payable in more ads or even someday a subscription fee—and a tax that Joe’s Video Webpage couldn’t afford, thus rendering Joe’s page too darn slow and putting him out of business.
But then I interviewed KyLin TV CEO Nancy Li for our Advanced Media Report back in June. She said, “The question to the broadband providers is, ‘What are you guys going to do with 30Mbits to the home?’ They want consumers to buy that service.”
In other words, it’s one thing to get consumers to step up to a megabit or so of network connectivity for better Googling and news reading. It’s quite another to try to sell people real broadband without video they will want to watch. And people don’t need broadband for the TV channels they already get, or those that Verizon and other new cable competitors want to provide them over cable-like dedicated channels. They need broadband for the “long tail”: for the gazillion-and-one shows that millions of Web pages put up—or that are available on file-sharing sites—that each appeal only to a few viewers (think of it as “singlecasting,” a term coined by Nigel Spratling).
For Verizon to try to charge Chinese ethnic video service KyLin TV a QoS fee would go against its own interests in attracting subscribers.
Even more powerful a refutation of the need for net neutrality than Li’s words was the presence at her side of a major KyLin TV investor by the name of Charles Dolan. He controls the other broadband ISP available to me, should I get ticked off by problems with Verizon. It’s called Cablevision Systems. He also founded HBO, among other ventures. He knows a thing or two about how content attracts viewers to cable operations. He’s not worried about KyLin having to pay tribute to Cablevision, which implies he doesn’t think Cablevision will be able to exact tribute from anybody else, either.
So, Democrat that I am (I live in a big blue city, readers, with no other way to vote on Primary Day), I’m inclined pretty Republican—and putatively anti-content industry—on this one. Google and Yahoo and Microsoft and Amazon have enough power to tell Verizon and Cablevision where to stick any QoS fees they want to impose, and even KyLin TV can probably instruct its subs—all 5,000 of them, so far, throughout all of North America—to switch from Verizon to Cablevision if Verizon tries to hit it up for carriage fees. Joe’s Video is, therefore, pretty safe.
So what’s the fight about? Could Hollywood and broadcasters possibly not understand the business they’re in, and be wasting scads of legal and lobbying (also mostly lawyers) fees fighting this? Yup, they’ve been equally misguided in most of their thinking about their future in a world of Internet distribution.
But could Microsoft and Google and other tech powers be so misguided, too? Nah, those guys are smarter. From the tech powers’ point of view—as from the telecoms’ and cable operators’—net neutrality is all about voice.
Or about VoIP (voice over IP).
I make a lot of international calls. Almost every time I do, the guy on the other side of the line says something like, “Can we do this call on Skype instead?” because Skype freeloads over the broadband connection, and is thus free (or almost free) to users, versus, for example, the horrendously high 10¢ a minute I pay Verizon to call Germany. I remember when that was a dollar or more, in the days when a dollar bought you lunch, and you had to schedule calls way in advance to reserve a circuit. So 10¢ doesn’t seem like a lot to me, and Verizon sounds a little better than Skype and it doesn’t share files on my PC, putting confidential information potentially at risk. But my interlocutors keep asking about Skype, and sooner or later, even an old AT&T (and I mean the old old AT&T) worker like me is going to use it.
Verizon knows that people even use it for rapidly increasing percentages of domestic calling. Verizon knows it will lose its dominant position, in its region, in voice traffic in a few years, and so do all the other phone companies. That’s why they want to charge eBay (owner of Skype) and Microsoft (which plans to build VOIP into Microsoft Office and Windows Messenger) and AOL (ditto in AOL Instant Messenger) and News Corp. in its MySpace messaging and Yahoo in its messaging, and on and on, for what they see as using their network to compete with their core business.
After all, telecoms have charged each other from time immemorial for picking up and delivering each other’s calls, and for providing quality of service for those calls. These are called “peering” agreements, when they are between telcos, and “service level” agreements, when they are between telcos and customers. And guess what? Such agreements are actually now in force for Internet carriage. Verizon has a peering agreement with Cablevision Systems, for example. If traffic comes out of Cablevision’s OptOnline service (or, more likely, out of a network origination center owned by a company like Level 3 that contracts with Cablevision to serve high-volume traffic), and is demanded by a consumer using Verizon Online, it doesn’t get from Cablevision or Level 3 to Verizon over the public Internet backbone. It goes directly, and more swiftly, between the two ISPs over a very thick pipe. On the other hand, if I as a Verizon subscriber pull down voice or video from some Burmese or Afghani server, it goes to Verizon over a public, skinny pipe. Should the Burmese server and (Level 3 working for) Cablevision get equal access to Verizon, so I get each form of traffic equally rapidly? Of course! And I don’t want to pay extra for it! And there should be an eight-lane highway taking me directly to my cabin in the mountains, so I never have to slow down for the Sussex County Fair on a two-lane road. But somehow, Sussex County never got around to paying for that highway.
Net neutrality is about voice rather than video because you don’t need 30 Mbps—or even 3 Mbps—to get a good VOIP connection. You need broadband for rapid delivery of video. You need attractive video services on the Internet (the most attractive of all, to many, is of course illegal file sharing) to persuade you to subscribe to bigger broadband. And Verizon and Cablevision need you to subscribe to bigger broadband to make an extra $30 or so a month from you.
To get a good VoIP connection, in contrast, Verizon’s cheapie ($14.95/month) 768 kbps service is enough. That and prioritization of traffic. Nobody’s going to pay them more per month just for VoIP, because double or 20 times the bandwidth won’t increase call quality. Verizon knows what kind of prioritization techniques increase call quality. And so do eBay/Skype and Microsoft and Vonage et al.
Do these voice-centric issues have something to do with video? Sure. MySpace and Amazon and Google seem to be models for what TV channels may turn into in a decade or so, and Microsoft may get there, too. And they all are not only either already doing VoIP or thinking about it, they are also wrapping VoIP in with their other services, which will include increasing video. Kids will voice-chat with each other over videos they’ve put on their MySpace pages, just as they IM each other now.
Does this hurt Joe’s Video if Verizon and Cablevision get a piece of that chat action? No, because Joe probably will never make money on chat—you need a substantial network to link conversations, so that will always be a big-player business. Verizon and Cablevision attempting to charge for prioritized voice traffic only hurts AOL or News Corp. or Microsoft or Yahoo: the chat systems providers. But, as mentioned above, those guys can bargain pretty strongly with Cablevision and Verizon, just as HBO or MTV or NBC bargains with those same delivery service companies. Seems fair to me, but then so does 10¢ a minute to Germany.
Neal Weinstock is editor-in-chief of Weinstock Media Analysis and can be reached through www.weinstockmedia.com.
