Paul Sweeting

[Commentary] While Google has gone quiet on network neutrality it’s making plenty of waves on other aspects of network management. I don’t think the shift in tactics is mere coincidence. Rather, I think Google, Facebook and other large bandwidth users have decided, like Netflix, that their real fight is not over the treatment of their content over the last mile but over how it gets to the last mile.

For all the sturm und drang over fast lanes and slow lanes, from the point of view of Netflix, YouTube and other video streaming services, it’s a bit of a red herring, as is much of the rest of the substantive debate over net neutrality as it has been defined by the FCC. Nobody’s going to pay for a fast lane on the last mile if they also have to pay a toll just to get their bits onto the last mile. So long as ISPs are able to erect those toll booths and manipulate the traffic around them, fast lanes and slow lanes are irrelevant in terms of their potential impact on a video provider’s business.

There’s another, longer-term consideration, however, that I suspect is also behind the shift in emphasis from net neutrality to peering. Charging for peering doesn’t actually make a lot of short-term economic sense for ISPs, since peering reduces costs for everyone.

By establishing the precedent now that major bandwidth hogs, which for the most part just happen to be major video streaming services, should pay for access to their networks they’re hoping to forestall the day when Netflix can demand payment for its content.

[Sweeting is Principal, Concurrent Media Strategies]

[Commentary] Some initial thoughts on the Aereo decision:

1. It seems pretty remarkable, given how Aereo came to be in the first place, that the only mention of the Cablevision remote-DVR case in the court’s 6-3 ruling comes in the dissent.
2. Legal scholar James Grimmelmann told the website Vox “the reasoning of Cablevision is dead.” How long before the broadcasters’ decide to test that proposition by going after cloud DVRs?
3. Bad cases make bad law, and Aereo is a case in point. Notwithstanding its self-conscious pose as a champion of (now martyr to) innovation, there was nothing particularly innovative about what Aereo did or how it did it, apart from the legally innovative workaround to copyright law on which it based its business model.

[Sweeting is Principal, Concurrent Media]

[Commentary] The war of words that erupted between Netflix and Verizon over who was responsible for low quality of service some Netflix subscribers were purportedly experiencing on Verizon FiOS escalated sharply when the telecommunications company sent Netflix a letter threatening legal action if the video company doesn’t cut out the trash-talking.

The likelihood that Verizon would actually follow through on its threat of legal action, in truth, is not very high. The discovery process involved in any sort of litigation would inevitably turn up a lot of laundry that Verizon would not want publicly aired concerning its dealings with various peering partners. Netflix, moreover, would likely welcome the lawsuit. It would give the video provider an opening to counter-sue and possibly give it leverage to renegotiate the terms of the interconnection deal the two companies recently signed on more favorable terms as part of any settlement agreement.

[Sweeting is Principal, Concurrent Media Strategies]

[Commentary] Forget fast lanes and slow lanes. Viacom has headed straight for the off-ramp from Phoenix-based cable operator Cable One’s broadband platform. The MTV and Comedy Central parent confirmed that it is blocking online access to its content by Cable One broadband subscribers as part of a pay-TV carriage dispute with the operator that has led to Viacom channels going dark on the system.

“Cable One has chosen to no longer carry Viacom programming and, as a result, it is no longer available to Cable One customers in any form,” Viacom said.

Fear of fast lanes (FOFL) comes in two primary flavors. Some fear that allowing paid prioritization will enable the biggest content providers -- Netflix, YouTube, the NFL ---- to pay for exclusive fast lanes, relegating everyone else inevitably to slow internet lanes. The other type of FOFL, expressed primarily by large content providers like Netflix and YouTube but echoed by others, is that permitting paid prioritization, particularly if coupled with unregulated peering policies, will leave them vulnerable to extortion by last mile ISPs. That is the essence of Netflix’s complaints about Comcast and Verizon: They shook us down for “interconnection” fees because they could. Given legal cover by the FCC, they fear, the shake downs will only become more common and more onerous. Those two propositions are not quite mutually exclusive. But they strongly suggest we’re not all talking about the same thing when we talk about fast lanes and slow lanes. In the former, it is Netflix we the rest of us need to fear; in the latter, Netflix is imagined to be powerless against ISPs.

But to see the danger of premature rule-setting you need look no further than the broadcast retransmission regime, which, as established by Congress and given full regulatory heft by the FCC. Those rules, as currently written, heavily favor broadcasters over pay-TV provider, leading to absurdly one-sided “negotiations” over retransmission fees that lead to ever-higher prices for consumers. As CBS made plain with its blackout of TWC broadband subscribers, in fact, broadcasters are more than happy to try to stretch their legally sanctified leverage in the pay-TV market into the nominally unregulated online market.

[Sweeting is Principal, Concurrent Media Strategies]

[Commentary] At its core, there is no great mystery (or great strategic vision) behind AT&T’s acquisition of DirecTV. As more services are delivered via IP over broadband networks, previously distinct business such as voice, media delivery, home automation and data, are becoming much less distinct. No matter their industry of origin, service providers of all stripes increasingly are all in the same business (or collection of businesses).

So the real battle has become one simply of subscriber bases and customer lock-in rather than the value or margins of any one service. Eventually, every service provider will be delivering everything to everyone.

The tools for managing and monetizing live-event streaming are getting better and more scalable, at a time when advertisers are increasingly focused on live, DVR-proof programming. Live events are also likely to be critical to the growth of the mobile video business, particularly as more spectrum becomes available after 2015 and technologies like multicasting develop.

Consumers may be wary of paying data charges to watch on-demand content they could watch at other times on non-metered platforms. But for most consumers, live events still need to be watched live, and they’ll pay for the ability to watch them.

[Sweeting is Principal, Concurrent Media Strategies]

[Commentary] Quick, what do Amazon, Netflix, Microsoft, Yahoo, Cogent, Level 3, Google, Facebook and Vonnage all have in common? Among other things, they all pump a lot of data onto last-mile broadband networks and they could all afford to pay for a fast lane, if necessary.

Well, allowing discriminatory network management would be a grave threat to Netflix’s and Google’s bottom lines in any case. For all the hue and cry over the prospect of fast lanes on the Internet for the few and “dirt roads” for the rest, the truth is, no one wants to pay for a fast lane, even if they are able to. It’s bad for business. Regardless of what happens with the vote, however, it’s really the whole net neutrality debate that’s gone off the rails.

As evident from the Netflix, et. al. letter, the debate has devolved into an argument between the big and the bigger over the price of throughput. And Chairman Wheeler has allowed the FCC to get trapped into refereeing among the vested commercial interests rather than promoting and protecting the public interest (more or less the definition of regulatory capture).

It’s hard to see what the public interest is in the rate that Amazon or Netflix is able to negotiate with Comcast for a fast lane. I’ve been skeptical that reclassification is the way to go because it could provoke such a monumental political fight that anything useful happening on the net neutrality front could be delayed for years. But if the only alternative is to limit the public’s interest in the most important communications network of our time to refereeing between Netflix and Comcast, perhaps it’s time to take on the fight.

[Sweeting is Principal, Concurrent Media Strategies]

The first quarter of 2014 was marked by controversies that dragged key elements of the connected-consumer space into the public policy arena -- dangerous and unpredictable territory for any industry. Among the key developments:

• Comcast announced plans to acquire Time Warner Cable for $45 billion, combining the two largest cable MSOs in the country and touching off fierce debate over media ownership, net neutrality, broadband access and antitrust issues just as the MVPD business is poised for further consolidation.
• Federal Communications Commission Chairman Tom Wheeler announced plans to re-impose network neutrality rules after a federal appeals court rejected the agencies previous rules
• A keenly watched court showdown between Pandora and ASCAP ended inconclusively, which is likely to pitch the ongoing debate over music performance rights back to Congress.
• Broadcasters will have their own courtroom showdown over performance licensing with Aereo, but even a win there won’t fully resolve the issue.
• Netflix’s transit and interconnection deal with Comcast thrust Internet peering into the policy spotlight in the first quarter but for now the FCC is keeping its powder dry on the issue.

Live-event streaming is not new. Companies like Ustream and Livestream have been at it since 2007 and major sports leagues have been offering live streaming of out-of-market games for nearly as long.

But at the National Association of Broadcasters (NAB) convention in Las Vegas video streaming service providers were clearly preparing for a major expansion in the breadth and volume of content broadcast over-the-top.

“It’s the fastest growing part of our business,” thePlatform’s senior VP of sales and marketing Marty Roberts told me. “The Super Bowl and the Sochi Olympics were really proofs points for a lot of people. There’s also a lot of interest coming from regional sports networks who want to offer their games online.”

Microsoft’s newly rebranded Azure Media Services (formerly Windows Media Services) also touted its live-streaming capabilties at NAB. Microsoft also announced a series of strategic partnerships with streaming service providers including Ooyala and iStreamPlanet to support its live-streaming push.

Verizon Digital Media Services, now bolstered by the acquisitions in 2013 of EdgeCast and UpLynk, is also preparing for a major expansion in the volume of live content streamed online. “Being able to do it at scale is obviously the key piece of it because the demand [for over-the-top access to live events] is insatiable,” VDMS’ chief revenue office Ralf Jacob said. Like thePlatform’s Roberts, Jacob also pointed to ability to insert targeted, online-only ads dynamically as a critical capability.

[Commentary] Dish Network’s landmark retransmission and TV Everywhere deal with Disney was in large part an out-of-court settlement of litigation between the companies that both sides had an incentive to settle. Yet for all that effort and angst, Dish’s Hopper was essentially a workaround for the fact that the satellite TV provider cannot offer its subscribers interactive features such as video-on-demand on its own platform because of the lack of a direct return path, putting Dish at a disadvantage to the cable TV providers with which it competes.

Don’t expect the floodgates to be thrown open generally quite yet, though. Dish and DirecTV occupy a unique niche in the pay-TV world in that their existing carriage deals are premised on a presumptively national footprint. In the wireline cable world, rights are typically limited territorially to the operator’s physical footprint. While those deals generally are not exclusive, licensing another operator to offer the same programming in that market would affect the rate the incumbent paid.

The one exception is for satellite providers, whose signals reach everywhere by the nature of the technology. Incumbent cable operators won’t like it, but forcing them to compete with Dish and DirecTV, even if their signals are sent over-the-top instead of out of the sky, would not fundamentally change the competitive balance in the pay-TV business.

[Sweeting is Principal, Concurrent Media Strategies]

[March 7]