Friday, March 20, 2015

New Video Streaming Options and Network Neutrality

           Over the last few weeks, several video streaming options have arrived.  See, e.g., http://www.nytimes.com/interactive/2015/business/media/streaming-tv-cord-cutting-guide.html?_r=0.  These new services raise two key pocketbook issues:

            1)         Can consumers reduce their total out of pocket costs by cutting, or shaving the cable television cord? and

            2)         Can incumbent broadband access providers retaliate by raising the costs of both content providers’ and end users, despite the FCC’s 2015 Open Internet Order?

            Cord Cutter/Shaver Empowerment?

            Many press accounts suggest that consumers can save money by terminating their cable subscription, or migrating to cheaper programming tiers.  If one can tolerate the loss of access to some live sporting events, from networks such as ESPN, then a significant savings accrues even factoring in a Netflix and Hulu subscription.  Cord cutting/shaving works best for consumers who can receive broadcast networks off air without having to install rooftop antennas.

            However, the cost savings equation also has to factor the cost of broadband access and the near certainty that last mile providers, like Comcast, will increase rates for “naked” broadband services, i.e., subscriptions that do not bundle video and/or telephone service with broadband access.  Despite the theoretical argument that platform operators/intermediaries controlling a doubled-sided market cannot gouge, the possibility exists that cable modem service providers can simultaneously raise broadband rates for downstream retail subscribers and extract higher prices and surcharges from upstream content distributors.

            The Specialized Network Exemption from Neutrality

            Another more ambiguous, but potentially harmful issue arises with the proliferation of streaming options: what flexibility and exemption from absolute neutrality can Internet Service Providers (“ISPs”) can achieve?

            This issue will start the process for the many ad hoc FCC "interpretations" that will occur going forward.  Predictably the Commission will have two conflicting issues in play.  On one hand, the 2015 Open Internet Order recognizes a specialized network option for traffic such as VoIP.  I believe the Commission will recognize that the low latency requirements of IPTV also qualifies for a conditional exemption from absolute neutrality.  But on the other hand, the Order explicitly states that the specialized network exemption shall not provide a loop hole for evading the overarching requirement for neutrality.

            The 2015 Open Internet Order generally prohibits paid prioritization and establishes a “no-unreasonable interference/disadvantage” standard for ISP treatment of upstream traffic, like that flowing from content sources.  This probably means that the FCC will want to make sure that specialized routing arrangements are technically necessary on quality of service grounds and not simply a construct to favor traffic of affiliates, or surcharge payers.  Sponsored data arrangements also fit into this category.

            Does an ISP simply partition generic bandwidth and call it a specialized network, or does the ISPs really and truly do something by way of dedicated, management?  Bear in mind that some way, somehow the FCC has avoided having to examine the functions and services performed by proxy server/CDN companies like Akamai.  Does an ISP simply have to show it operates like Akamai, but extends the value added, specialized features for the link downstream to end users?

            Stay tuned.

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