Blog on the Run: Reloaded

Wednesday, January 15, 2014 7:08 pm

Watch cable TV? Use the Internet? You’re about to get screwed.


So on Tuesday, a federal appeals court threw out Obama Administration “net-neutrality” rules, on the laughable grounds that Internet service providers (ISPs) are not common carriers. The amount of delusion required to make such a “factual” finding is only slightly less than that required to believe that one may walk directly from here to London on dry land.

The companies that sued to overturn the rulings have business  models that have been badly (and, frankly, deservedly) damaged by upstarts like Netflix. They brought this on themselves. So, naturally, this being a free market and all, they turned to the courts to impose burdens on their new competition, and, naturally, this being a free  market and all, the courts obliged them.

MisterMix at Balloon Juice summarizes nicely:

[The plaintiffs], who are almost all cable companies, are full of [expletive], because with their lagging TV business, they’re all scrambling to find ways to (a) kill off Netflix and substitute their own streaming offering and (b) charge hefty usage-based pricing for their internet service, which has roughly 95% profit margins already. Here’s how they’ll do it:

  1. The coming of “4K” streaming, which is a super high definition stream on next generation TVs, will use 3-4 times the amount of bandwidth that today’s high definition streams use. 4K users will blow out the caps that providers like Comcast have in place, opening the door for the cable boys to charge premium premium for users who have 4K TVs.
  2. The streaming services of the cable providers will be exempt from the bandwidth caps, so users who don’t want to pay more for bandwidth will have an incentive to switch to Comcast’s version of Netflix.
  3. Streaming providers who want to sell video to customers without busting the caps will be allowed to provide what AT&T Wireless calls “Sponsored Data”. This means that the streaming company will pay the cable company for the bandwidth their subscriber uses. The streaming company will pass on that cost to the consumer. (Note that AT&T can provide “Sponsored Data” without regulatory issues because wireless is exempt from net neutrality regulation.)

That’s the plan, they’re executing it slowly but with grinding efficiency, and the roadblocks the Obama Administration are throwing up in their path are getting overruled. And, by the way, they won’t be investing in their aging infrastructure, except in places where Google or some other fiber optic provider starts competing with them. This is how corporatism will make slowly but surely leave us in the dust behind countries that make Internet access a national priority.

Many, many countries, developed and developing, friendly and not-so, have correctly perceived that quality Internet infrastructure is at least as important as good roads, water systems, electrical grids and so on. Not all of them approach the issue in the same way on a public-vs.-private basis, but they all understand that quality, affordable Internet is an essential competitive tool in the global economy. Congress has refused to recognize this and has fought to prevent administration efforts to do so; the results, in terms of our ability to compete, are bad and getting worse. If the Supreme Court doesn’t overturn this ruling, Netflix being forced out of business — although it would piss me off — would be the least of our concerns compared with our national ability to compete in the global economic marketplace.

2 Comments »

  1. Undecided as of now

    Tell me where they are mistaken

    Comment by Fred Gregory — Wednesday, January 15, 2014 11:48 pm @ 11:48 pm | Reply

  2. Easy. The writer is using Orwellian language to suggest that each side is trying to do the exact OPPOSITE of what it actually is trying to do.

    The FCC is trying to use regulation, ironically enough, to level the Internet playing field by treating all data as equal — the digital equivalent of a free market. This approach would basically make content or online services offered by an individual or a small or medium-sized business as easy and cheap to receive as content or services from the Verizons of the world. The plaintiffs (Verizon and a very few other very large companies) are trying to do the opposite: use the courts to game the system to gain an unfair advantage for their digital products/services and those of their biggest clients — in effect, a digital cartel. I’ve studied this issue in some detail both before and during my grad program, from both a technical and a legal perspective, and this really is an instance in which the government is trying to keep a few large companies from UN-leveling the playing field, for the benefit of consumers and most businesses.

    This dynamic has happened over and over again during the century-plus history of telecommunications. Early in this century there were a lot of small, regional telephone companies connected to each other and competing, and long story short, AT&T ended up owning them all. Same thing has happened in radio, TV, and cable (cable providers, not content providers, although their ownership has been concentrated, too). A good book that explains the history and mechanics without getting horribly technical is Tim Wu’s “The Master Switch.” My only complaint with the book was that I thought Wu was optimistic to the point of naivete about whether the government would allow a level playing field. As it happens, since 2009 the FCC has been trying to do exactly that and powerful, rent-seeking corporate interests are fighting them. And money talks.

    (The Wu book really is a good read, but if you don’t have time, there are plenty of interviews you can Google of Julius Genachowski, former FCC chair, in which he lays out the logic pretty clearly.)

    Comment by Lex — Thursday, January 16, 2014 10:06 am @ 10:06 am | Reply


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