The Coming Internet Video Crash

snydeq writes "First, it was data caps on cellular, and now caps on wired broadband — welcome to the end of the rich Internet, writes Galen Gruman. 'People are still getting used to the notion that unlimited data plans are dead and gone for their smartphones. The option wasn't even offered for tablets. Now, we're beginning to see the eradication of the unlimited data plan in our broadband lines, such as cable and DSL connections. It's a dangerous trend that will threaten the budding Internet-based video business — whether from Netflix, Hulu, iTunes, Windows Store, or Google Play — then jeopardize Internet services of all sorts. It's a complex issue, and though the villains are obvious — the telecom carriers and cable providers — the solutions are not. The result will be a metered Internet that discourages use of the services so valuable for work and play.'"

Comments

Utility

[Anonymous Coward]

It needs to be regulated like a public utility.

Re:Utility

[MobileTatsu-NJG]

You mean like water, where you pay for what you use?

You know what water companies don't do? They don't make you pay $10/mo. for 10 liters of water or $20/mo. for 80 liters of water.

Oh, and water, electricity, and gas are finite resources. Data is not.

Re:Utility

[KhabaLox]

You mean like water, where you pay for what you use? Or electricity, where you pay for what you use? Or gas, where you pay for what you use?

Sure, as long as they price it at the marginal cost to push that bit down the pipe. ;)

This has been brewing for years.

[TaoPhoenix]

It started with the old hourly charges from the old services like CompuServe and AOL, then "because of consumer demand" they went to Unlimited.

Notice this article talks about the "entertainment" side. Look at the Cloud side.

1. "Everyone use your software from the Cloud! It's nice and fluffy!"
2. "Let's cap bandwidth so that when you pull your data every 7 seconds you burn 4 megs, and then you will hit your cap and we can charge the fees."

If I was better at graphic design, I've wanted to make "chart news" with trends like these pointing in opposite directions in 2010 that becomes 2012's news when they collide.

Yes

[Anonymous Coward]

A market controlled by cartels or monopolies is not free, and is every bit as bad as a market controlled by a government.

I know you were being sarcastic. I am just adding to the thought.

Re:Yes

[MightyMartian]

The problem here is that the telecommunications tends towards natural monopolies. The costs of rolling out large area copper or fiber means the market will almost inevitably favor those who get in early. The only reason that cable ever was competitive was because it started out as an entirely different service than telephone, and it was only very late in the game that both cable and telco lines started being used for large scale data transmission.

Then you go to wireless. Well, there's only so much useful spectrum out there, and unlicensed bands are far too filled with clutter to be of much use, so again, you're left the companies who get on in early dominating the market, with the costs of creating a competing network, even where you have spectrum, or at least there are protocols in place to share the spectrum, new players are not likely to come along very often. For even most moderate sized cities, there are only a handful of meaningful broadband competitors.

So the only real option you're left with is some sort of government-imposed regulations.

Re:Yes

[Spy Handler]

exactly right.

You either go the socialism route and the gov't mandates a reasonable service for a reasonable price, for example 20mbps/2mbps unlimited internet for $49 a month... the public wins.

OR you go full capitalism and deregulate *everything* while protecting against monopoly/cartels (such as the Verizon/AT&T duopoly) with Sherman Antitrust-esque laws. Result: the public wins even more.

Right now in the US we have the worst of both worlds, with a gov't protected cartel without the gov't mandated price controls. Crony capitalism at its best.

Re:Yes

[Anonymous Coward]

as the company that has provided such a high quality, low cost product that no-one can compete with them must continue to provide such quality, or risk new competition arising.

That is outright false.

There are a host of perfectly legal things that established monopolies can do that prevent competition from ever arising, and that require no intervention from the government. Here are just a few:

1) Buy up any emerging businesses, and just shut them down.

2) Lock up the suppliers of any emerging businesses into exclusive contracts, so the new businesses can't get their supplies (or at least not affordably) and hence can't cash-flow their business long enough to get a foothold.

3) Lock up the potential customers into long-term contracts, so the new businesses starve before they can get a foothold.

4) Regionally price your offerings at a loss wherever competition starts to spring up, and starve them out of existence, then re-adjust your prices once they are gone.

5) Hire all the talent out from under the owners of the new businesses, and let them fall apart.

6) Use your wealth to out-market the new businesses (as *anyone* can tell you, good marketing beats good product any day of the week).

7) Sue the new businesses with compeltely frivolous charges. It doesn't even matter if you lose, you drown them in legal expenses.

There are also some dirty-pool options, like hiring goons to burn down their places of business. But why bother with those...any combination of the above will prevent any serious competition from ever arising, and you will be free to offer crappy service at high prices.

And, of course, any large and wealthy business *will* have influence over government (that is just how money works). They will get special tax breaks and what-not because of the jobs they create (and the government wants those jobs to be local, obviously). These breaks will not be fairly distributed to potential competitors. Also, laws can be passed that establish quality or regulatory requirements that work as severe barriers-to-entry to any businesses not already established.

There is, in fact, so much more than this...but you have to suspend your blind faith in complete hands-off governence to think the possibilities up.

Re:Yes

[Anonymous Coward]

The problem here is that the telecommunications tends towards natural monopolies. The costs of rolling out large area copper or fiber means the market will almost inevitably favor those who get in early.

That's like claiming parcel delivery tends towards natural monopolies because laying new asphalt is cost-prohibitive.

If you forcibly separate the infrastructure providers (road construction) from the service providers (UPS, Fedex, etc), then you have beneficial competition with very little downside.

Re:Yes

[calzones]

My original comment was a reply to this assertion:

You can't have a monopoly or a monopolistic cartel without government intervention. 'Free market monopolies' are a misnomer, as the company that has provided such a high quality, low cost product that no-one can compete with them must continue to provide such quality, or risk new competition arising.

That is not narrowly focused on the question of dolling out a limited resource. It is a general statement asserting as factual that monopolies are impossible sans a meddling government. That's a patently false assertion. That's the point of my counterargument.

Now the more on-topic nuance about my response, which I didn't give voice to, is that telecoms (A) have astronomically high barriers to entry because they require massive infrastructure that relies on land settled upon by other humans (whole cities, towns, and private residencies), and (B) any such massive infrastructure requires protection from other who would seek to reclaim the land for some other reason (save the spotted owl), or potential competitors.

Hence, even without a government, the barriers to entry are astronomical. If you wanted to run a telecom in a veritable unregulated libertarian wild west, you'd have to have a whole crew dedicated to enforcing that no one messed with your property; you'd have to make so a ridiculous number of deals with land owners costing a ridiculous amount of money. And once established, you could easily bully anyone else seeking to do the same... not that anyone else could really pull it off unless they were already rich on their own.

In the meantime, all the citizens of the land would be subjected to infrastructure wars between barons seeking to provide telecom service and the constant uprooting of land, cables strewn about the skies, and probably fractured service and abandoned equipment. Hence, society chooses to regulate such an industry. Two separate issues... yet regulation can help abate both.

I'm not saying government isn't corrupt. I'm not saying competition doesn't drive down costs. I'm not saying government will necessarily solve the problem. I'm just saying that to assert that the monopolies would not exist otherwise is absurd, delusional even, especially in the context of TFA. Finally, I am saying that a government COULD solve the problem.

Re:Yes

[Anonymous Coward]

Without Government interference you'll likely have problems with any type of infrastructure. The right of way laws afforded to utilities for example and the only two other options you have are a free for all (everyone runs everything everywhere) or nobody can run anything anywhere because I own the land you'll need to cross and I'm simply not going to allow you to give my neighbours electricity.

Utlitly infrastructure shouldn't have the pretence of competition or being privately owned(because unless they allow anyone to dig up the roads, it's never going to be anything but a select number of awarded companies) . It should be ran as some sort of non-profit organisation (preferably with rules relating to conduct in salaries) and their job should be nothing but to provide a state of the art infrastructure at as little as possible cost. Let the resellers foster the competition, otherwise you'll be stuck in the forever cycle of getting shit services from companies that stick their hands out to Government everytime they need to invest anyway.

Re:Yes

[calzones]

This is quite true. I've certainly believed the pros would outweigh the cons if we nationalized the telecom infrastructure and allowed any old company to come along and attempt to compete as a service provider on that infrastructure. Esp. the "last mile" could do to be excised from the cable companies.

However, the screams that would arise when the telecoms lose ownership of something into which they invested billions of dollars would be deafening.

While we're at it: no company selling connectivity should be allowed to sell content. Not even affiliated with a company that does. It's an inherent conflict of interest.

Re:Yes

[Beer_Smurf]

Yes, being in aviation, I am telling you that the reason I can't start an airplane manufacturing business is very much the government. Government certification costs are usually much higher than the actual development of the plane itself.

A lesson to Americans

[Hentes]

Free market never really works well with critical infrastructure.

Re:A lesson to Americans

[thegarbz]

Free market never really works well with government funded or subsidised infrastructure.

FTFY.

If this was really a freemarket then there wouldn't be a monopoly.

Re:Yes or reply to someone who ignored Adam Smith

[WillAffleckUW]

You can't have a monopoly or a monopolistic cartel without government intervention. "Free market monopolies" are a misnomer, as the company that has provided such a high quality, low cost product that no-one can compete with them must continue to provide such quality, or risk new competition arising.

I see you failed to read all seven books of Adam Smith on what capitalism is, and are a servant of the Mercantilists that opposed Capitalism.

Re:Free market!

[AwesomeMcgee]

Unless the envelopes have checks in them with donald trump level 0's on them, those people could give two craps.

Re:Free market!

[_xeno_]

Except in this case, regulation is the problem. This problem didn't exist back in the dial-up days. Some 15 years ago, there was a choice of like twenty different ISPs in the area, including some that were "free" and ad-supported.

Now, there's a choice between two: Verizon and Comcast.

Why just those two? Why does no one else compete with them? Because they're legally forbidden from competing with them.

Of course, it no longer matters. Because Comcast and Verizon are the big players, even if the regulation preventing anyone else for competing was lifted, no one else could possibly compete anyway. If they tried, Comcast and Verizon would just lower prices to undercut the newcomer. (Hell, Comcast and Verizon already try and undercut each other in a similar way by offering "introductory pricing." First year, you can get like 75% off your bill! Then the price skyrockets...)

So - yes, now the only solution is regulation. But that's not a failing of the free market, that's a failing of the original regulation that created the current oligopoly in the first place!

Re:Unfortunately, the solution is obvious

[geekoid]

for now.