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

[Mitreya]

It needs to be regulated like a public utility.

Or at least decoupled from the monopolized infrastructure so that other providers (that do not own an exclusive and non-negotiable cable hookup to your house) can compete.

Re:Utility

[jamesh]

It needs to be regulated like a public utility.

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?

Yes. Exactly like that.

I don't watch movies over the internet very often, and I don't keep my bandwidth at capacity 24/7 downloading stuff, and I certainly don't want to be subsidising those that do.

Screw the business models of those "budding internet video businesses". I'm not (indirectly) paying for a service I don't use just to protect a poorly thought out business plan. This isn't health or something important, it's entertainment, and you can pay for it yourself.

Free market!

[Mitreya]

No worries, I am sure the highly competitive and heterogeneous market will take care of it

As providers try to cap their data plans, new market players will emerge and take over by offering unlimited plans that consumers want

Right?

Re:Free market!

[raydobbs]

...or the large players will gather and plot to harm the consumer. Adam Smith pretty much makes the case that you -need- to regulate some industries, since they will not do it themselves. The consumer cannot 'vote with their wallet' when all the players offer the same vile offerings, racing each other to the bottom.

Re:Free market!

[jimbouse]

I run a small WISP (wireless ISP, tower based) that does exactly this. We cost more than the incumbents but offer unlimited downloads and you get what your pay for.

People are happy to pay money for a service that performs as advertised.

My tiers bill out at $36/Mbit. It sounds steep compared to a 10Mbit for $80/mo from the local incumbent. Except that the incumbent can't actually provide that speed, nor will they let you use your connection to the fullest.

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

[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

[calzones]

Collusion, oligopolies, and high barriers to entry for certain enterprises (once established by first-to-market types, or when invested in by rich types) mean a free market does indeed lead to monopolistic abuses.

Of course, all you have to do is look at human history and the natural world to see that this is the case. Mafias, gangs, cliques, pecking order, castes, nobility, feudalism, etc, etc... It's the nature of all social organizations that some will become strong and leverage that strength against others and some who ultimately become utterly dominant.

Establishing rules and enforcing them, (i.e., a regulated society that values more opportunity for more members of society and a more level playing field) is the ONLY way to circumvent this tendency.

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

[rickb928]

The flaw in this is that 'early' means different things.

The Bells got into telephony early, and dominated. The Breakup tried to remedy the monopoly, and did so, though the aftermath was a new set of problems.

When cell service came to be, the government decided the Bells and Baby Bells would noobe allowed to dominate this market, so they created 'A' service and 'B' service, 'wireline' and 'non-wireline'. Does anyone remember which was which? And they oermitted CDMA and TDMA to slug it out. We now know TDMA as GSM, its successor.

Data service brought an entirely new set of options, and the telecoms were the logical leaders, going from slow speed leased lines to faster, and faster. Proprietary protocols, DDS2, T1/E1, and all the T3 and OC- speeds. SONET, MLPS, etc. The telecoms fought and lost the battle to keep their copper and fiber to themselves. But the CLECs failed to account for other players.

Cable companies jumped in and provided data service on their networks. Power companies toyed with it, but failed to deliver working solutions.

Today, Internet service is pretty much split into three providers in most areas, cable, telecom (DSL) and wireless. In the rural areas, the providers are either limited by range or nonexistent, but where service is avaialble, mostly it has 2-3 players. Please, before you flame me with the exceptions, it's generally true that cable reaches a little further than DSL, and wireless is generally limited to the cell footprint. Satellite is a poor quality solution, and is not germane to my examples. FIOS and other telecom or higher speed non-copper services only add competitors, though not many.

To turm Internet service into a utility in most of the US is to ignore the reality that there is a competitive market, and the utility model doesn;t seem to fit well, at least not to me.

BUT...

This is an issue of The Commons. And net neutrality is a disguised Commons issue.

If the Internet providers are still also providing other services, they have potential incentives to limit one in favor of the other. Case in point, cable services.

Video over the Internet is insanely popular for several reasons, but two come to mind as direct threats to cable providers: On-demand video, and non-real-time video.

On-demand video, like Netflix, competes directly with cable company movie channels, both the HBO model and on-demand/rental channels. this is revenue lost to them, and Netflix is literally eating their lunch.

Non-real-time video I think of as the Hulu model. While cable companies have DVR solutions, again Hulu takes the bread from their mouths. Direct competition.

BitTorrent is just another delivery method, with the added unpleasantness of rampant copyright violation, which then gets the cable companies in hot water with their bread and butter video providers.

Add in another factor - video is a bandwidth hog, at least more than even Flash gaming. Probably even PC gaming. This increases their network costs, and logically so, at every part of their network.

You could make the case that Internet service is a significant threat to the cable companies, yet they are stuck with being their own worst enemies, for now. too much money to turn down, at least at the moment.

Notice I haven't even mentioned the VOIP services they got into to scrape mor erevenue from their networks, and the threat of Skype etc, and the challenge of various videoconferencing solutions such as Facetime?

So video, to the cable provider, is a necessary and detested evil. The solutions? Traffic shaping, packet inspection, etc.serve to make the competitive services less useful, and discourage them. Bandwidth caps can nail Netflix and Hulu. Add speed caps, and the cable cos. can deal their competitors a blow. But users then might flee. To where? Well, DSL providers are not much better behaved. Any other provider with a relationship to broadcast media is also of divided loyaltes.

DSL providers are limited in

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

[tmosley]

Because it doesn't operate in its own interest, it operates in the interest of others.

WAHAHAHAHAHHAHAHAHAHAHAHAHAHAHHAHAHAHAHAHA!!!!!!

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.