May 28, 2009
Providers Blocking Online Video Access Michael Harris, Light Reading tell a friend >>article link >>
The dark day that net neutrality activists feared has finally arrived. Access to free online video content is intentionally being blocked to tens of millions of broadband users, while millions more users might soon see their video streams intentionally degraded.
Essential egalitarian principles, such as unfettered content access, are being trampled upon, only to save bandwidth and money. And who are the nefarious characters orchestrating this online axis of evil? Cable operators? No. Telcos? No. Alas, it is the purveyors of Internet video content themselves.
The New York Times reports that Internet video and rich media service providers are finding that users in developing countries are swamping their infrastructures. Server installations and bandwidth are far more expensive in such geographies, and advertisers are unwilling to pay a premium to reach audiences that, by U.S. and European standards, are poor. In other words, insatiable consumption with limited revenue has online video players bleeding red ink.
The Times explains:
This intractable contradiction has become a serious drag on the bottom lines of photo-sharing sites, social networks and video distributors like YouTube. It is also threatening the fervent idealism of Internet entrepreneurs, who hoped to unite the world in a single online village but are increasingly finding that the economics of that vision just do not work.
Last year, Veoh, a video-sharing site operated from San Diego, decided to block its service from users in Africa, Asia, Latin America and Eastern Europe, citing the dim prospects of making money and the high cost of delivering video there.
“I believe in free, open communications,” Dmitry Shapiro, the company’s chief executive, said. “But these people are so hungry for this content. They sit and they watch and watch and watch. The problem is they are eating up bandwidth, and it’s very difficult to derive revenue from it.”
Time Warner Cable Inc. (NYSE: TWC)’s Glenn Britt and Comcast Corp. (Nasdaq: CMCSA, CMCSK)’s Brian Roberts feel your pain, Dmitry. So does former Cisco Systems Inc. (Nasdaq: CSCO) executive Mike Volpi, now CEO of video site Joost .
“Whenever you have a lot of user-generated material, your bandwidth gets utilized in Asia, the Middle East, Latin America, where bandwidth is expensive and ad rates are ridiculously low,” Mr. Volpi said. If Web companies “really want to make money, they would shut off all those countries.”
So where does Google (Nasdaq: GOOG), the great defender of Internet freedom, stand on this issue?
Tom Pickett, director of online sales and operations at Google’s YouTube Inc. division, explained to the paper:
“We may choose to set a limit to how much we are willing to pay in bandwidth cost,” Mr. Pickett said. In some countries, he said, “there may be particular peak times where instead of high definition, we might decrease the resolution.”
In other words, YouTube may intentionally degrade user bandwidth to save a buck. Had this idea been broached by an MSO, the Federal Communications Commission (FCC) would have already scheduled a hearing to investigate.
Now, does this mean Time Warner Cable was unfairly criticized for its metered billing trials, as contended by Insight Communications Co. Inc. CEO Michael Willner in his blog? (See TWC Mothballs New Metering Trials and TWC Dons Larger Consumption Caps.)
“Time Warner was not looking to gouge their customers without regard for their ability or desire to pay. They simply were seeking an answer about how to cope with the rapidly changing nature of broadband services that are being launched today,” Willner wrote, while explaining his reasons why “consumption-based billing is actually pro-consumer.”
Kudos to Willner for being the only CEO of a major U.S. MSO to write a blog for the general public, inviting comments.
One of Insight’s “very happy” customers, Jason Stiles, did so, rightly questioning cable operator logic on the issue. He points out that MSOs already charge for extra bandwidth with higher prices for faster speeds. If an MSO really wants to move to metered billing, he argues, it should first eliminate speed caps. Only those that use such speed to consume excess network resources should pay.
Bryan Boyko, a Time Warner Cable sub in Austin, Texas, who writes a blog for IT vendor NetQoS Inc. , links to a passionately written open letter when replying to Willner. The argument seems likely to fall on deaf ears, so to speak.
Even so, Boyko points to the same conundrum as Stiles. In a related blog post, he explains:
“Data is not the limited resource, bandwidth is. It’s an argument which ultimately boils down to: ‘It’s not too much data that causes congestion, it’s too much data at once.’ Therefore, prices should continue to be based on bandwidth, not data consumption.”
Quite true. Metered billing based on data (bit) consumption is actually a tactic intended to address weaknesses in bandwidth pricing strategies. In other words, as MSOs continue to ratchet up advertised access speeds, they face more bandwidth congestion. It’s why most MSOs already charge more for faster access.
Boyko advocates an alternative to metered billing for data consumption: using QoS policies to manage bandwidth congestion. In other words, follow Comcast’s lead.
In the end, for its network management practices to appear reasonable, it seems all Comcast needed was a little help from Time Warner Cable and Veoh Networks Inc.
