Loss of Net Neutrality Could Be Bad for All Online Video Business

Loss of Net Neutrality Could Be Bad for All Online Video Business

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The end is nigh! The sky is falling! Tiered Internet premiums are coming, secret backdoor dealings to speed some services and slow others on the way! That’s some of what I have read recently in regards to the Appeals Court decision to strike down FCC net neutrality in favor of Verizon. Now if you don’t know, Verizon spends millions in anti-consumer lobbying already, apparently, they might have swayed the minds of some judges somehow. It seems the judges do not understand the concept of zeros and ones and what it means to data transmission.

Granted, right now things look pretty bleak for consumers, what with Amerika Inc. spreading its oily tendrils throughout every facet of life and conditions slowly sinking for many consumers, not to mention the absolute erosion of U.S. citizen privacy. The latest pro-corporation ruling probably won’t be the last, or even the straw that breaks the proverbial camel’s back just yet.

What we Don’t Want to Talk About – Streaming Video Fees per ISP

No one really wants to speculate too much about what this latest blow could mean. Some are saying it’s bad for Netflix because ISPs could now say that video is different than other forms of data transmission (it’s not, it’s all ones and zeros, FYI). Whether that cost goes to companies like Netflix, Amazon, or Hulu or the ISPs flip it onto the consumers, we will all pay in the end. Netflix will need to keep its doors open and lights on and if it is suddenly hit with massive fees from Time Warner, it could have to resort to higher subscription costs for consumers. Bad news everyone.

The One-Two Punch

Even worse could be fees on both ends. Time Warner could ask for millions from Netflix which would then cost consumers more as subscription rates rise. Then comes, what I believe companies like AT&T, Verizon, and Time Warner have already prepared and were just waiting to roll out, is a tiered Internet service fee structure. Something like say, this:

  • 20Mbps Internet monthly: $75
  • 200GB bandwidth add-on: $25 (for when you pass some arbitrary bandwidth cap)
  • Access to streaming music: $5 per month
  • Access to streaming video from Netflix: $10 per month
  • Unlimited streaming video from any source: $100 per month (on top of the $75 standard fee and the $25 bandwidth cap raise)

Ouch. Higher subscription fees and then higher fees for Internet service? It sounds ridiculous, but there are already bandwidth caps in effect on some of those providers who constantly whine about how much data they are putting through their network (which was made to transmit data remember) and how low their profits are because they are only pulling in single digit billions per year, oh, and not paying taxes on most of it.

The Crux of the Problem – Network Oversell

Really, what the problem is, is not users using the Internet they pay for, it’s the providers haphazardly overselling their network capabilities. Time Warner here on Milwaukee’s south side can barely even push digital cable shows without interruption anytime from mid-afternoon straight through to midnight. Heaven forbid the Packers should be playing because that will just flat out bog down the entire system.

This is all because Time Warner has been dragging its feet on putting its technology first. I hope they do get purchased and disassembled because, frankly, they suck both from a quality of service perspective and from a pricing and packaging perspective. The same goes for AT&T, because apparently, it’s time to break them up into pieces again. Of course, the country would have to rely on the Federal Court System for some assistance in all this, and personally, I haven’t got the faith in them to do what’s right for the people. But I’ll digress so as not to get too political for this piece. However, it must be said because it is part of the current situation and problem.

Netflix, Lend Me Your Ears

Here’s what I really think Netflix needs to do if a cable company comes a calling with a cost sheet for getting their service through their network. Cut access to their services on that network. How many phone calls do you think the customer service center for the cable company would get when no one can access Netflix video streaming because there’s a message that says this:

Netflix retrans fees

Yes. That says retransmission fees. It’s called hardball and it may need to be played. You see, Netflix is a value-add service, or rather, should be seen as one, just like CBS, The Weather Channel, AMC, and all the other channels that are available through cable (and have been having retrans fee problems). If the MSOs are going to try and say that streaming video is different than other forms of data transmission, then Netflix should agree, and move their content and service into the same category as other subscription channels like HBO or Showtime. If the MSO wants its customers to have access to it, they will need to pay. If they don’t pay, then their Internet product will be inferior to others, meaning that their subscribers will begin to look elsewhere.

If Netflix is a major portion of their Internet usage, any suggested list of vendors provided by Netflix will certainly be enough to start them thinking about changing providers. Imagine what a million customer service calls and 100,000 subscriber drops would do to an MSO stock price not to mention the social media tsunami of public complaints and reactions. Time Warner already lost hundreds of thousands of subscribers, plain evidence that there’s something rotten in 60 Columbus Circle (that’s Time Warner Cable Corporate HQ, FYI). Time Warner Cable currently operates in 28 states and has over 15 million subscribers. Netflix operates around the world and has around 30 million streaming subscribers in the US. Netflix is adding subscribers, TWC is losing them. Who would win this battle?

Check and Mate.

Of course, this is all still premature because it’s just a Federal Court of Appeals decision. There’s still a higher court as well as the court of public opinion, in which Verizon, TWC, AT&T and their ilk are not currently well regards. Verizon may very well have nearly 100 million subscribers, but some savvy marketing from say a Sprint/T-Mobile merged carrier who cut a deal with Netflix could easily begin to flip subscribers. Sprint over with your Verizon phone and contract and we’ll get you up and running with 4G Internet and a free month of Netflix! Plus, a guarantee that Netflix will always perform optimally on our network.

The Bigger Picture

Now I have, like many others, somewhat fixated on Netflix in this article thus far. However, I see bigger waves that could be generated. Netflix isn’t even the biggest of the online video destinations. YouTube is, each and every month according to comScore. Would an MSO be ballsy enough to approach them and say, “Sorry, Google, but you will need to pay in order for YouTube to cross our network boundaries.” I think not because Google would probably say something like, “See this big red button? It’s power for the Internet, would you like us to push it and send all the people who complain your way?” Same thing, Google turns off all of its service to an MSO and guides the people to the MSO customer service.

Any service that has loads of video streaming (Vimeo, DailyMotion, Veoh, MetaCafe, VEVO, Machinima, Revision3, etc), including all your video advertising networks out there (Hulu, Google, Facebook, Microsoft, AOL, SpotX, TubeMogul, Brightroll, Specific Media, Tremor), should be getting together and preparing for a major war against the Internet service providers who don’t see things your way. What would it to do the business of a single video ad network if all of its content was banned from 20 million subscribers?

Remember, there are only about 190 million U.S. citizens who watch video online each month. What if multiple mobile carriers and cable companies try the same tactics? Can you afford to have your ads not reach 100 million people that they reach now? Can you afford to serve one billion less ads than you do now? Can you afford to not get together with others in your industry and put your foot down…firmly on the side of net neutrality?

Note: The opinions expressed here are solely those of the author and in no way represent the views of ReelSEO, it’s owners, partners or other staff.


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