BT’s Battle Against the BBC’s Online Video
- From: Frank Merlott <Frank@xxxxxxxxxxxx>
- Date: Sat, 13 Jun 2009 11:48:09 +0200
Net neutrality is a phrase that means a lot of things to a lot of people. But here’s one important policy question that net neutrality rules may clarify: Can an Internet provider, which may also offer cable television service, deliberately slow down connections to Internet video sources, or ask the video companies to pay to have their programming carried?
That issue, bubbling under the surface in the United States, has emerged in Britain, where BT cut the transmission speed for some online video from 8 megabits per second to less than 1 megabit per second from 5 p.m. to midnight, according to an article in The Financial Times.
“We can’t give the content providers a completely free ride and continue to give customers the [service] they want at the price they expect,” John Petter, managing director of BT Retail’s consumer business, told the newspaper.
Internet television is a hot topic in Britain in part because the BBC has made a great deal of its programming available on its iPlayer service. Since the business model of the BBC is to collect taxes from British subjects, it doesn’t have the revenue concerns that face networks in the United States.
BT’s stated reason for the speed cut is the increasing cost of carrying online video. The cost landscape in Britain is a bit different than in the United States because regulations force a separation between the part of BT that owns the phone lines that reach to people’s homes and a separate unit that offers voice, data and video services to consumers. (The reason is that other companies can buy access to BT’s wires to offer consumers their own communications services.)
Still, the underlying economics, as I wrote about in the context of Time Warner’s plan to increase fees on heavy users, mean that expanding a network to handle lots of video is a real but unexceptional cost for an Internet provider.
There are two other motives that may well be at play: making more money and undercutting competition. Big Internet providers have long grumbled about providing “free” access to big sites.
Since it was started, the Internet has been built on a “meet in the middle” economic model. If the customer of my I.S.P. is using a Web site run by the customer of your I.S.P., we both pay to bring the traffic to someplace where our networks are connected. Each I.S.P. covers its costs and hopes to profit by charging its own customers.
BT argues that this arrangement is out of whack, and that providers of high-bandwidth video services should pay more for delivery of their content. There’s no immutable law of nature that says the Internet will always work the way it does now, but BT is implicitly proposing a rather radical change.
As for competition, BT offers BT Vision, video programs by way of a set-top box connected to its broadband service. The service had difficulty competing with BSkyB, the satellite broadcaster that dominates TV in Britain. Indeed, Dan Marks, the chief executive of BT Vision, recently resigned. When it was introduced in 2006, the service was projected to have three million subscribers by the end of 2010; it now has less than 500,000 subscribers.
How this will play out depends on competitors and regulators. The Independent followed up on The Financial Times report, saying that other Internet providers did plan to ask the BBC and other video providers for payment, but it did not quote them by name. Nonetheless, two of the three other large Internet providers also have significant video businesses to protect: Virgin Media is the largest cable company in the country, and BSkyB offers Internet service (reselling service over BT’s wires). So they may well be rooting on BT’s war with the BBC.
So far, Ofcom, the British telecom regulator, has been supportive of BT’s move and told The Independent it saw no reason to intervene in the market right now.
So far, the threat to cable TV in the United States from Internet video has been more theoretical than real. There is no sign yet, other than some anecdotal news reports and comments from early-adopter Bits readers, that many people are abandoning cable. But I’m sure the pressure will grow, and a cable or phone company may well find itself tempted to cut speeds or impose tolls on Hulu, YouTube and the rest.
Setting clear rules of the road for this issue could be a rather useful result of the net neutrality debate that President Obama has promised.
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