Net Neutrali-what? AT&T's New Streaming Service Won't Count Against Its Broadband Caps. But Netflix Will.

from the fake-barriers-but-real-penalties dept

For a long time, we've noted how broadband usage caps are bullshit. They don't actually help manage congestion, they have nothing to do with "fairness," and are little more than glorified price hikes on the backs of captive customers in uncompetitive markets. Worse, they can be abused anti-competitively by incumbent broadband providers, one of the major triggers of the net neutrality debate.

For example, AT&T for a while has made its own streaming TV services exempt from its usage caps, while competing streaming services (Netflix, Amazon, whatever) count against a user's monthly data allotment. This gives AT&T a distinct advantage in that users are incentivized to avoid competing services lest they face completely arbitrary and unnecessary usage limits and fees. It's bullshit. It has always been bullshit.

AT&T has added another layer to this bullshit cake. The company has long experimented with something called "sponsored data," which lets companies pay AT&T extra if they want to be exempt from AT&T's (again, completely arbitrary and unnecessary) broadband usage caps. This adds yet another anti-competitive layer to the equation by letting a deep pocketed company (say: ESPN) get a distinct advantage over smaller startups that can't afford to pay AT&T's toll.

Last week AT&T launched yet another streaming TV service, HBO Max. This service also won't count against AT&T's usage caps and overage fees, AT&T confirmed to The Verge:

"According to an AT&T executive familiar with the matter, HBO Max is using AT&T’s “sponsored data” system, which technically allows any company to pay to excuse its services from data caps. But since AT&T owns HBO Max, it’s just paying itself: the data fee shows up on the HBO Max books as an expense and on the AT&T Mobility books as revenue. For AT&T as a whole, it zeroes out. Compare that to a competitor like Netflix, which could theoretically pay AT&T for sponsored data, but it would be a pure cost."

This has been a hard thing for some folks to understand (for whatever reason) so I'll reiterate: this is a regional telecom monopoly, imposing completely unnecessary limits on uncompetitive markets, which don't apply to the incumbent's own services. Efforts to impose net neutrality have always been about preventing incumbent telecom monopolies from abusing their market power by imposing unnecessary barriers to competitors, and this is precisely that. Fortunately AT&T's own incompetence has kept the company from dominating the streaming space so far, but it doesn't make this any less of a bad precedent.

Filed Under: competition, favoritism, hbo max, net neutrality, sponsored data, streaming, zero rating
Companies: at&t, netflix

Facebook, Google's Supposed Love Of Net Neutrality Notably Absent In India

from the don't-be-evil dept

With it now relatively clear that nobody will tolerate outright throttling or blocking of services, we've noted repeatedly how ISPs have turned their gaze toward other, more subtle ways of abusing their gatekeeper mono/duopolies on the net neutrality front. The most notable being interconnection -- or intentionally degrading service to extract new tolls from content companies, and zero rated apps -- or letting some content bypass the cap if a content or service company is willing to pay ISPs a premium. Both battlefields obviously benefit the ISPs and content companies with the deepest pockets.

One of the major reasons Facebook and Google were so quiet during the latest round of the net neutrality fight is because they were happy with the original 2010 rules, given they didn't cover wireless whatsoever. But they were also happy about the loopholes regarding zero rated apps, which play a starring role in the companies' future global ambitions. Zero rating is particularly important to the companies overseas, where both offer free, walled-garden internet access where their services get preferential treatment from wireless carriers (see Facebook Zero or Google Free Zone).

With the neutrality debate taking root globally, both Facebook and Google are taking increased criticism for "supporting net neutrality in the US" (though, as we've noted, they really haven't) while pushing for zero-rated models that trample neutrality overseas. In India for example, regulators are now being bombarded with comments from a public that's realizing just how badly these models tilt the entire massive playing field toward the gaping maws of industry giants, whether that's the regional wireless company, Facebook, or both:

"Reliance’s deal with Facebook, called Internet.org, effectively gives you one social network at no cost, while forcing you to pay for others like LinkedIn. It might seem like the company being generous, but it only works because Facebook and Reliance were able to strike a deal. A smaller social networking firm that doesn’t have Facebook’s resources or influence would find it harder to build an audience, because they’re competing with a free service....Pahwa pointed out that this strategy could result in dominance of major players in the market and crowding out of others who can’t afford to “strike deals or pay up for getting access to the fast lane".

Indian Internet users aren't alone in realizing the problems inherent in zero rated apps. A growing chorus of Internet content companies have started backing away from zero rated efforts like Airtel Zero or Facebook's Internet.org deal with Reliance. The Times Group, India Today, NDTV, IBNLive, NewsHunt, and BBC have all pulled out of the initiatives citing the bad precedent set in cherry picking which content gets a free ride. Flight, hotel and travel price tracking website Cleartrip also dropped out, posting to their blog that such exclusionary practices are against the company's DNA:

"...the recent debate around #NetNeutrality gave us pause to rethink our approach to Internet.org and the idea of large corporations getting involved with picking and choosing who gets access to what and how fast. What started off with providing a simple search service has us now concerned with influencing customer decision-making by forcing options on them, something that is against our core DNA."

While the neutrality debate in India may be fresher, the public and industry there are already more in tune to the threat posed by zero rated apps than many U.S. customers and companies are. And the U.S. and India are obviously seeing more conversation on this issue than, say, markets in Africa. There, in many markets, users are happy to get access no matter what it looks like, and Google and Facebook are aggressively jockeying for pole position over billions in new advertising eyeballs. These services in particular are a two-sided coin. On the one side, both companies are correct in noting that the services deliver limited web access (and all the great things that entails) to those who currently don't have service. On the other hand, as Susan Crawford highlighted a few years ago, what these users are getting is a notable bastardization of the internet:

"For poorer people, Internet access will equal Facebook. That’s not the Internet—that’s being fodder for someone else’s ad-targeting business," she says. "That’s entrenching and amplifying existing inequalities and contributing to poverty of imagination—a crucial limitation on human life."

If you're building internet access from the ground up dominated by a few ISPs and a few content gatekeepers, it certainly makes you wonder what kind of strange monstrosities these models evolve into. When the internet starts from a place of openness, companies have a steeper uphill climb. Here in the States, both AT&T and T-Mobile have struggled to convince the public that these models heavily benefit consumers. AT&T has been setting a horrible precedent by allowing deep pocketed companies to bypass usage caps, pitching the concept as "1-800" or "free shipping" for data. T-Mobile's had better luck convincing users that exempting only the biggest music services is a consumer boon for the ages (it's not, because it puts non-profits, independents and smaller companies in an immediate competitive hole).

While zero rated apps are now banned by net neutrality rules in a growing list of countries (Chile, Slovenia, The Netherlands and Canada), the FCC's new rules appear to take a hands off approach to zero rating. That's a decision you can be sure Facebook and Google -- both still frequently praised in the media as champions of net neutrality -- had notable input on.

Filed Under: favoritism, india, internet, net neutrality, picking favorites, zero rating
Companies: airtel, facebook, google, internet.org, reliance, wikipedia

FCC Commissioner Spearheads Flimsy Attempt To Shame And Discredit Netflix For Its Title II Support

from the faux-outrage dept

Given Netflix's rather vocal opposition to usage caps and support of Title II (pdf), the company is unsurprisingly public enemy number one for many major broadband and TV companies (and their various PR, lobbying and policy folk) at the moment. There's a pretty apparent attempt on some fronts to paint Netflix as the villain in the recent interconnection feuds, in which Netflix (and companies like Level 3 and Cogent) insist incumbent ISPs are intentionally letting interconnection points degrade to extract new fees from content and service companies.

This week, Netflix's supposed villainy was highlighted by FCC Commissioner Ajit Pai, who penned a letter (pdf) to the company complaining that Netflix had abandoned its net neutrality principles and had been hypocritically encouraging the creation of Internet "fast lanes":

"Netflix has been one of the principal advocates for subjecting Internet service providers (ISPs) to public utility regulation under Title II of the Communications Act, arguing that this step is necessary to prevent the development of so-called "fast lanes" on the Internet. "The basic argument," you have said, “is that we're big believers in the free and open Internet." For this reason, I was surprised to learn of allegations that Netflix has been working to effectively secure "fast lanes" for its own content on ISPs' networks at the expense of its competitors.

What is Pai's evidence that the company is being a hypocrite on neutrality? Exhibit A appears to be Netflix's refusal to join a new coalition called the Streaming Video Alliance, whose founding members include two of the biggest players in the cable and broadband industry: Comcast and Charter Communications. One of the group's other founding members is Frost and Sullivan analyst Dan Rayburn, who has spent much of the last year telling anyone who'll listen that incumbent ISPs with thirty years of anti-competitive behavior are just misunderstood, and it's Netflix that's to blame for most of the modern era's Internet video problems.

That Netflix didn't feel the overwhelming need to join this coalition of BFFs isn't particularly surprising.

Pai's other example of Netflix's fast lane hypocrisy appears to be simply the fact that Netflix runs its own content delivery network, Netflix Open Connect. Open Connect is a free-to-join CDN that involves ISPs hosting Netflix caching hardware on their network, something that reduces Netflix's costs, but also reduces overall ISP traffic load, improving video delivery efficiency all around. To hear Pai tell it however, Netflix's CDN is a big, bad bogeyman:

"Some have suggested that Netflix has taken these actions because the company is currently installing its own proprietary caching appliances throughout ISPs' networks as part of its Open Connect program. If ISPs were to install open caching appliances throughout their networks, all video content providers—including Netflix—could compete on a level playing field. If, however, ISPs were to install Netflix's proprietary caching appliance instead, Netflix's videos would run the equivalent of a 100-yard dash while its competitors' videos would have to run a marathon."

You might recall that AT&T, Verizon and Comcast refused to participate in Netflix's CDN, instead forcing Netflix to pay them new interconnection fees to keep streaming performance from foundering. Meanwhile, Netflix makes the company's peering locations, guidelines, hardware design and the open source software components largely open to inspection, so while you can't go build Netflix CDN hardware yourself, we're not exactly talking about state secrets. It's also worth noting that small and mid-sized ISPs (usually with much better track records on consumer issues than their larger brethren and no TV revenues to protect) have wholeheartedly supported Netflix's efforts. Dane Jasper, CEO of Sonic.net, for example called Netflix's Open Connect "brilliant." George Mitsopoulos, COO of independent ISP Ikanos/DSLExtreme, also similarly notes that Open Connect is of great benefit to ISPs.

None of this is to say Netflix is a saint. Everyone is running blindly toward the Internet video cash trough, and all of them want everyone using their preferred solutions, with meaningful transparency an ongoing problem. To be sure, Netflix's ISP rankings system is also a bit of a ham-handed attempt to name and shame ISPs that don't use its CDN (Open Connect partners unsurprisingly seeing better positioning), and the company's initial decision to restrict higher-quality "Super HD" streams to just these partners was thankfully reversed. That said, at some point you have to ask yourself based on history and experience: which do you trust more on consumer issues: Comcast or Netflix?

You also have to wonder why an FCC Commissioner that has no problems with rampant media consolidation, net neutrality violations or the lack of broadband competition is just so very concerned about such a curiously specific issue. Of all the pressing consumer issues facing the telecom and TV market (usage caps, neutrality, lack of competition, sneaky fees, cramming, etc.) Pai's greatest concern is Netflix's free, entirely voluntary content delivery network? If one didn't know any better, one might get the impression that the legacy TV industry and its loyal politicians and pundits are putting on a political dog and pony show to punish Netflix for standing up to companies with thirty years of anti-competitive behavior under their belts.

Filed Under: ajit pai, content delivery networks, dan rayburn, favoritism, fcc, net neutrality, open internet, standards, streaming
Companies: charter communications, comcast, netflix