The Battle to Save Netflix Moves to Washington

The future of over the top video (at least in the United States) is increasingly moving into the hands of the U.S. federal government.

On June 16, the New York Times reported that the Justice Department was investigating whether cable companies were discriminating against video providers such as YouTube and Netflix by treating their data differently (i.e. counting it toward a data cap while exempting similar data from the provider’s own Web video service from said cap). In addition to determining whether cable companies are engaged in discriminatory practices, the Justice Department is supposedly taking a broader look at video delivery in the United States. According to the Times:
The department is also said to be studying the ways in which distributors bundle disparate television channels together in all-you-can-watch packages. Distributors and programmers have resisted calls to unbundle channels, but Internet distribution may give consumers more choices in that area — assuming that data caps or other network management practices do not stand in the way.
As if on cue, the Times had another story just a week later. Can you guess the title? “Internet Providers Testing Metered Plans for Broadband.”
Imagine that.
What’s happening is obvious: the cable companies are digging a second trench around their profit margins. The first trench is the uneven application of ‘data caps’ to third party video services and the providers own Internet video (the kind that sparked the Comcast-Netflix row). If this trench is over run, the second line of defense will be to hike the price of America’s broadband access or put caps in place to discourage bandwidth-heavy applications like video streaming among price-sensitive consumers.
The Justice Department may yet rescue over the top providers from discriminatory treatment, but they can’t set the price of broadband access. Even more competition for residential broadband – the oft-cited remedy for price hikes – may not be enough. In the mobile world, there is far more competition for data access and all the major carriers have either scrapped or are poised to scrap unlimited data plans in favor of tiered pricing.
While data caps wouldn’t kill streaming video options outright, it could definitely put the brakes on future growth in the U.S. Those cord cutters, and cord shavers, who are driven by cost pressures may think twice as the economics of their Internet bill change. And, as the Times piece notes, tiered pricing would also put a crimp on pay providers attempt to “unbundle” their service by offering a selection of pay TV content to any subscriber with broadband access.
And while we’re on the subject of Washington and the future of video delivery, Dish’s Chairmen Charlie Ergen also made an appearance, testifying before the Communications and Technology Subcommittee of the Energy and Commerce Committee about Dish’s new commercial-skipping set-top box technology. Broadcasters are suing Dish over the technology, but Michigan Democrat John Dingell voiced his own concerns, as reported by National Journal:
“I’ve got an election coming up, like all my colleagues,” Dingell said, during his questioning of Dish Network Chairman Charlie Ergen. “We all put political ads on the local stations to reach our constituents. The Hopper potentially limits the ability of every member of this subcommittee to reach constituents to help them make up their minds on Election Day.
I think Dish just found their next marketing hook.