The Internet Distinction

(Original at Harvard Law and Policy Review)

The cable system providers will have both the motive (maintaining the money flow) and the ability (physical control of the Internet Protocol pipe to the home) to ensure that competing pure Internet businesses dependent on high-capacity connections will not be a meaningful part of the media landscape unless they pay tribute to the cable operators.

[. . .]

Let’s assume that all communications across the cable-provided pipe are “just like” Internet transmissions, in that they take advantage of the efficiencies of the Internet Protocol. Let’s further assume that all of the “channels” conveyed via that pipe are digital and thus virtual—making the capacity of cable’s DOCSIS 3.0 pipe almost unlimited. Let’s further assume that cable systems have adopted a services overlay that puts IP services into a common provisioning and management system, complete with elaborate digital rights management control; in other words, the cable industry will be able to perfectly charge for each thing you do “online,” invisibly, just like the wireless carriers do. Let’s further assume that that services overlay will allow for the personal targeting of advertisements across that pipe based on (and inserted into) your use of voice, video, Internet access, social networking, gaming, and location-based services. Let’s assume, finally, that the device wars are lost and that only devices sold by the cable network provider are allowed to access all of this information and present it to consumers.

[. . .]

Avoiding disruption [of the cable Pay-TV model] depends on making over-the-top services of all kinds—not just entertainment, but any interactive engagement that depends on reliably real-time high-bandwidth communication, like videoconferencing, news, and certainly sports—less attractive to consumers. Unless, of course, those over-the-top services are willing to do a deal with the cable companies on their terms by giving them a piece of their money flow, in which case the companies have every interest in prioritizing them and calling them “specialized services,” which are not subject to any net neutrality rules. The cable distribution industry is interested in having more people sign up for its high-speed Internet access services, because that’s where future growth lies. The industry just wants to make sure that the services being accessed by consumers are in the right kind of commercial relationship with the cable distributors: providing a piece of equity, or paying for carriage. Given all of these assumptions and predictions, the existence of a single, powerful pipe to many homes in America raises a number of troubling policy questions. We will be discussing these problems for years.

The cable system providers will have both the motive (maintaining the money flow) and the ability (physical control of the Internet Protocol pipe to the home) to ensure that competing pure Internet businesses dependent on high-capacity connections will not be a meaningful part of the media landscape unless they pay tribute to the cable operators. Because the cable operators will be providing both pay-TV distribution and high-speed Internet access distribution, they are well positioned to prevent the outbreak of competition and new business models made possible by the higher-speed Internet.

[. . .]

The emergence of a de facto cable monopoly in high-speed wired Internet access in most of the country cannot stay a secret. At the least, affordability concerns will become salient at some point. Despite the best efforts of the National Cable & Telecommunications Association (NCTA) and the cable companies’ lobbyists, legislators may begin to care about telecommunications policy because the American people may begin to care.

What tools are available to confront the looming cable monopoly? At some point, the Telecommunications Act of 1996, which required basic “telecommunications” providers to be subject to regulation but has been effectively avoided through litigation and regulatory legerdemain, will need to be re-written. A mosh pit of stakeholders will do their worst.

[. . .]

It will take time, and hard work, but surely we are capable of taking on the overall question of data access without assuming that the current market structure is the right one for all of us.

CONCLUSION

The looming cable monopoly is prompting a crisis in American communications. As the big squeeze continues, the genuine economic and cultural problems created by this monopoly may become more obvious to all Americans. We could tell this story by comparing the market power of the major cable companies in this country to the worst days of the railroad and oil trusts of the early 20th century; we could do it by comparing our country’s policies on high-speed Internet access—policies pushed relentlessly forward by the incumbent network operators—to the plans of our developed-country brethren; we could do it by gathering anonymous anecdotes from people who have tried to do transactions with the cable companies and are now afraid of retribution from them. Finally, we could take a deep breath and examine our country’s approach to “culture”—once we had the courage to say the word—and the effect of these singular giant pipes on our shared future. However we decide to proceed, we should pay attention to these pipes.