by John N. Rose
OPASTCO President
A dominant producer of sports video content has entered the Internet content arena, and its Internet pay-to-play model threatens ISP broadband take rates, local competition, and your customers’ ability to purchase the online content they want.
ESPN360.com is strong-arming cable/IPTV providers who also have ISPs into buying Internet access to its sports content. ISPs are required to pay a fee based on all of their customers, not just the ones who want ESPN360 content. If an ISP doesn’t pay, the cable/IPTV provider may lose all of its ESPN-affiliated programming and none of its customers have access to ESPN360’s content. This is the anti-consumer practice known as broadband tying, and it is poised to grow. OPASTCO and other associations are working with the FCC to try to end broadband tying.
Separate from broadband tying, the Internet pay-to-play model has piqued the curiosity of many online content producers. If the Internet pay-to-play model spreads, it could affect ISPs everywhere. This raises a number of hot-button issues for small and rural ISPs:
1. Broadband could become very expensive if ESPN360-type online content producers multiply. ISPs already pay for access to the Internet backbone and transport costs. Add the costs to make Internet pay-to-play content available to their customers and the costs rise every time a new “must have” content subscriber comes calling. Today it might be ESPN360, but tomorrow it could be dozens of others. Those costs add up and someone has to pay. Either the ISP will pay out of its already tight margins or the costs will be passed on to the customer. Increases in the price of broadband, caused by these added-on programming costs, could ultimately lower the take rate and/or delay deployment of or upgrades to broadband infrastructure.
2. For the first time, consumers aren’t choosing which Internet content to buy and when they wish to pay for it. This raises questions about net neutrality. The online content is paid for and selected by the provider. Consumers have no say in which content they can or cannot receive in an Internet pay-to-play scheme. Net neutrality gives consumers the right to access any lawful Internet content of their choice, run applications and use services of their choice, connect any legal device to the network, and the right to choose their ISP, application and service providers, and content providers.
3. Small and rural cable/IPTV providers who want or are forced to participate in an Internet pay-to-play scheme must face a high price for the competitively advantageous content. A cable/IPTV provider must either pay the high price of access for every Internet subscriber or choose to forego the programming. The very largest cable/IPTV providers may be able to negotiate a low price per customer. Imagine what a small provider must pay.
The communications industry is closely watching what happens with ESPN360’s pay-to-play model. If it is successful, other online content providers could follow with exclusive Internet access pay-to-play deals. The results could be very expensive for rural broadband providers and their customers—and possibly disastrous for OPASTCO members.
1 Comment
In an environment where telecom companies had to unbundle why shouldn't content providers? Keep the pressure on. I think eventually this will result in a micropayments solution. Access any content anytime, anywhere. For each session 2 cents here, 31/2 cents there, etc. Use the credit card to fund your account, say $25. When the fund is near exhaustion replenish the account. I expect clearinghouses to surface to provide accounting services to us. I think net neutrality is here to stay.