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TV overhaul fueling battle over net neutrality

The outcome of a battle over net-neutrality regulations will hit one of America’s most beloved daily fixtures: the living-room TV.

The way we watch television is undergoing a major overhaul. And that has investors, analysts and public interest groups scrambling to set the stage for how businesses will be able to make a footprint in the competitive and nascent market.

In the second quarter, the number of paid television subscribers to cable and other services dropped for the first time on record by 216,000, according to a recent report by SNL Kagan. Meanwhile, consumers are clamoring for more video news and entertainment online, with streaming-video views up six-fold last month, according to Comscore. Of course, online video viewing is still tiny compared to traditional broadcast and cable viewing, with just 4 percent share of the overall market.

But investors and analysts expect that growth to explode. Google is getting into the market, with CEO Eric Schmidt saying earlier this week that the company will introduce its answer to Apple’s TV product next year. Netflix, meanwhile, is teaming up with game console makers to bring television shows and movies on demand to homes, for less than most cable and satellite television service providers charge.

Amid this activity, a battle is underway over Federal Communications Commission rules that may shape how broadband providers such as Comcast, Verizon Communications and AT&T respond to the growing industry for Internet video.

“The bottom line is that investment in infrastructure is expensive and there is still no economic model for making money off video on the Internet. That means carriers need flexibility,” said Gillis Cashman, a general partner at M/C Venture Partners in Boston. The venture firm has invested in several broadband companies, such as Baja Broadband and Zayo Bandwidth.

Such flexibility could include tiered pricing – or charging consumers by bandwidth consumption, he said. Carriers should also have the ability to make money from deals with content firms and applications companies. Imagine AT&T offering a better-quality channel of service for gamers through a partnership with Nintendo, for example. Or Verizon offering better download speeds for HD YouTube clips – another hypothetical scenario.

Such arrangements are being hammered out at the FCC, which has tried to get Internet service providers and opposing content and applications firms to come to an agreement on whether tiered service offering would be allowed in any net-neutrality rules.

“The problem here in its barest form is that there could be anticompetitive behavior,” said Matt Wood, an associate director for Media Access Project, a nonprofit group advocating for media reform. “How can you ensure a carrier won’t prioritize their own content or those of a partner to shut out a competitor online?”

The idea of paying for priority – known as managed services – was proposed by Google and Verizon in a agreement intended as a blueprint for congressional legislation. AT&T has argued that such business arrangements already exist online. The telecom giant sparked criticism from the international engineering standards body, Internet Engineering Task Force, when it cited past documents by the group that AT&T said supported paid prioritization. IETF’s chairman said AT&T’s characterization of its view on paid prioritization was misleading, according to a report by CNET.

Instead, public interest groups say consumers, and not carriers, should call the shots on what applications and content they choose.

In a letter to the FCC, the public interest group Center for Democracy & Technology said support of managed services by AT&T, Verizon and Google could lead to gatekeeping of Internet content.

“Ensuring that operators do not engage in paid prioritization is fundamental to
ensuring that the Internet continues to operate as an open, interconnected
platform for commerce, speech, and innovation,” the center wrote.

By Cecilia Kang  |  September 9, 2010; 9:00 AM ET
Categories:  AT&T , Broadband , Comcast , FCC , Google , Net Neutrality  
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Comments

The reason Cable TV subscriptions is down is because of the prices and constant rate hikes. Internet accessibility is also eroding into their once untouchable market.
Yes, Google, Apple, Amazon etc. are coming out with TV over the internet soon, but there are also smaller players like, SeeTVPC [dot] com. The cumulative effect off all this competition is making it harder for traditional cable tv to grow.

Posted by: monicapellar | September 9, 2010 2:51 PM | Report abuse

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