Pay-as-go Internet access boon for cable, troublesome for Internet firms
Analysts say the Federal Communication Commission's endorsement of usage-based pricing for Internet broadband could be a boon for Internet access providers who are concerned that video Web streaming could cause customers to cancel TV service.
Craig Moffett, an analyst at Bernstein Research, wrote in a note to investors Tuesday morning that the agency's approval of pay-as-you-go broadband access "can't be overstated."
"Usage-based pricing will preserve, and even enhance, the economics of cable’s infrastructure... even if consumers eventually get some, or even all, of their video content over the Web," Moffett wrote.
FCC Chairman Julius Genachowski said in his net neutrality proposal that he recognizes the need for cable and telecom firms to manage congestion on their networks and recover the costs of building that infrastructure by charging for the highest users.
"Our work has also demonstrated the importance of business innovation to promote network
investment and efficient use of networks, including measures to match price to cost such as
usage-based pricing," Genachowski said.
This, analysts say, could be a way for cable firms to prevent users from "cutting the cord," or canceling their television services.
"Usage-based pricing is a clear positive for cable/telecom/wireless providers, but it also might be a concern for Netflix," said MF Global analyst Paul Gallant. "Depending on where the tiers were set, usage-based pricing on wire line broadband could end up deterring some people from dropping cable for over-the-top video."
Netflix has argued against paid prioritization of services that would allow a carrier to prioritize their own content or that of partners over streaming Internet content such as Netflix's videos. In its third quarter conference call, Reed Hastings, chief executive of Netflix also said the company is watching warily as broadband providers introduce tiered pricing plans.
"We have some vulnerability depending on cap usage and what happens," he said. Comcast puts its cap at 250 gigabytes, but AT&T mobile data is capped at 2 gigabytes, which is "not enough room to deliver hours and hours of high def," Hastings said.
We are definitely sensitive, as you point out, to in the long term, whether most of the
industry ends up 250 gigabytes… or two at the other extreme," Hastings said.
FCC net neutrality plan gets picked apart from all sides
| December 7, 2010; 11:47 AM ET
Categories: Comcast, FCC, Net Neutrality
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