This isn’t about Facebook or this year’s TV up fronts. Those two topics have been beaten to death all week. So I want to talk about a smaller story with (potentially) much bigger ramifications.
This week, news broke that Comcast is giving up on its broadband caps. That’s the good news. The bad news is that the company is now experimenting with a system that would allow it to bill customers for the data they use. The New York Times has the details.
In a sense, this is actually an old story. For several years now, Internet service providers have been angling toward a model that allows them to charge heavy users more. But back when the ISPs first started floating that idea, the so-called heavy users were probably downloading pirated content, or at the very least frequenting torrent sites, where, you guessed it, they were probably downloading pirated content. That was a few years ago. But in Internet-time it was an eternity. To give you some perspective, the first time I remember hearing that news was right around 2008. Back then, I was just warming up to the idea of streaming Netflix. But most nights, if I wanted to watch a movie, I used a DVD.
Fast-forward to today and you should be able to figure out why news that the nation’s largest cable provider had floated the idea of charging $10 per GB block might have some people worried. After all, we’re all becoming heavier users, especially those of us who have cut the chord. But even if the pricing is fair, the pay-per-use model may not bode well for online video, which eats up a lot of space on the network.
Right now, we’re still talking about potential winners and losers in the online video space. Will Hulu beat Netflix? Will Apple beat Amazon? Will YouTube’s premium channels gain traction? Or, will Comcast crush all of these companies? As Netflix pointed out, one of the biggest problems with the Comcast plan is that so far the company doesn’t intend to count its own content against the meter. That certainly seems shady. But it also highlights the real problem with pay-per-use, because it forces consumers to make choices about what they watch based on factors like how much data they have left in their plan that month and — even more alarming — which company is willing to subsidize the delivery. If those are the questions (rather than, is this a good video?), then it won’t be long before we’re done with the Internet as we know it. Instead, we’ll have a platform that isn’t much different from linear TV. The company that provides your broadband will set the prices, and that will in turn allow them to determine what most of us watch.
That’s bad news for consumers. But it’s terrible news for advertisers. Branded content probably won’t be high on anyone’s list when everything you watch counts against the meter. Worse, marketers will inevitably go back to a media-buying model. Except that ISPs will have a stronger position for setting prices than TV networks because the ISP market isn’t all that competitive. That’s bad for established brands, but it’s a real curse for new advertisers because they won’t have the budget to compete.
Improving broadband in the U.S. is a serious issue, and I understand that ISPs need to be paid. But they also need to have the right incentives. ISPs aren’t the enemy here, but they easily could be. The pay-per-use model isn’t the right answer here. If we want the best content, we need broadband access that doesn’t favor one type of content over another.