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Content Providers Square Off Against Phone, Cable Companies

Net-Neutrality Battle Could Decide Future of Internet

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WASHINGTON (AdAge.com) -- To hear Net-neutrality advocates tell it, phone and cable companies are out to change the very structure of the Internet.
Net neutrality could be the biggest congressional battle of the year for marketers.
Net neutrality could be the biggest congressional battle of the year for marketers. Credit: AP

In a best-case scenario, they say, competing marketers such as Google and Yahoo, Ford and GM, and Microsoft and Amazon would wage broadband bidding battles to enter the fastest lanes of the information superhighway. In a worst-case scenario, phone and cable companies simply would give their own siblings preferred access to the fast lanes, shunting others into the slow lanes, potentially costing them customers and eyeballs for their ads.

Battle of the year
Phone and cable companies claim they just want a fair shake and promise they can be trusted to do the right thing with a deregulated Internet. What is clear is that this is becoming the biggest congressional battle of the year for marketers, for whom the Internet has become a vital sales, CRM and advertising channel.

The potential winners if tiered Internet becomes a reality: the nation's big phone and cable companies, as well as the marketing partners who can afford the tolls for the access required to provide high-speed video and audio. The losers: consumers, who may have fewer choices and could see prices rise for Internet downloads; content providers that don't hook up with the phone or cable companies; content providers that compete with phone or cable companies; and the raft of small businesses and consumers who won't be able to compete, period.

The battle started as telephone companies pushed to have the broadband space deregulated. Opponents claimed that certain aspects of the proposed legislation would allow Internet service providers to charge different rates for different bandwidth speeds, creating a tiered Internet. They began lobbying for so-called Net neutrality, which would in essence keep the same speeds available to all users -- content provider or consumer.

A-list of content providers
This isn't simply a matter of disgruntled open-source geeks fighting the man. The roster of companies clamoring for Net neutrality reads like an A-list of major content providers: Microsoft, Amazon, Yahoo, Google, eBay (owner of Skype), Travelocity and Sony are among those advocating legislation barring the phone and cable companies from imposing tolls and discriminating among content.

If a tiered Internet were put in place -- still an if, now that the House Judiciary Committee has sent its own legislation guaranteeing Net neutrality to the floor and the Senate Commerce Committee is considering an amendment imposing net neutrality -- the major content providers could afford to pay to play, but the ramifications would be felt by both consumers and marketers. It could change which sites consumers use to download music and videos, search the Web and even book travel reservations.

It could force marketers and media companies to take telephone companies and cable providers as new partners. Finally, it could raise Internet ad prices either indirectly, as content providers look to lessen the impact of the new tolls, or directly, as marketers are required to pay to use the better pipes to deliver their advertising. It also could concentrate Web users (and therefore ad dollars) with those providers willing and able to pay the fees. Sound familiar? Glenn Reynolds, a law professor and a former communications lawyer, warned that tiered service would "likely result in an Internet that looks more like cable TV than the Internet."

The big fear
"The big fear is that they are going to charge me money to deliver the content to the end user," said Bruce Eisen, president of CinemaNow, a Web site that offers licensed downloads of movies and TV shows. He said the company normally doesn't get involved in lobbying, but "this one seems more pressing. I want to make sure our little voice is heard."

Julie Supan, senior director of marketing for YouTube, said there is concern that without Net neutrality, what emerges will be discrimination among content providers in the technical quality of Web sites.

"The Internet has leveled the playing field for all users, allowing everyday people to have their voices heard by millions of people. This is what YouTube is committed to as well," she said. "Net neutrality prevents gatekeepers from blocking or discriminating against new ideas or new technologies. It is the reason the Internet has become an unrivaled environment for economic innovation, open communication and free speech. It ensures that Internet users, not Internet providers, choose which Web sites users access."

Phone companies, on the other hand, argue that the Net neutrality fight is a silly one -- an attempt to impose a government solution on a problem that doesn't yet exist. They also argue that Net neutrality would make it difficult to bring technical innovations to market.

'Imagined Internet ills'
"Net neutrality legislation endangers both the future of video choice and the accelerated broadband investment that is just beginning to gain traction," Tom Taulke, Verizon exec VP, told the Senate Commerce Committee last week. He said the request to regulate the Internet "is based on hypothetical and imagined Internet ills, as opposed to real harm."

But earlier comments by other phone executives haven't exactly instilled faith in content providers. AT&T Chairman Edward E. Whitacre Jr. was quoted in Business Week in November complaining about content providers. "They don't have any fiber out there. They don't have any wires. They use my lines for free -- and that's bull," he said. "For a Google or a Yahoo or a Vonage or anybody to expect to use these pipes for free is nuts!"

Daniel Berninger, a senior analyst with Tier1 Research, said phone companies "want an additional party in the transactions. They are watching all the commerce going back and forth and want a piece of the action."

Media companies remain silent
Oddly, while some big marketers are raising the alarm about Net neutrality, media companies have been silent. Disney/ABC, NBC and CBS all declined requests for comment on Net neutrality. "Things in Washington tend to get compartmentalized," said Art Brodsky, a spokesman for Public Knowledge, a group organizing for Net neutrality. "A lot of guys aren't focusing on this as an issue that could drastically affect their businesses."

But even some Net-neutrality supporters say all the hand-wringing may be moot. Jeff Jarvis, who blogs at BuzzMachine.com, said competition from wireless providers and peer-to-peer technology (such as BitTorrent) would foil tiered service. And the content providers might not play along.

"From a content-provider perspective, it's simply unworkable to imagine that they would have to negotiate bribes to no end of bandwidth providers across the country," Mr. Jarvis said. "Now, having said all that, we must keep Net neutrality as an expectation in Internet access. The broadband Internet is just too important to the business, strategic, educational and cultural needs of the nation to allow it to be hampered on behalf of a few crumbling companies."
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