The telcos are doubly damned.
On the one hand, American telecommunications companies continue to hold back TV’s natural evolution. Television service hasn’t improved for decades. To watch your favorite programs, you still have to buy overpriced packages of channels you hate. Even now, when pervasive broadband invites infinite distribution alternatives, the telcos ruthlessly stymie innovation and strong-arm content providers into antiquated deals.[1]
On the other hand, the telcos seem intent on breaking the Internet. Verizon recently won a court case against the FCC, invalidating rules that prevented ISPs from discriminating against traffic. Net neutrality—so key to free speech and healthy competition—is now on death watch. And because telcos own local monopolies in so many markets, Americans may have no choice but to accept it. We’ll pay whatever the ISP demands, accept whatever speeds are available, and put up with whatever crippled version of the Internet they deign to offer.
One company is uniquely impacted by both telco sins. Netflix, the one-time DVD-by-mail startup and current king of streaming video, has a stake in both TV’s evolution and net neutrality.
On the one hand, Netflix represents the future of television. Watch what you want, when you want it, at one low price. Give your customer a simple, intuitive interface, available on any device, anywhere in the world. Just compare Netflix’s clean design to your cable box’s tangled, unresponsive, janky mess of a menu.
Of course, Netflix depends on content providers who sit under the telcos’ thumb. At any time, the streaming service could lose its content deals, leaving behind a wasteland of straight-to-DVD movies and outdated TV shows.
That’s why it’s so important that Netflix develop its own content. House of Cards, Orange is the New Black, and Arrested Development aren’t just fun side-projects. They represent Netflix’s future and the future of TV. Let the telcos lock down traditional programming. It won’t matter, if you produce original shows that the viewers adore.
Netflix also stands to be victimized by the second ISP sin: hobbling the Internet. Netflix currently accounts for a huge chunk of U.S. Internet traffic. If the telcos target anyone for “traffic shaping,” they’ll target Netflix. Imagine a world where Verizon slows Netflix to a crawl (“Buffering… buffering…”), but lets its own streaming service scream through the pipes.
That’s why Netflix has already taken a preemptive, offensive stance against traffic shaping. Soon after the FCC lost its net neutrality case against Verizon, Netflix CEO Reed Hastings posted a strongly-worded letter to investors. He vowed to fight any attempt by the ISPs to slow down Internet video. In response, Hastings warned, Netflix would “vigorously protest and encourage our members to demand the open Internet.” Want to see someone get angry? Interrupt their Breaking Bad binge.
American telcos own the infrastructure that links us to the wider Internet. But they don’t own the Internet itself. They can’t hold back new TV business models forever. They can’t escape the fact that their customers just want a big, fat, wide-open connection to the wider network. Hopefully, the telcos accept their “dumb pipe” destiny quietly. But if they can’t (or won’t), let’s hope that Netflix flexes its muscles.
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And even when the content companies do stream online, they often require a cable or satellite subscription. In other words, they’re scared of losing their lucrative telco contracts. ↩
Matt Hauger 