July
03, 2006
Copyright Mediaware Infotech Pvt. Ltd. |
The
U.S. Congress has recently become the venue for a pitched battle.
The battle is between telecom operators ("pipe providers") and content
creators. And the issue in brief, is whether a "pipe provider" is
justified in charging for the content that passes through his pipes?
Or should the "pipe provider" continue to charge on the basis of content
volume / pipe size?
Content providers have always relied on a flat Net access rate. As
have their consumers. Now telecom cos. are clearly looking for a bigger
piece of the pie.
With telecom cos. wanting to charge more for video delivery (so that
they can fund & maintain faster pipes), "digital divide" may take
on a new meaning !
Round One
Content providers like AOL, Myspace, YouTube, Google et al occupy
the topmost layer of the broadband network. They are in direct touch
with the ultimate consumer, delivering multiple content sometimes
for a price and mostly free along with paid ads.
With video ads gaining popularity, the bandwidth consumption as well
as direct ad revenues are bound to multiply. And the new online advertising
schemes like "pay per action ads" (Google's new ads where payment
is based on sales / sales lead), are clearly based on the principle
of Net neutrality.
Loss of Net neutrality is bound to affect the digital delivery of
video & digital television.
While Net neutrality is far from being abolished, the first round
has clearly gone in favour of the U.S. telecom cos. (See box.) The
U.S. Senate Commerce Committee has not voted for implementing price
controls for broadband networks. Which indirectly means that broadband
providers could (if the law utlimately goes through), charge more
on a selective basis.
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U.S.
Senate Commerce Committee Rejects Net Neutrality?
June 28, 2006
The U.S. Senate Committee has voted in favour of a bill
which will permit U.S. telecom & cable cos. to deliver
digital video through their pipes. But it did not come
to any decision on an amendment that would prohibit
Internet service providers (mainly telecom cos.) from
discriminating against Web publishers, by blocking their
content or charging them extra.
In doing so, the U.S. Senate Commerce Committee in effect,
has rejected the amendment that would include a Net
neutrality guarantee as part of the new U.S. telecom
laws.
While the bill has a long way to go before it becomes
law (it has to be passed by the full Senate), the first
round is clearly in favour of the telecom cos.
Note: It is interesting to note that the U.S. Telecom
Regulator Federal Communications Commission (FCC) can
enforce Net neutrality without any new legislation.
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It's All About Money
AT&T Chairman Edward Whitacre is on record (Business Week, November
'05 Issue) about content providers "They don't have any fiber out
there. They don't have any wires. They use our 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!"
Telecom & cable cos want to be the new party in the transactions.
They want a piece of the action.
The Internet Is Regulated
According to telecom cos., the Internet is regulated! Because telecom
cos. are not permitted to charge different access rates to different
players. Their idea of a deregulated Net is one where the market forces
decide on the broadband access pricing structure.
On the other hand, content-providers cannot even think of a scenario
where they have to negotiate premiums with multiple Internet pipe
providers. And all said & done, how far will Net neutrality progress
if content providers do not play ball with telecom & cable cos.? No
wonder online giants like Microsoft, Amazon, Yahoo, Google, Sony are
unitedly fighting for status quo.
Whatever the outcome, Net neutrality promises to be the mother of
battles for U.S. marketers. While the rest of the world watches eagerly.
Future of Internet
Content providers & consumers feel that telecom & cable cos. are trying
to change the structure of their (beloved) Internet. At the very least,
this restructuring could force competitors into bidding wars for broadband
access for their online properties. (Imagine a Google & a Microsoft
outbidding each other for securing the fastest Net access. And that
too with multiple pipe providers.)
In short, telecom & cable cos. would have the ultimate power to decide
who gets access to the fastest lanes. And at what price.
From their angle, telecom & cable companies want a "fair" share of
the commerce which their pipes are delivering by "tiering" the Internet
(by allowing Internet service providers to charge different rates
for different client segments). This would force marketers & content
providers to "partner" with telecom & cable cos.
Unfortunately, it could also make the Web look more like Cable
or Satellite TV.
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Mediaware Infotech Pvt. Ltd.
The New Mahalaxmi Silk Mills Premises, Mathuradas Mills Estate, Opp
Kamala City, Senapati Bapat Marg,
Lower Parel (West), Mumbai 400 013.
Tel: 6660 2634 Fax: 24923765 Email : response@mediawareonline.com
Mediaware Gulf
P.O.Box No. 182620, Dubai Media City, U.A.E.
Tel: +9714 3681655 Fax: +9714 3688058 Email : m-e@mediawareonline.com
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