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Studios neutral no more on neutrality - July 20, 2007

There were two ways the studios could have approached the question of Net neutrality.

One would have been to recognize their long-term business interest in open access to the network and to support the principle of neutrality.

Today, the studios make the bulk of their money from the sale of DVDs and the theatrical box office. But it's inevitable that distribution over IP-based networks will some day be the dominant business of content creators.

That makes the issue of access to those networks critical to the studios' long-term profitability.

Allowing network operators to discriminate on the basis of content puts them in essentially the same gate-keeping position as cable and satellite operators, which ought to give programmers pause.

Getting and keeping channel space on a cable system is a never-ending negotiation with the operator. If your programming is compelling enough, you may have the leverage to charge the operator for the right to transmit it. But if your programming is new, or untested, or aimed at a niche audience, you may have to pay for access to the system's subscribers.

Either way, your margins are always subject to negotiation.

In talking with studio execs over the years about Net neutrality, some have indicated they sort of like the idea of a market for network bandwidth, figuring they can afford to pay the freight and some of their competitors might not be. So they don't mind the idea of allowing operators to charge programmers for the use of their networks.

But the issue isn't the price of bandwidth (i.e. use), which everyone, including a programmer's competitors must pay. It's the price of access. 

If an operator can say "yes" to some content, and "no" to some other, then another party has leverage over your margins--a situation that sometimes can't be helped but that no business should ever seek for itself.

Besides, network operators could charge for bandwidth based on how much you use without violating the principle of open and non-discriminatory access to the network. Traditional telephone networks have long operated on exactly that principle.

True, embracing the cause of Net neutrality, for the studios, would have meant making common cause with their frequent critics in the public interest community. But in this case, they might just have had a common interest.

The other approach the studios could have taken to net neutrality would be to see the debate through the lens of near-term concerns like Internet piracy.

Guess which one they chose?

In its filing with the FCC in response to the agency's Notice of Inquiry into broadband industry practices, the MPAA came out against neutrality regulation, on the grounds that it might interfere with operators' ability to implement technology to filter unauthorized copyrighted content from their networks--assuming they could be persuaded to do so.

"Whatever the FCC decides to do about Net Neutrality," the filing says, "it is crucial that the action not inhibit the development and deployment of these new [filtering] technologies, or inhibit the ability of content producers, distributors and Internet Service Providers to make arrangements to harness technology to solve problems involving quality of service; security; traffic shaping; bandwidth hogging; caching; jitter/latency; and other factors."

That "make arrangements" bit is a nice touch.

In other words, a content neutrality requirement might prohibit network operators from blocking content coming from certain applications or using certain protocols the studios don't like, such as peer-to-peer file-sharing networks. In order to block such content, the network operator must play the role of gate keeper.

Whether that turns out to make good business sense for the studios in the long term is, apparently, a different question.

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