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Wednesday, August 20, 2014

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  • With Google-Verizon Deal, Net Neutrality Uncertainty for Video Providers Rises

    A possible private deal between Google and Verizon, for how the latter will handle traffic on its wired and wireless networks, means the prospect of the FCC brokering a net neutrality consensus among key stakeholders just got less certain. The inconsistency that could result isn't good news for online and mobile video content providers seeking assurance that delivery of their content won't be affected by network operators either technically or financially.  

    To put this possible deal in context, the FCC has been trying to forge a net neutrality agreement among key parties in the wake of a recent court decision that severely curtailed its regulatory authority. The talks have been conducted in secret and the parties have pledged not to disclose their progress. The policy goal is to ensure network owners don't bias for or against any kind of traffic, so that the Internet's longstanding openness will be perpetuated.

    Online and mobile video are key elements in the net neutrality debate because many network owners (e.g. Verizon, Comcast, AT&T, etc.) are also subscription video providers. The concern has been that if "over-the-top" video sources like Netflix, Hulu, YouTube and others began looking competitive, network owners could tweak their network management policies to reduce the appeal of these alternative services. Note, many networks already have data usage caps, which will no doubt begin kicking in for some users soon as their online video consumption through various connected devices (Blu-ray players, gaming consoles, Roku, iPad, etc.) increases.

    In the past I've written that while Internet openness is essential, pre-emptive net neutrality regulation - in the absence of sustained and clear-cut network biases - would be unwise. The main problem is unintended consequences, notably reduced investments by network owners, that could result. I've advocated regulatory restraint, coupled with vigilance and a willingness to act quickly in the event of broadband ISP misbehavior.

    However, a Google-Verizon deal raises at least two concerns for me. First is the prospect of inconsistency across the Internet ecosystem. If the Google-Verizon deal doesn't become a precedent for a broader industry consensus, and other private deals are possibly made, that could leave online video providers with a patchwork environment to navigate. It's not clear yet whether Google-Verizon also contemplates payments by content providers for preferred network access, but if it does then their financial picture would be further scrambled.

    Second, there's speculation that the Google-Verizon deal only covers Verizon's wired network, not its massive wireless network. If so, that sets up an artificial dichotomy just as mobile video usage is set to take off. Particularly with Verizon's high-speed LTE deployments just months away, drawing a distinction between wired and wireless makes little sense. And because Google and Verizon are such close wireless partners, with Google's Android OS helping Verizon gain strength in the smartphone market, there's a perception of preferred treatment for YouTube and other possible Google content services.

    Add it all up and a private Google-Verizon deal not only complicates the FCC's net neutrality policymaking process, it also creates a highly uncertain environment for online video providers. It is yet another twist in the ongoing net neutrality saga.

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