BT’s Battle Against the BBC’s Online Video

By Saul Hansell
Policy and Law

Net neutrality is a phrase that means a lot of things to a lot of people. But here’s one important policy question that net neutrality rules may clarify: Can an Internet provider, which may also offer cable television service, deliberately slow down connections to Internet video sources, or ask the video companies to pay to have their programming carried?

That issue, bubbling under the surface in the United States, has emerged in Britain, where BT cut the transmission speed for some online video from 8 megabits per second to less than 1 megabit per second from 5 p.m. to midnight, according to an article in The Financial Times.

“We can’t give the content providers a completely free ride and continue to give customers the [service] they want at the price they expect,” John Petter, managing director of BT Retail’s consumer business, told the newspaper.

Internet television is a hot topic in Britain in part because the BBC has made a great deal of its programming available on its iPlayer service. Since the business model of the BBC is to collect taxes from British subjects, it doesn’t have the revenue concerns that face networks in the United States.

BT’s stated reason for the speed cut is the increasing cost of carrying online video. The cost landscape in Britain is a bit different than in the United States because regulations force a separation between the part of BT that owns the phone lines that reach to people’s homes and a separate unit that offers voice, data and video services to consumers. (The reason is that other companies can buy access to BT’s wires to offer consumers their own communications services.)

Still, the underlying economics, as I wrote about in the context of Time Warner’s plan to increase fees on heavy users, mean that expanding a network to handle lots of video is a real but unexceptional cost for an Internet provider.

There are two other motives that may well be at play: making more money and undercutting competition. Big Internet providers have long grumbled about providing “free” access to big sites.

Since it was started, the Internet has been built on a “meet in the middle” economic model. If the customer of my I.S.P. is using a Web site run by the customer of your I.S.P., we both pay to bring the traffic to someplace where our networks are connected. Each I.S.P. covers its costs and hopes to profit by charging its own customers.

BT argues that this arrangement is out of whack, and that providers of high-bandwidth video services should pay more for delivery of their content. There’s no immutable law of nature that says the Internet will always work the way it does now, but BT is implicitly proposing a rather radical change.

As for competition, BT offers BT Vision, video programs by way of a set-top box connected to its broadband service. The service had difficulty competing with BSkyB, the satellite broadcaster that dominates TV in Britain. Indeed, Dan Marks, the chief executive of BT Vision, recently resigned. When it was introduced in 2006, the service was projected to have three million subscribers by the end of 2010; it now has less than 500,000 subscribers.

How this will play out depends on competitors and regulators. The Independent followed up on The Financial Times report, saying that other Internet providers did plan to ask the BBC and other video providers for payment, but it did not quote them by name. Nonetheless, two of the three other large Internet providers also have significant video businesses to protect: Virgin Media is the largest cable company in the country, and BSkyB offers Internet service (reselling service over BT’s wires). So they may well be rooting on BT’s war with the BBC.

So far, Ofcom, the British telecom regulator, has been supportive of BT’s move and told The Independent it saw no reason to intervene in the market right now.

So far, the threat to cable TV in the United States from Internet video has been more theoretical than real. There is no sign yet, other than some anecdotal news reports and comments from early-adopter Bits readers, that many people are abandoning cable. But I’m sure the pressure will grow, and a cable or phone company may well find itself tempted to cut speeds or impose tolls on Hulu, YouTube and the rest.

Setting clear rules of the road for this issue could be a rather useful result of the net neutrality debate that President Obama has promised.

Comments are no longer being accepted.

Larry June 12, 2009 · 5:54 pm

In the US, we probably have a bigger problem: some people’s ISP is also their TV signal supplier. They have a strong incentive to slow down ‘free’ video services like Hulu to prevent people from abandoning cable/satellite TV entirely (as described by the author with the Time Warner example, until Time Warner spun off its cable assets). It seems to me that BT has much less of an interest in regulating their broadband in the way described above, since they are not competing against themselves for TV entertainment revenue (except for what sounds like the ill-conceived BT vision). Why not just beef up your ISP so it’s more desirable?

b June 12, 2009 · 6:57 pm

if you pay for 10mbits, shouldn’t you get 10mbits all the time? If it isn’t really 10mbits, then they need to change the way the talk about the service to prospective customers.

Catherine Fitzpatrick June 13, 2009 · 2:46 am

“Net neutrality” is a term invented by various geek lobbies who have a vested interest in having their means of production be entirely free, and who need to reduce or eliminate their own business costs.

“Net neutrality” masks the interest groups at work like Google or various API engineers or WoW patch and Lost episode torrenters behind a fake notion of “public interest” — even going so far as to preposterously claim that their *need* to consume in the public commons should be called “the right to freedom of expression”.

The term should be relabelled “net congestion,” since that’s what the issue is about: a scarcity, which is broadband, and a demand exceeding supply.

To demand that companies provide this scarce commodity for free or low cost or with government subsidies or control is basically technocommunism. To claim that the telecoms are “already subsidized” is to dodge the issue of what it means to have broadband FURTHER subsidized by the state, indulging the need of heavy users to consume.

Good for John Petter, he has summed up the issue cogently and accurately. The effort to cast it differently as a “right” is misleading and false.

When you pay for an amount, who says you pay for a guaranteed speed? You don’t. And you are not entitled to it just because you consume more (where does the rest of real life work like that?!).

Companies may evolve different models of meters or one-time usage packs you buy or who knows what. What they will not be doing is continuing to enable you to endulge your torrenting at the expense of my email. And I will be charged more if I want to run a virtual world. And that’s ok.

There is only one way to have this debate fairly and democratically in this country, without the hijacking of the Obama administration czars on this by Silicon Valley interests, which is already happening.

And that is to stop calling it “net neutrality,” as if telecoms are supposed to endlessly supply you with broadband you need to consume. It’s about *consumption* and not content.

I do not work for a telecom; I do not represent industry interests; I don’t even have cable TV. What I simply won’t do is stand idly by while this debate skewed to the extremist left every time it is had, and I will speak up.

Detlev C.M. June 13, 2009 · 8:22 am

Very true -b – I’m living in the UK… we pay for a 8MBit/s connection but only get 3-4 MBit/s because Tiscali can’t supply more on our phone line.

If your access to a legal site is slowed – customers should complain.

However the way I know the British they’ll rant about it at home, but will never take it any further…

Apart from the fact that internet access is expensive in the UK anyway…

My grandfather in Germany has a connection of 16MBit/s – at the current exchange rate its possibly the same to slightly less of ours in the UK.
But he get’s 4 times the speed easily…
(Noticed that dowloading XP SP3 and IE8 from Microsoft)

Perseus June 13, 2009 · 2:02 pm

You pay your IPS for a connection to the Internet, but for some reason what they charge you monthly isn’t enough for them?

The ISP’s cost of moving the bits around is falling, yet when large amounts of bits move at one time and get delivered to their paying customers that somehow cost more money?

DOCSIS technology can provide the bandwidth needed for video to plain old cable TV systems and will only cost about $60 per household, but this huge expense must be covered by the content providers?

In Japan, you can get 150 Megabit per second for about $60 a month, but such wonders can’t be accomplished in the USA or UK without selling the farm?

Watching the gravy train of bits pass by without getting a piece of the action, that’s a crime. So let’s kill the goose that laid the golden egg? We can all go to sleep tonight safe in the knowledge that the business acumen that underlies the current economic crisis isn’t dead yet.

PJS June 13, 2009 · 6:27 pm

If ISP’s cannot provide guaranteed speed, whats the use of charging some sites for content .. even if they charge youtube and others, that won’t mean that anyone will get their email without any delay .. just a thought …

Daneil June 14, 2009 · 6:11 pm

This is ridiculous. The company serving the video content is paying for bandwidth. The user consuming the video is also paying for bandwidth. Nobody is getting a free ride.

For many of their packages, BT have enforced caps on the amount of bandwidth you can consume per month. Other companies that use part of the BT network have also enforced caps on monthly bandwidth, updating existing contracts with their clients.
How can BT complain, if BT chooses to offer an “unlimited package” that people are using properly, respecting the fine print fair usage policy I may add!
Essentially what they are admitting is that they can not provide the service they decided to sell.

Knut Forkalsrud June 14, 2009 · 6:33 pm

In response to Catherine Fitzpatrick’s comment: The road network is a good example where your entitlement is not dependent on your usage. It works because the value of the road network is higher when the reach is wider. The same argument can be made for internet access.

But even ignoring that, the business proposition here would be to charge consumers by usage, having metered broadband access. BT and the other providers don’t seem to want that. The most reasonable explanation I can find is that they don’t want to compete for the customer. It is much easier to exploit a monopoly on the user base and charge the content providers on the other end. The Google’s of the world are already paying based on usage on their end.

Do we really want BT to be able to extort whatever fees they want for access to BT’s customers?

EJ June 14, 2009 · 7:02 pm

This debate is all about Time Warner, Comcast, etc. finding new revenue streams. I mix Christian music for a living and move huge files up and down the net regularly. I use Earthlink DSL and they’ve never complained about me using “too much” broadband; if I use 100 gigs in a day or 1 gig in a day their costs don’t change at all, neither do I affect “Catherine Fitzpatrick”‘s email speed. It’s about charging more for the same service. Service, as most people have pointed out, that rarely lives up to it’s advertised abilities.
As a side note, internet use is not a liberal idea, I need access as much as any “telecommunist”.

Art in Olney June 14, 2009 · 7:42 pm

Shame on former AT&T (now GM) Chairman for starting that ridiculous idea, echoed above, that someone is getting something online “for free.” Just a Google and every other company that uses the Internet pays for its bandwidth, the BBC and every country in the U.K. pays for its bandwidth. That’s how information and video, requested by customers who similarly pay their monthly bills, gets shipped around.

The idea of Net Neutrality is not a recent geek invention. It goes back, in the telecom world, to the Communications Act of 1934, and was in place until 2005 when the George Bush FCC revoked for advanced services. Non-discrimination is vital to a marketplace.

The big difference between the U.K. and the U.S. is that at least over there, consumers have a choice of Internet Service Providers. Here, thanks to the FCC, we have very little. Both situations, the ability to discriminate in traffic, and the lack of competition, need to be addressed here.

Art Brodsky
Public Knowledge
Washington, D.C.

Phil Leigh June 15, 2009 · 8:42 am

Over ten years ago Bob Metcalfe who is the inventor of Ethernet predicted that the Internet would collapse because traffic was growing exponentially. ISPs used Metcalfe’s credibility to argue for higher rates.

Today we know that Metcalfe was wrong. Furthermore, the (largely dial-up) ISPs could not make their argument stick because the broadband providers saw an opportunity to obsolete the dial-up service.

Finally, the Time Warner annual report documents that the companies direct ISP cost actually *dropped* last year even as the number of subscribers grew.

In conclusion, since the traffic on the Internet has *always* increased exponentially, I am skeptical that there is justification for higher rates.

Phil Leigh June 15, 2009 · 8:58 am

Catherine Fitzpatrick:

Net Neutrality is a principle intended to insure that videos from the New York Times and the Wall Street Journal get the same access to bandwidth as the Web videos provided from Time-Warner and Comcast. In short, it is not just “geeky” interest groups that benefit from Net Neutrality.

Jason Krantz June 15, 2009 · 10:31 am

Hmm; Catherine Fitzpatrick (post #3) claims that she does not represent telecom companies, yet she sets up a straw-man argument (i.e., “net neutrality” is a code word for “free consumption of resources disguised as a first-amendment issue,” which it certainly is not. That doesn’t even make sense). She then goes from this straw man argument to discuss how the debate is skewed to the “extremist left” by “the geek lobby.”

No one wants anything for free. We all pay for our bandwidth–from consumers to big companies like abc.com. ABC pays for bandwidth to stream their “Lost” episodes part way to me; I pay for bandwidth to stream those episodes the rest of the way to my computer. You have both parties paying; what’s the problem?

Ms. Fitzpatrick, why should anyone believe this is anything other than astroturf? Even your name is generic enough to be ungoogleable.

Jason

Larry June 15, 2009 · 5:03 pm

Phil Leigh, thanks for that piece of information. I hadn’t heard that before, but Mr. Metcalfe sounds like a modern-day Malthus.

Len Henriksen June 17, 2009 · 6:54 am

I agree with the general disposition here that if you have paid for a broadband service you have paid for a set speed. I recently tried to watch the BBC’s South Pacific on iPlayer but couldn’t as I had “insufficient bandwidth”, even with a 16 meg connection. I have paid for a service to BT to operate my internet consumption through them, I have paid my TV License to enjoy the right to watch BBC programs on TV and online, yet I am the one that endures the negative consequences of BT’s conflictual commercial interests-how is this fair? Virgin Media do not operate such a stingy regulatory practice on internet access despite providing cable TV as well as being an ISP. If IPTV really is to be the future of broadcast media then such ridiculous commercial tensions need to be negotiated fairly for all parts involved. This topic is currently being discussed on //www.meettheboss.com/Discussion.aspx?discussionID=180 where discussion is focused on the future of IPTV and whether it will ever usurp the throne of conventional broadcast methods. What do you think? At the very least we need to start regulating large corporate behaviour and not lose sight of the consumer’s rights and interests as well.