Dan Gillmor: Internet content in peril in non-competitive world

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: "Robert J. Berger" <rberger () ibd com>
Date: Wed, 22 Jan 2003 21:19:25 +0900
To: Dewayne Hendricks <dewayne () warpspeed com>, Dave Farber IP
<dave () farber net>
Subject: Dan Gillmor: Internet content in peril in non-competitive world

Posted on Tue, Jan. 21, 2003 story:PUB_DESC
Dan Gillmor: Internet content in peril in non-competitive world
By Dan Gillmor
Mercury News Technology Columnist
http://www.siliconvalley.com/mld/siliconvalley/5002309.htm

As competition bogs down for high-speed Internet access in the United
States, prices are rising. This helps explain why it costs much more for
people here to subscribe to cable-modem or digital subscriber line services
than it does, for example, next door in Canada.

Stunted competition also may be a harbinger of something even more
pernicious, says Yale Braunstein, a professor in the School of Information
Management and Systems at the University of California-Berkeley. The same
companies that are gaining oligopoly power over the transport of data have
every incentive to influence the content, too.

He's onto an issue that has gotten far less attention than it deserves. The
United States is lunging toward a short-to-medium-term future in which one
or two companies in any given community will decide what gets delivered, or
how quickly or reliably, on the vast majority of high-speed data
connections.

The question boils down to something fairly simple, Braunstein and several
other speakers noted at the Pacific Telecommunications Council annual
meeting this week. Should giant telecommunications companies -- namely the
cable and local-phone provider -- have vertical control over everything from
the data transport to the content itself? Or should we insist on a more
horizontal system, in which the owner of the pipe is obliged to provide
interconnections to competing services?

The cable and phone companies are insisting that they need vertical control
or they won't provide broadband (fast) data connections to U.S. households.
They appear to have persuaded the Federal Communications Commission's
industry-lapdog chairman, Michael Powell, and a majority of his colleagues.

What's the problem if the cable and phone companies insist on being both the
data-access providers and the Internet service providers? Simple: They will
abuse this power.

SBC Communications is now in a partnership with Yahoo for customers who sign
up for DSL connections. Yahoo content gets preferred placement on
subscribers' home pages. Subscribers can change the home page, but most
customers of any product stick with the default.

Still, it's hard to see a big problem -- so far. But Yahoo and SBC will
surely take further advantage of their partnership over time, leaving
competing information services at a disadvantage.

``It's not an on-off thing,'' says Braunstein. ``Yes, you'll be able to get
to the New York Times, but it may be harder to get there.''

News-article text will always be a relatively quick download. But when it
comes to more advanced information content, video in particular, the telecom
provider's opportunities for turning a system to its own advantage are far
greater.

This is why Walt Disney Co. signed a little-noticed letter late last year to
the Federal Communications Commission, urging the FCC to insist on equal
treatment for all Internet services on these increasingly concentrated
pipelines. Disney's co-signers included Microsoft and several
public-interest groups that are normally not on the side of either of those
companies.

The cable-TV industry responded to the letter by noting, accurately, that
Microsoft was hypocritical to be decrying the kind of anti-competitive
tactics for which it had become notorious over the years. Apparently, we
should encourage such anti-customer tricks for everyone.

The cable giants have an even greater incentive to rig their systems than
SBC does at the moment. They own much of the TV programming that flows on
their systems. Comcast, which has been given approval to buy AT&T's cable
arm, has many ownership interests in content.

Worrying about this kind of cross-ownership misses the bigger issue,
Braunstein says. You can replace ownership with exclusive contracts like
SBC's deal with Yahoo, and you've achieved the same result.

The media's inattention to this issue is at least somewhat understandable.
The threat is more theoretical than real today, at least in the United
States. People in China, where the government censors Internet content, know
firsthand the danger of centralized choke points.

Of course, the mass media, buried in a conflict of interest, are also
ignoring the current threat posed by growing ownership concentration. You'd
have to be paying close attention to realize that the Federal Communications
Commission will soon decide, with precious little debate or public input,
how much more corporate concentration it will allow in the nation's media.

Powell said a few days ago that doomsayers would be proved wrong when the
FCC finally acted, because he was also worried about too much concentration
in the major media. (For a man who once said his religion was the
marketplace, this was a surprising statement.) But he seems unconcerned by
the more worrisome form of concentration.

Of course, this wouldn't be such a problem if there were lots of data
conduits. There aren't. In the foreseeable future there won't be. So the
answer, of course, is to separate content from delivery in such concentrated
markets.

The Internet is an infinitely diverse medium. But if you can't find it, or
if there are artificial barriers to seeing it, diversity means nothing.

-- 
Robert J. Berger - Internet Bandwidth Development, LLC.
In Tokyo as Glocom visiting research fellow through April 2003
Cell: +81 80-3121-6128 Work: +81 3-5411-6613 http://www.glocom.ac.jp
eFax: +1-408-490-2868 rberger () ibd com http://www.ibd.com


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