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Like a Virgin

Back in November 2005 the CEO of AT&T, Ed Whitacre, told Business Week that he was tired of big Internet sites like Google and Yahoo! using "my pipes" "for free". With those words he launched the issue of network neutrality onto the front pages and into the public consciousness. At the time, it seemed like what one of my editors used to grandly dismiss as an "American issue". (One such issue, it's entertaining to remember now, was spam. That was in 1997.) The only company dominant enough and possessed of sufficient infrastructure to impose carriage charges on content providers in the UK was BT - and if BT had tried anything like that Ofcom would - probably - have stomped all over it.

But what starts in America usually winds up here a few years later, and this week, the CEO of Virgin Media, Neil Berkett, threatened that video providers who don't pay for faster service may find their traffic being delivered in slow "bus lanes". Network neutrality, he said, was "a load of bollocks".

His PR people recanted - er, clarified a day or two later. We find it hard to see how a comment as direct as "a load of bollocks" could be taken out of context. However. Let's say he was briefly possessed by the spirt of Whitacre, who most certainly meant what he said.

The recharacterization of Berkett's comments: the company isn't really going to deliberately slow down YouTube and the BBC's iPlayer. Instead, it "could offer content providers deals to upgrade their provisioning." I thought this sounded like the wheeze where you're not charged more for using a credit card, you're given a discount for paying cash. But no: what they say they have in mind is direct peering, in which no money changes hands, which they admit could be viewed as a "non-neutral" solution.

But, says Keith Mitchell, a fellow member of the Open Rights Group advisory board, "They are in for a swift education in the way the global transit/peering market works if they try this." Virgin seems huge in the context of the UK, where its ownership of the former ntl/Telewest combine gives it a lock on the consumer cable market - but in the overall scheme of things it's "a very small fish in the pond compared to the Tier 1 transit providers, and the idea that they can buck this model single-handedly is laughable."

Worse, he says, "If Virgin attempts to cost recover for interconnects off content providers on anything other than a sender-keeps-all/non-settlement basis, they'll quickly find themselves in competition with the transit providers, whose significantly larger economies of scale put them in a position to provide a rather cheaper path from the content providers."

What fun. In other words, if you're, say, the BBC, and you're faced with paying extra in some form to get your content out to the Net you'd choose to pay the big trucking company with access to all the best and fastest roads and the international infrastructure rather than the man-with-a-van who roams your local neighborhood.

ISPs versus the iPlayer seems likely to run and run. It's clear, for example, that streaming is growing at a hefty clip. Obviously, within the UK the iPlayer is the biggest single contributor to this; viewers are watching a million programs a week online, sopping up 3 to 5 percent of all Internet traffic in Britain.

We've seen exactly this sort of argument before: file-sharing (music, not video!), online gaming, binary Usenet newsgroups. Why (ancient creaking voice) I remember when the big threat was the advent of the graphical Web, which nearly did kill the Net (/ancient creaking voice). The difference this time is that there is a single organization with nice, deep, taxpayer-funded pockets to dig into. Unlike the voracious spider that was Usenet, the centipede that is file-sharing, or the millipedes who were putting up Web sites, YouTube and the BBC make up an easily manageable number of easily distinguished targets for a protection racket. At the same time, the consolidation of the consumer broadband market from hundreds of dial-up providers into a few very large broadband providers means competition is increasingly mythical.

But the iPlayer is only one small piece of the puzzle. Over the next few years we're going to see many more organizations offering streaming video across the Net. For example, a few weeks ago I signed up for an annual pass for the streaming TV service for the nine biggest men's tennis tournaments of the year. The economics make sense: $70 a year versus £20 a month for Sky Sports - and I have no interest in any of Sky's other offerings - or pay nothing and "watch" really terrible low-resolution video over a free Chinese player offering rebroadcasts of uncertain legality.

The real problem, as several industry insiders have said to me lately, is pricing. "You have a product," said one incredulously, "that people want more and more of, and you can't make any money selling it?" When companies like O2 are offering broadband for £7.50 a month as a loss-leading add-on to mobile phone connections, consumers don't see why they should pay any more than that. Jerky streaming might be just the motivator to fix that.



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