In a new twist on the subject, Disney is being accused of pushing the boundaries of network neutrality principles. And if Disney gets away with it, other content owners are liable to follow, making broadband more expensive and less accessible, according to the American Cable Association.
As the Federal Communications Commission collects formal input on national broadband policy, the ACA appears to be one of the few respondents, if not the only one, to call attention to what it fears can turn into a particularly nasty development for all ISPs: the migration of cable network pricing practices to the Web, which will be to the detriment of consumer and Internet service providers – including cable operators.
In the cable business, all programmers charge a fee based on a video provider’s entire subscriber base, not on actual viewers. It has also become common practice for some programmers with one desirable channel to threaten to withhold access to that channel unless providers also carry that programmer’s other, less frequently watched channels.
Disney, with its ESPN network, has been the biggest source of video provider complaints on both counts – Disney frequently forces any provider that wants ESPN to also broadcast other ESPN-branded channels. ESPN also has long charged far, far more per subscriber than any other network.
The ACA says Disney is now doing the same thing with its ESPN 360 Web site. Disney wants ISPs to pay for ESPN 360 per subscriber, and threatens to block access to ESPN 360 from any subscriber of any ISP that refuses to pay, the ACA says.
Content providers have been talking about adapting the cable business model to the Web. For example, Jeff Zucker, CEO of NBC Universal, has said so explicitly (story here; WSJ subscription required). The devil is in the details.
The ACA does not object to a content provider directly charging consumers a subscription fee for content on the Web.
The ACA does object to:
- Content owners forcing the ISP to become the billing agent. Under those circumstances, the ISP must then turn around and charge all of its customers higher fees for content, including those who don’t access the content. The practical result is that the programmer inoculates itself from any risk, essentially by hiding behind the ISP, which takes all the flak for rising prices.
- Content owners threatening to withhold content. If an ISP were to threaten to block access to a specific programmer’s content, the ISP would be investigated for unfair business practices – violating network neutrality principles. Content programmers should not have dispensation to violate those same principles.
Adding legitimacy to fears that powerful content owners consider blocking online access to content to be an allowable business practice were the events associated with a carriage spat between Viacom on one hand and Time Warner Cable and Bright House Networks on the other. The dispute got particularly ugly when Viacom threatened not only to pull its content from the two operators’ cable networks, but also threatened to block access to its online content from any consumer with a TWC or Bright House address, as reported by DSL Reports (story here).
The ACA said that if Disney and other programmers get away with forcing ISPs to charge a per-sub fee, and that if Disney, Viacom and others can get away with threatening to cutoff access to any ISP and its customers that fail to comply with their demands, it “will cripple the national effort to deliver affordable broadband access to every U.S. household.”
The ACA’s constituency – smaller cable operators – is most likely to be harmed because they have less leverage to negotiate with programmers, and their customers tend to be most sensitive to fee increases.
In its comments filed with the FCC, ACA President and CEO Matthew Polka continued, “The FCC and parties involved in the net neutrality debate should be concerned that Web-based content and service providers – such as the Walt Disney Co., Google, Skype and others – will drive up the retail cost of broadband access and drive down new adoption rates.”
An ESPN spokesman disputed the ACA accusation, saying the company does not force distributors -- small or large -- to carry any of its products, and ESPN licenses only ESPN to distributors.
ESPN vice president Katina Arnold provided the following statement: “ESPN360.com is a business that would simply not exist but for this economic model, and it offers over 3,500 live events which would mostly not otherwise be seen. It's typical ACA is making unsubstantiated claims, and this is another attempt to convince the government to give it valuable programming for free."