Thank God We Don't Have Cable Neutrality

Time Warner Cable, the owners of the Dodgers local broadcast rights is continuing to battle with local cable channels to be added to their cable package.  Like last year, it appears that no deal will be forthcoming and the Dodgers (and perhaps more disheartening, Vin Scully in his last year) won't be on many TV sets this summer in LA.  Kevin Drum essentially says bravo to the cable companies for opposing the Dodgers bid to jack up basic cable rates in the area.

Boo hoo. They tried everything—everything, I tell you. Except, of course, for the one thing that would have worked: the right to make the Dodgers an extra-cost option, not part of basic cable. Most cable operators see no reason that every television viewer in the LA basin should have to pay 60 bucks a year more in cable fees regardless of whether or not they care about baseball.

And that's the one thing TWC won't do. Why? Because then it will become crystal clear just how few households actually care enough about the Dodgers to pay for them. And that would truly be a disaster beyond reckoning. There's a limit to the amount of sports programming that people are willing to have crammed down their throats!

I actually agree with him, and will add that it is always great to see a progressive acknowledge consumers do actually exercise accountability on businesses.

But I will observe that had we adopted cable neutrality rules** as we have for net neutrality, the cable companies would have found it impossible, or at least much more difficult, to oppose carriage by a pushy and expensive content provider.  It is this sort of intra-supply-chain tug of war that generally benefits consumers in the long run (as it has in LA, at least for Drum) that is essentially outlawed by net neutrality rules which basically declare content providers the victors by default.  As I wrote before:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators....

I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking.

** Footnote:  OK, we sortof did have cable neutrality in one respect -- over the air broadcasters were able to obtain crony legislation that cable companies had to carry every locally broadcast channel.  So that channel 59 that you never bothered to watch now get's equal treatment with the NBC affiliate.   This was a huge boon for these stations, and the value of these often tiny stations exploded with this must-carry rule.  Essentially they were given an asset for free, ie position in a cable lineup, that other competitors had to fight for.

Al Gore, as an aside, actually became rich with exactly this game.   It is hard to fight your way into a cable lineup nowadays.  Al Gore did it with this Current TV startup based on his name and a promise of a sort of MTV for politics.  The channel went nowhere and lost a lot of money, but it now had one valuable asset -- placement in cable TV lineups.  So it sold this asset to Al Jazzera, which had struggled to get placement.

  • Pete Chiarizio

    Back east, we're going through the same thing with the Yankees and Comcast; two things I could care less about as a cordcutter of 5 years. It's like no one is willing to pay for what they want until they exhaust every effort to get the uninterested to pay part of their way - whether it's sports programming and stadiums, light rail, every Bernie Sanders idea, etc....

  • Mondak

    Sports programming is the only reason I still have not cut the cord. There is so many good options for watching other content with Netflix and Amazon that I wouldn't really miss anything too much. My Achilles heel is the NFL. I watch like every damn every week.

    The interesting thing to me is that "Cable" was a bundle of content with a delivery method. Now however, if I could PICK what content I get and have it delivered by another method (internet) what loyalty would I have to a cable company who has been awful at every step. I read about cable companies complaining about the $6.10 they pay to ESPN. I'd pay $10 / month for ESPN properties, buy an HD over the air antenna for $50 one time, and have no reason to keep cable.

    Also, I am in favor of "Net Neutrality" until I have real choices for delivery. The market can't respond with an un-throttled option if there really is only one or two providers in an area.

  • LoneSnark

    Sure, and since your internet provider has a monopoly, you're going to have to pay whatever costs content producers impose upon your ISP. Yes, we started from a free system, so culture takes awhile to shift. But it is only a matter of time until a content provider insists on the ISP not only paying for unequal peering, but also paying hosting fees, or any other cost it can get away with from the FCC. After-all, not much difference between forcing AT&T to spend millions dollars running fiber and upgrading equipment so Netflix doesn't have to and just forcing AT&T to cut a check to Netflix.

  • mx

    This view doesn't take into account the differences between cable TV providers and ISPs. Cable companies, or more generally, multichannel video programming distributors (MVPDs), package a bundle of video channels together into a service and sell it to customers, collecting revenue per channel/user from subscribers, remitting it back to the networks (some of which may be owned by the MVPD itself), and keeping something for themselves to pay for infrastructure, overhead, and profit. In contrast, ISPs, since the walled garden era of Prodigy and AOL is over, provide access to the entire internet; they don't feed subscriber revenue all the way up the chain to the individual websites their users choose to access. They are free to add value-added services on top of that access (and many do, such as Verizon's NFL Mobile deal or the VoIP services most offer), but most people don't want ISPs to work like cable companies and pick and choose what websites they're offering (see also the massive opposition to Facebook's free basics internet in India).

    The problem is that, without net neutrality, the infrastructure market is free to influence the market for content providers (and they don't even have to reveal what they're done), and most of the last-mile infrastructure providers have both limited competition and conflicts of interest with content providers.

  • mx

    And what if Netflix pays AT&T to block Hulu?

  • irandom419

    Those local channels that they were forced to carry, are now encrypted. They wanted to incentivize folks to get a cable box for so much a month to push other services. At that point, I said !@#$ off and just watch everything off Hulu and CBS.

  • EricP

    Net neutrality, in theory but probably not in practice, is to prevent rent-seeking and potentially double billing. As a customer, I'm already paying to move bytes across their network. Why should Netflix or Pornhub have to pay a ransom to avoid being throttled or blocked when the client has already paid for those bytes? This behavior is pure rent-seeking.

  • Matthew Slyfield

    This story sounds backwards. Time Warner Cable is a cable operator. In fact, they are the cable operator in my area.

  • Matthew Slyfield

    Because all of the broadband ISPs have oversold their networks at too low a price. In order to build sufficient network infrastructure for every customer to use their full bandwidth 24/7 while maintaining flat rate prices, they would have to increase their prices by at least an order of magnitude. If they don't throttle some date, all of it will be uncontrollably and unpredictably throttled by network congestion.

    And it's even worse for the cable ISPs The cable networks are built around nodes. That great bandwidth the cable company promised you that is so much higher than DSL, that is actually the total bandwidth for the node you are connected to. However, by design the cable network has as many customers connected to a single node. There network is not set up to handle one node per customer, because it's piggybacked on their TV delivery network which was originally designed for one way push delivery of TV style content.

    On the TV side, a fixed volume of content is pushed continually to every node and then every customer connected to the node even though any one customer is actually only using a tiny fraction of that content at any one time.

  • mx

    Time Warner Cable is a cable operator that serves parts of the LA area, but they also run SportsNet LA, which paid billions for the rights to broadcast Dodgers games. Other cable and satellite providers can reach a contract with TWC to carry that channel. Less than half of the LA market uses a provider that has an agreement for SportsNet LA.

  • mx

    Net neutrality allows "reasonable network management" practices. Nothing says that ISPs cannot oversell, and it's common in the industry to have an abuse policy that covers particularly excessive use. The new broadband disclosure rules announced today may require ISPs to provide subscribers with a range of average speeds they can expect to receive, but that still doesn't prevent network management practices. The issue comes when the decision of what to throttle is not, er, neutral, but done on the basis of commercial interests.

  • Incunabulum

    What if AT&T pays for them to not be blocked.

    What if Sony pays a developer to only release a game on their console?

    What if CBN pays TWC to block Spike?

    What if my local radiologists pay my local hospital to stop using MRI's?

    What if, what if, what if.

  • Bram

    Can't Dodger fans just sign-up for a MLB package? Pretty sure I could see every MLB game I want all season for less than $60.

  • Matthew Slyfield

    Sorry, as long as the government gets to define "reasonable" I'm not buying it.

    "The issue comes when the decision of what to throttle is not, er, neutral, but done on the basis of commercial interests."

    Why should that be an issue?

  • joshv

    I just don't get the concept of "double billing". You have not paid for all possible bytes you might ever download. Pornhub pays for their servers. They pay to connect those servers to the internet, and they pay for the bandwidth they use. Their ISP in turn uses that bandwidth payment to purchase interconnects to other networks. In the Netflix example, Netflix cheaped out, and bought cheap bandwidth from a cut-rate provider that tried to cheap out on its interconnect to Comcast. So Netflix complained, and then eventually capitulated and paid a bit more to ensure that it had proper connectivity to Comcast.

    I mean, did you really think that your cable internet subscription funds the entire Internet?

    Now, if Comcast refuses to sell Netflix interconnects at a reasonable and competitive price, then that IS an issue, but as far as I know there's never been a company that did it (or if they did, they didn't get away with it). If Comcast throttles an interconnect to below the contracted SLA, well then that's an contract issue between the counter parties to that SLA, it's not a net neutrality issue.

  • Emil

    Small correction, it's not actually per node bandwidth but they would never be able to provide that bandwidth to all of their customers at the same time (this is sort of the main underlying concept time-division-multiplexing on which the entire Internet and IP-world is based)

  • jhertzli

    At first, I thought the net-neutrality controversy was about the standard left-wing line that we can bring the millennium by passing the right regulations. That turned out not to be what it was about. They're saying it's a matter of stopping a horrible situation.

    My second thought was they were talking about real problems. Leftists sometime identify real problems (e.g., stagflation in the 1970s) and propose absurd solutions. I thought that was the matter here. That turned out not to be what it was about either. They're saying they want to keep the current system.

    As far as I can tell, they're assuming that all good things come from regulations and if the present unregulated system is good it must be due to the regulations yet to be passed. The future regulations will be so beneficial that their good effects extended back in time.

  • MB

    The cost to an ISP of a Netflix that no one watches is zero.

    And ISPs selling website subscription packages like cable companies seems like a good idea to you? I'd call that an absolute travesty, and very likely to destroy the entire internet....

  • LoneSnark

    If AT&T finds a way to make achieve above market profits providing internet service, then more corporations will pay whatever it takes to become internet service providers, followed shortly by competition advertising the fact that "And we don't block Hulu!"