Tuesday, November 29, 2016

Zero-rating is bad

Zero-rating, or the practice of not counting the usage of select services against a mobile carrier or internet service provider's data cap, is fundamentally the same as being non-neutral. These MSO's can claim all day long that they're advocates of net neutrality, but as long as they promote zero-rating, they're simply not telling the truth - they are establishing de facto tiers for content and playing favorites. You might think it's awesome that you can binge Netflix on T-Mobile without incurring extra fees, but you must realize that this is anti-competitive towards every Netflix competitor that's not a part of BingeOn.

Zero-rating is simply unfair to the smaller content providers who don't cozy up to these carriers and ISPs and pay these gatekeepers for access to their customer bases. Either truly be neutral as universal access providers without respect to services and completely remove data caps, or enforce the same policy against all sites and services by dropping the practice or zero-rating and capping data equally.

What's interesting about all of this, by promoting zero-rating, these companies are tacitly acknowledging that they can handle much more bandwidth than they claim their networks can handle, which means the entire practice of capping to begin with was only a means of producing artificial scarcity to create service tiers and capture more market share by varying their product's price points. This would be totally acceptable if they continued to be neutral, but zero-rating is effectively circumventing net neutrality.

As major multi-service operators like AT&T and Comcast NBC Universal become more and more vertically integrated* and content licensing becomes more and more convoluted** (especially as the cable TV business model erodes in favor or cord-cutting and cord-slimming, wherein the potential to offer "reduced cost" internet-only over-the-top channel bundles becomes popular and these apps then become zero-rated themselves since they aren't regulated the same way cable and over-the-air currently are - imagine ESPN only being available on PlayStation Vue and not Sling), unless we reject zero-rating now, the possibility of fully enclosed digital eco-systems that block or prevent access to their competitors becomes a reality. This is already happening in the device eco-system and has become standard practice among the likes of Apple, Google and Amazon when it comes to their respective content stores. Sure, it seems silly to think about, but do we really only want, say, Disney movies, to someday only be available through one MSO they might someday own?  That's what we are marching towards, in my opinion.

On the other hand, it might be really interesting to see how the over-the-top model evolves as cable declines, and if the initial clamoring for customers results in the reduction of pricing for everyone at first, until things settle and prices go back up. Time will tell.

*- Simply put, vertical integration means a company makes the product and the means of distributing that product. Imagine having to drive to another town just to see a certain movie because the studio doesn't own any of the movie theaters in town - thankfully, that hasn't happened for nearly a century because studios are not allowed to own theaters!

**-Licensing is how content makers provide their content to services. Each service needs a separate license, contract, etc. Imagine you can only buy your favorite music from a particular service, say iTunes, because that music has been exclusively licensed to it by a record label that, for instance, was unable or unwilling to also license to Spotify or Amazon Music. If you don't use iTunes you can't legally listen to the music.