MLB Advanced Media hits ISPs hard on net neutrality

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If you’ve followed the various net neutrality-related hastags on Twitter, you’ve probably seen a lot of high-fives being offered to Major League Baseball Advanced Media (MLBAM, a.k.a. BAM) for its short and pointed comments to the FCC on why permitting ISPs to sell fast lanes is a terrible idea, many of them linking to an article on Quartz yesterday headlined, “The best argument yet for net neutrality comes from Major League Baseball.

BAM’s three-page letter is indeed a model of concise, to-the-point argumentation:

In response to a central issue raised in the NPRM, we urge the Commission to prohibit Broadband ISPs from charging Internet content distributors (“Edge Providers”) for faster or otherwise preferential delivery of content to American consumers.

Fast lanes would serve only one purpose: for Broadband ISPs to receive an economic windfall. American consumers would be worse off as the costs of fast lanes are passed along to them in new fees or charges where there were none, or higher fees or charges where they existed.

Fast lanes would create new economic barriers for start-up entrepreneurs and innovators that have been critical to the growth of the Internet economy. As bad, since fast lanes would necessarily mean there are slow lanes, they would amount to “picking winners and losers online,” with Broadband ISPs acting as fast lane “gatekeepers,” precisely the opposite of the Commission’s past policy.

The assertion that fast lanes are needed so that Broadband ISPs can invest in broadband infrastructure is unsupported by the facts. Broadband ISPs already generate tens of billions of dollars in revenue annually, with margins in excess of 60%, from their cable broadband services. They already have ample capital to invest in their systems. There can be no assurance that any fast lane revenue would be invested to improve or expand broadband service.

Even the most concise of presentations can contain volumes between the lines, however, and that’s certainly the case here (even if it may be getting by some of those praising the comments on Twitter).

As the league notes elsewhere in its letter, MLB Advanced Media is “the nation’s largest Edge Provider of live event video,” handling backend streaming services for all MLB games as well as for third-party producers like ESPN and the WWE Network. And live event video streaming presents many of the questions around paid prioritization of bits (i.e. fast lanes) more squarely than nearly any other application.

As the amount of over-the-top live streaming grows (see my recent report on the topic) those questions will only get more urgent, and more expensive to resolve, making MLBAM anything but a disinterested party on the matter.

Live video, like any real-time application, is highly sensitive to buffering and other glitches that can arise when networks get congested. That’s especially true of live sports. According to a recent study by Conviva, buffering had a greater negative impact on how willing consumers were to watch live sports online than on any other streaming application.

One plausible conclusion you could draw from that data is the live event streaming is precisely the sort of application where you might want to prioritize some bits over others. But the question would then become: who pays for that?

It’s pretty clear from the last of the paragraphs quoted above whom MLBAM thinks should pay: the ISPs that are making 60% gross margins from their broadband services.

That, too, is a plausible argument. It is, after all, the ISPs own paying customers that are requesting live content and it ought to be up to the ISPs to provision their networks sufficiently to deliver the experience they’re selling. But it’s still an argument for prioritization: ISPs should make a priority of provisioning their networks to support our streams, on their dime.

In other words, MLBAM is not really arguing that the FCC should not “pick winners and losers,” despite what it says in the letter. It’s arguing for why it should be on the winning team.

It’s not a huge step from there, in fact, to the position Viacom and CBS have taken in blocking online access to their content to certain ISPs’ subscribers as part of pay-TV retransmission disputes with those providers’ cable-TV parents. In each case, edge providers argue that cable operators are making a lot of money from broadband and they should share some of that money with the edge providers, either directly, via payment for content (albeit buried inside a “comprehensive” carriage deal) or indirectly, by assuming the cost of delivering that content.

Regardless of the merits of either side of that argument, it’s fundamentally a commercial dispute. And try as MLBAM (and Netflix) might to make it seem otherwise, its commercial interests are not co-terminus with the public’s interest in net neutrality, which is really about ensuring Americans unfettered access to any and all legal content on the internet, regardless of who’s doing the fettering, at a reasonable cost.

That means (or should mean) no blocking and no content-based or content-source based discrimination, disclosure of policies and other consumer protections that are the classic and necessary realm of regulators. The “at a reasonable cost” side of the equation, however, is really about price-setting, and when it comes to price setting, markets can be a pretty useful mechanism. What MLBAM (and Netflix) is asking the FCC to do, however, is to prohibit the emergence of a two-sided market for last-mile transit.

There are, in fact, good reasons for policymakers to be wary of a two-sided market for transit, not least being that ISPs’ effective monopoly on access to their subscribers creates a powerful incentive to engage in rent-seeking, which is not a market mechanism but a market distortion that, by definition, will not yield an optimal price.

The important question with respect to prioritization ought not to be whether its paid for, or even who should pay, but whether excessive rent-seeking — whether by ISPs or edge providers — can be policed effectively short of prohibiting a market for last-mile transit altogether. But the answer to that question may not lie within Section 706 — or even Title II — of the Communications Act.

 

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