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Will H’wood take a stand on Net neutrality?

Congloms may be forced to choose as telcos fish for fees

“Net neutrality” may sound like something only a Web geek could love, but at some point showbiz, largely indifferent to it so far, will have to start declaring an interest — perhaps passionately.

Why? Because Net neutrality — or, as some call it, Net regulation — has the potential to affect content protection, otherwise known as Priority No. 1 of the entertainment industry.

Access to online content, itself no small concern, could also be at stake.

Even the term “Net neutrality” is the source of some controversy. Is the issue “neutrality” or “regulation”? It depends on who’s talking.

From its inception, the Internet has always delivered information on a first-come, first-served basis, whether it’s your music download, your neighbor’s porn or your office’s email.

Thus the Net has always been “neutral.”

But there’s no rule that says it has to be that way. If you get your Internet from Time Warner Cable, for example, there’s nothing to stop it from sending you content from Time Warner sites first and doling out content from the competition with whatever bandwidth happens to be left over.

Nor is there anything to keep an Internet service provider like Earthlink from taking fees from Disney or NBC Universal to give some sites priority — and to block other sites altogether.

That would give Web sites with deep pockets behind them a new advantage in getting their content in front of Web users, while sites that can’t afford those fees could be kicked to the virtual curb.

Those who value the current “neutral” state of the Internet are seeking legislation to protect “Net neutrality.” Many of the companies involved, though, see an opportunity to make money. They, along with those who generally favor free markets, condemn such legislation as “Net regulation.”

Fears that the current Net neutrality could be lost erupted at last year’s Telecom Next show after AT&T topper Ed Whitacre (who retired June 4) was quoted as saying that Google and other content providers were getting a free ride.

He told Business Week, “The Internet can’t be free in that sense, because we and the cable companies have made an investment, and for a Google or Yahoo or Vonage or anybody to expect to use these pipes free is nuts!”

Whitacre later backtracked, noting that customers would desert any provider who blocked some sites, but it was too late. The push to protect Net neutrality is on.

Given the potential for chaos if some content gets priority to some customers but not to others, as the pro-NN faction calls it, you’d think the entertainment industry would be all for passing laws that enforce Net neutrality.

You’d be wrong. Very few industry companies have publicly taken a position on NN to date, preferring a wait-and-see approach to the volatile issue.

How volatile? Only one industry exec agreed to be quoted by name on the subject.

“Intellectual property protection is our litmus test,” says Rick Cotton of NBC U, who could easily be speaking for the entire content industry.

As one industry lobbyist notes, showbiz tends to favor the side of the broadband providers, who oppose any mandated Net neutrality, because the providers can help identify and pursue online bootleggers and pirates.

Moreover, the industry is not comfortable with the pro-NN side because many NN advocates are also calling for restrictions on copyrighted material to be loosened.

“But studios are still not able to get the kinds of guarantees on piracy they want from broadband providers,” the lobbyist says.

Hence, the slight tilt toward providers, but no definite or publicly stated alliance. As one exec says, “We’re neutral on Net neutrality.”

None of the big four TV networks has taken a public position on Net neutrality, either, but the Media Institute, a First Amendment think tank funded by major media companies including the nets, filed comments just last week with the FCC opposing NN regulation, saying there is “no need” for it.

One major conglom has taken a public stand. Disney has come out against Net neutrality legislation in the wake of the Mouse House’s deal with Verizon in which the telco agreed to cooperate on identifying pirates.

Also, according to a studio insider, Disney feels the Federal Communications Commission’s suggestions on open and equal Internet operations are adequate and accepts the broadband providers’ pledges not to discriminate.

But other companies are frustrated with Verizon and Comcast. “They refuse to take even modest steps like passing notices on to their customers that they’re dealing in pirated material,” says an industry exec.

Comcast and Verizon have cited privacy concerns, but the exec isn’t buying it.

“Some 60% of broadband activity is devoted to illegal peer-to-peer activity,” the exec asserts. “This isn’t a needle in a haystack. This is a major commitment of their resources to facilitating theft, and those two providers are not lifting a finger to help.”

A telco exec says Verizon offered the same deal it cut with Disney to all member studios of the Motion Picture Assn. of America, but only Disney responded.

As the finger-pointing goes on, the MPAA and the companies it represents are charting an antipiracy course down the middle of the Net neutrality debate.

Conversations with the org reveal a desire to express neither support for nor opposition to the possibility of future Net neutrality legislation, but to simply say that any NN law should not prevent broadband providers from being able to pursue pirates.

Part of the failed attempt at telecom reform in the last Congress contained a provision that would have imposed Net neutrality regs, and industryites say the way the provision was written, it was possible to interpret it as an unintended prohibition against monitoring pipelines for piracy.

The fight at that time over whether NN regs were necessary — most Republicans said no, most Democrats thought yes — was the single largest reason the massive telecom reform bill stalled and died.

Some don’t think that Congress will take up Net neutrality again before the next presidential election. But showbiz could be affected anyway. The market could be the catalyst.

Put another way: An industry exec says that, with assured cooperation on piracy from the broadband providers, his company would not likely object to paying more for premium Internet speed and image quality. It’s “not inappropriate” that heavy users of the system pay a reasonable amount more, he adds.

A telco exec notes that no broadband provider has asked heavy users — neither downloaders nor content distributors — for premium pricing.


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