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August 17, 2018

Redefinition

Robber-barons2-bosses-senate.pngOnce upon a nearly-forgotten time, the UK charged for all phone calls via a metered system that added up frighteningly fast when you started dialing up to access the Internet. The upshot was that early Internet services like the now-defunct Demon Internet could charge a modest amount (£10) per month, secure that the consciousness of escalating phone bills would drive subscribers to keep their sessions short. The success of Demon's business model, therefore, depended on the rapaciousness of strangers.

I was reminded of this sort of tradeoff by a discussion in the LA Times (proxied for EU visitors) of cable-cutters. Weary of paying upwards of $100 a month for large bundles of TV channels they never watch, Americans are increasingly dumping them in favor of cheaper streaming subscriptions. As a result, ISPs that depend on TV package revenues are raising their broadband prices to compensate, claiming that the money is needed to pay for infrastructure upgrades. In the absence of network neutrality requirements, those raised prices could well be complemented by throttling competitors' services.

They can do this, of course, because so many areas of the US are lucky if they have two choices of Internet supplier. That minimalist approach to competition means that Americans pay more to access the Internet than many other countries - for slower speeds. It's easy to raise prices when your customers have no choice.

The LA Times holds out hope that technology will save them; that is, the introduction of 5G, which promises better speeds and easier build-out, will enable additional competition from AT&T, Verizon, and Sprint - or, writer David Lazarus adds, Google, Facebook, and Amazon. In the sense of increasing competition, this may be the good news Lazarus thinks it is, even though he highlights AT&T's and Verizon's past broken promises. I'm less sure: physics dictates that despite its greater convenience the fastest wireless will never be as fast as the fastest wireline.

5G has been an unformed mirage on the horizon for years now, but apparently no longer: CNBC says Verizon's 5G service will begin late this year in Houston, Indianapolis, Los Angeles, and Sacramento and give subscribers TV content in the form of an Apple TV and a YouTube subscription. A wireless modem will obviate the need for cabling.

The potential, though, is to entirely reshape competition in both broadband and TV content, a redefinition that began with corporate mergers such as Verizon's acquisition of AOL and Yahoo (now gathered into its subsidiary, "Oath") and AT&T's whole-body swallowing of Time Warner, which includes HBO. Since last year's withdrawal of privacy protections passed during the Obama administration, ISPs have greater latitude to collect and exploit their customers' online data trails. Their expansion into online content makes AT&T and Verizon look more like competitors to the online behemoths. For consumers, greater choice in bandwidth provider is likely to be outweighed by the would-you-like-spam-with-that complete lack of choice about data harvesting. If the competition 5G opens up is provided solely by avid data miners who all impose the same terms and conditions...well, which robber baron would you like to pay?

There's a twist. The key element that's enabled Amazon and, especially, Netflix to succeed in content development is being able to mine the data they collect about their subscribers. Their business models differ - for Amazon, TV content is a loss-leader to sell subscriptions to its premium delivery service; for Netflix, TV production is a bulwark against dependence on third-party content creators and their licensing fees - but both rely on knowing what their customers actually watch. Their ambitions, too, are changing. Amazon has canceled much of its niche programming to chase HBO-style blockbusters, while Netflix is building local content around the world. Meanwhile, AT&T wants HBO to expand worldwide and focus less on its pursuit of prestige; Apple is beginning TV production; and Disney is pulling its content from Netflix to set up its own streaming service.

The idea that many of these companies will be directly competing in all these areas is intriguing, and its impact will be felt outside the US. It hardly matters to someone in London or Siberia how much Internet users in Indianapolis pay for their broadband service or how good it is. But this reconfiguration may well end the last decade's golden age of US TV production, particularly but not solely for drama. All the new streaming services began by mining the back catalogue to build and understand an audience and then using creative freedom to attract talent frustrated by the legacy TV networks' micromanagement of every last detail, a process the veteran screenwriter Ken Levine has compared to being eaten to death by moths.

However, one last factor could provide an impediment to the formation of this landscape: on June 28, California adopted the Consumer Privacy Act, which will come into force in 2020. As Nick Confessore recounts in the New York Times Magazine, this "overnight success" required years of work. Many companies opposed the bill: Amazon, Google, Microsoft, Uber, Comcast, AT&T, Cox, Verizon, and several advertising lobbying groups; Facebook withdrew its initial opposition.. EFF calls it "well-intentioned but flawed", and is proposing changes. ISPs and technology companies also want (somewhat different) changes. EPIC's Mark Rotenberg called the bill's passage a "milestone moment". It could well be.


Illustrations: Robber barons overseeing the US Congress (via Wikimedia).

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Stories about the border wars between cyberspace and real life are posted occasionally during the week at the net.wars Pinboard - or follow on Twitter.