Wednesday, June 21, 2006

Content providers and ISPs: who really has the stronger hand?

George Ou points out a case where the content provider is already offering content only to the ISPs who enter into agreements with the content provider, rather than an ISP only allowing connectivity to content providers who enter into agreements with the ISP. While there are lots of examples of content providers making arrangements with individual users, it has been relatively rare that the arrangements are made on the part of an entire ISP. This is extremely common, however, in the cable industry, where there have frequently been disputes between content providers and cable companies which have led to content providers denying the use of certain popular channels unless the cable companies agreed to per-user fees or to carry other additional channels. A similar dust-up occurred in March 2004 in the direct broadcast satellite business, when Viacom and EchoStar (Dish Network) could not reach an agreement to carry some additional Viacom channels. So Viacom pulled local CBS channels it owned, MTV, Comedy Central, Nick at Night, BET, and other channels, until EchoStar budged.

In this case ESPN360 only makes its video content available to selected ISPs (including Adelphia and Verizon) but not to others (such as Cox, Comcast, Time Warner, and SBC). ESPN has regularly behaved similarly with respect to cable companies.

Proposed network neutrality regulations have had nothing to say about the inability of users to obtain content because content providers block their ISPs, or surcharges on ISPs by content providers for their users to have access to premium content. And this is even though there are often real monopolies on content (only a single provider owns it, and may completely control who has access to it, at least until it gets out to P2P networks), while there aren't any real monopolies on Internet access (though some network neutrality advocates have endorsed nationalization of "backbone," which would create a government monopoly).

I think that in general, the ISP does have more overall power and influence than the content provider, but there are exceptional cases where content providers like ESPN360 may have a stronger hand against ISPs. Overall, there's a lot more money spent on communications than there is on content (as Andrew Odlyzko's 2001 "Content is Not King" essay explained), and the real drivers of that spending are business and peer-to-peer communications, not content providers.


Richard Bennett said...

You say: Overall, there's a lot more money spent on communications than there is on content.

Perhaps this is a function of the billing models we have today. Most content is paid-for by advertising, and there's a limit to the advertising dollars. In a world where there were pay-per-view (like iTunes) and subscription payment models, the economics might be the reverse.

And if you combine broad acceptance of payment for content with home theater integration of PCs with Internet access, well, it's a brave new world.

Lippard said...

Could be--but isn't the trend on the Internet towards paying less for content (and lots of advertising-sponsored content), rather than more?

Richard Bennett said...

There are probably several trends, now that we have over a billion people in the Internet.