According to a recent analysis by Sandvine, Netflix, the streaming video service, accounted for one-third of all Internet traffic in North America last year, making it the single largest user of bandwidth on the continent. Apart from being a repository of old Star Trek episodes, Netflix has recently ventured into producing successful streaming-only series of its own, such as the Washington drama House of Cards and a new season of the cult favorite Arrested Development. Netflix now has more subscribers than HBO.
So it should come as no surprise that Internet service and cable TV providers—Comcast, Time Warner, Verizon FiOS, etc.—are keeping a close eye on the little streaming service that could, the content company that is changing the way we watch television and threatening their video-on-demand services. And we know what that ultimately means for the cable companies’ bottom lines.
All this high-definition video-streaming uses a lot of bandwidth, particularly during peak usage hours, prompting the companies that control the “last-mile” tubes of the Internet—that is, the cable companies—to be very much concerned about consumption. One way they propose to deal with network congestion is to cap data usage, an idea that could put a company like Netflix out of business.
Susan P. Crawford, who teaches at Cardozo Law School and was a special assistant for technology policy in the Obama White House, is so concerned about this possibility that she regularly notes that readers of Captive Audience might have to substitute “any new online video-distribution company” for the word “Netflix.” (So far, it isn’t necessary.) She argues that, since the cable companies view Netflix as a direct content competitor, it is in their interest to curb usage of that service in favor of their own offerings. One way to do that would be to allow unlimited streaming of certain content but have Netflix streaming, or other Internet traffic, count toward data caps.
Crawford, an ardent supporter of net neutrality—the idea that governments and service providers should treat all Internet traffic equally, no preferential processing or speeds for certain types of data—suggests that such policies would stifle innovation and prevent “the next Netflix (or Google, Facebook, Amazon)” from being born. In fact, Verizon and the FCC are currently battling in court over whether the commission has the authority to enforce its 2010 Net Neutrality rules.
With America’s Internet future in the hands of a few major corporations, Crawford argues, the prospect of continued American supremacy in Internet innovation is bleak. Like the emergence of electricity a century ago, high-speed Internet is today the lifeblood of our economy, not a luxury but a necessity for rural and lower-income Americans to be able to compete in the global economy, bring their products to market, and find new and better jobs.
Crawford laments how far we have fallen behind the rest of the developed world in wired Internet access, comparing us unfavorably with nations such as Japan and South Korea, where more than half of all households have super-fast fiber lines. The percentage of Americans with access to fiber? Seven percent—and at five times the price of the same service in Sweden. Yet it hardly seems fair to compare ourselves with countries such as South Korea, which is roughly the size of Virginia. As we’re often reminded, usually by the cable companies themselves, it is extremely costly to rewire a country the size of the United States. And maybe that’s where Crawford’s arguments are strongest: We should view high-speed Internet access as a utility, not a luxury reserved only for those in metropolitan areas or with the means to pay sixfold the international standard.
It was a contentious issue in the 1930s, but no one would reasonably argue today that the Tennessee Valley Authority should have been a private company, or that households should have multiple providers of water or natural gas. Yet in terms of high-speed Internet access, much of America is already experiencing it as a privately owned utility, the precise opposite of the head-to-head competition favored by deregulators. Local franchises of cable and Internet companies make agreements with municipalities, effectively creating local monopolies of service, and, in many cases, making it almost impossible for other providers to enter certain cities or towns. Crawford highlights the (perfectly legal) “agreements” between the titans—Comcast gets Boston and Chicago while New York is Time Warner’s playground—which allow the big fish to never be in direct competition, turf agreements that would have made Al Capone proud.