IT Curmudgeon

The cable companies are experimenting with pricing models for Internet service that could make it impractical to download feature-length video. The only things that can stop it are competition or government regulation.

These companies that offer Internet services through their networks are called "Internet Service Providers," or ISP's. Right now their highest profitability will be achieved if they can limit your access to companies that provide video-on-demand and other competing services over the Internet.

Last week I wrote about feature length video entertainment on the Internet. I noted new arrivals for delivery of feature-length video by Internet downloads, Hulu and YouTube Shows. These are free but other businesses are finding their way into homes such as NetFlix and BlockBuster, both of whom are offering downloads for fees instead of their normal delivery vehicles.

A typical cable customer today pays $40 for Internet, $40 for telephone service, and large amounts for cable service that might include HDTV, HBO, and other premium television services. With access to video-on-demand through the Internet, and to download it for viewing through computers or televisions, suddenly the business models of the cable companies is dramatically changed.

The Cable Companies don't want you to pay $40 for Internet and get the other services from competitive businesses like Vonage. Suddenly news stories are floating across the wire saying that "we are running out of bandwidth."

Do you think that the world is running out of bandwidth? Current, in-the-ground fiber optic cables can transmit data at hundreds of gigabyte, perhaps even terabyte frequencies (millions of times faster than they do today). This is done with increasingly sophisticated Light Terminating Equipment, or LTE's. LTE's exist in the lab that are blindingly fast. Internet 2 is a project designed to make 100 gigabyte or 1 terabyte speeds universal.

If cable companies want to simply balance usage of the Internet connections on their networks, they wouldn't be gearing up to charge $150 per month for high-end usage. Remember that they receive huge fees from the studios and syndicated networks for access to you on your television. If you could go directly to HBO or Showtime, how would that change the economics of the situation?

The best outcome for consumers is to be able to use the Internet to obtain competiive services. ISP's will try to manipulate the market to limit the development of these new business models and technologies.

What's the best way to ensure that this will happen? There are only 2 ways it can work:

• competition
• government regulation

Most people would agree that the first of these is the best. If a cable company and a telephone company both have access to your home to provide Internet service, then you are likely to see the service, costs and utility of products improve. If you only have one provider reaching your home, you are likely to be at the mercy of a provider who can control features and pricing at will.