AT&T is Reminding Us Why the Video Marketplace Was Traditionally Highly Regulated
AT&T is Reminding Us Why the Video Marketplace Was Traditionally Highly Regulated
AT&T is Reminding Us Why the Video Marketplace Was Traditionally Highly Regulated

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    When Public Knowledge came out against the proposed AT&T/Time Warner merger in 2017, we were worried that the merger would create both the incentive for the combined company to withhold, or charge more for its own content to rival distributors, and to discriminate against competing content on its own distribution services.

    The merger went through despite strong opposition. The district court in particular all but hand-waved away clear evidence of the incentive the combined company would have to discriminate.

    Unfortunately the predictions of competitive harm were quickly realized. AT&T raised prices on its video services while dropping third-party channels. It began engaging in hardball negotiations, leading to the first-ever blackout of HBO.

    Now, it is clear that AT&T is giving special treatment to its own video services on the broadband networks it controls. AT&T exempting its own video services from data caps (while purporting to “pay itself” for the privilege) is exactly why we need net neutrality rules, which prevent broadband providers from discriminating against unaffiliated content providers, and exactly why anticompetitive mergers between content companies and distribution networks should not be allowed to go through. If you’re an AT&T customer, you’re effectively punished for choosing to watch Netflix, Disney+, or your favorite Twitch streamer instead of HBO Max.

    When ISPs give special treatment to their own affiliated content services, competition suffers. The company that owns the pipe should not discriminate against competitors. As the previous Federal Communications Commission found, internal accounting tricks, where a company takes money from one pocket and puts it into another, don’t lessen the consumer harm of content discrimination. It is always possible for a company to pay itself arbitrary rates for “sponsored data” that are infeasibly high for third parties.

    More than that, AT&T’s actions, taken together, closely mirror the kinds of structural competitive problems that have long existed in the broadcast and cable TV world.

    Video competition has always been a challenging issue in the United States because it depends on complex specialized infrastructure of one kind or another, where content and the infrastructure that deliver it are unavoidably linked. Whether it’s broadcast licenses, coaxial or fiber networks, or satellites, distributing high-quality video to the home is a complex enterprise, and the infrastructure provider necessarily determines what content is carried. A broadcaster decides what programs it carries, and a cable provider decides what channels it carries — it’s just the way those technologies work. Much of traditional FCC and media regulation is designed to counter the gatekeeper power that control of this infrastructure creates.

    While broadband networks are equally complex, they have a significant advantage over traditional video delivery networks, in that it is possible to decouple content from the pipe. With broadband, unlike cable or broadcast TV, it is possible for consumers to access video from any number of competing and diverse services. This is a basic point but it bears keeping in mind, as this advantage evaporates if the company that controls a broadband connection artificially promotes its own services and disadvantages those of competitors. Doing this takes us right back to where we were before, where content and the infrastructure that delivers it is tied together. The traditional public policy response to this situation is to regulate the video service directly — to ensure that it carries diverse, independent content, to ensure that the rates charged to consumers are not excessive, and other things.

    AT&T’s actions seem like they are designed to reproduce the structural competitive problems that gave rise to such regimes as program carriage, program access, fin-syn rules, and other regulatory responses to a video marketplace plagued with competition bottlenecks and conflicts of interest. This is not to single out AT&T — other major media and broadband companies do similar things, and the growing model where video services have to strike “deals” with streaming platforms such as Roku and Fire TV — with customers blacked out in the meantime — is also a troubling echo of the kinds of issues that have invited regulatory responses in the past.

    The alternative to this is true openness and competition: open broadband networks, where viewers can access whatever video services they choose without being throttled to slower speeds or penalized on their bill, and open platforms, where any video service can reach users where they are, without requiring that they buy a new device. Additionally, it seems more straightforward to prevent anticompetitive conflicts of interest from existing at all, by blocking mergers like AT&T/Time Warner, rather than permitting them to go through, and then trying to address them with various proscriptive regulations.


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