American Cable Association President and CEO Matthew M. Polka urged Federal Communications Commission Chairman Julius Genachowski to examine closely the business models of powerful Web content providers like ESPN360 as the agency considers the adoption of more expansive Net Neutrality regulations that would apply to ACA members and other entities that provide broadband access.
"If the FCC moves forward with its rulemaking, ACA urges the Commission to ensure that broadband content providers are similarly prevented from imposing closed Internet business models that are even more problematic today than the concerns raised about the ability of broadband access providers to distort various forms of Internet commerce and competition," Polka said.
On Sept. 21, Genachowski said in a speech at the Brookings Institution in Washington, D.C., that the FCC would conduct a rulemaking designed to turn into formal rules the four principles contained in the agency's 2005 Internet policy statement. Genachowski said he would propose to expand the policy statement to include an explicit non-discrimination prohibition and a transparency requirement, which would order broadband providers to disclose how they manage their networks.
"For the last few years, some in Congress and at the FCC have been pushing for rules that would prevent broadband service providers, particularly the larger ones, from operating their networks in ways that would unfairly prevent consumers from accessing all lawful Web-based services and applications," Polka said. "However, during that same period, some Senators, House lawmakers and FCC Chairmen have been missing the far greater threat to the `Open Internet' ideal, which is how media conglomerates and Web giants are using their leverage to assure themselves preferential treatment on the networks of Internet service providers at the expense of other Web-based services, applications and consumers.
ESPN360, owned by the Walt Disney Co., is pioneering such a closed Internet business model, under which broadband service providers must pay ESPN fees based on their total number of broadband subscribers, forcing those who have no interest in viewing sporting contests over the Internet to subsidize those who actually want to access ESPN360 on a regular basis.
"ESPN, the largest and most dominant sports programming business in the country, uses its leverage in the satellite and cable marketplace to coerce broadband service providers into giving ESPN360 preferential treatment on their networks at the expense of consumers on the one hand and of other Web-based services and applications that might seek to compete against them on the other. How can a Web-based sports site fairly compete against ESPN on the Internet when ESPN has secured for itself a substantial per-subscriber fee from every broadband customer in the country?" Polka said.
After the FCC has codified its Net Neutrality rules, Genachowski said he wanted the FCC to evaluate alleged violations of the non-discrimination principle on a case-by-case basis. Genachowski did not reveal in his speech whether the FCC would look at discriminatory business models used by media giants offering content over the Internet.
"Disney refuses to market ESPN360 directly to consumers because the sports media giant believes that there's not enough individual interest in its service to support a subscription model in which those who want the content pay for it. Disney also refuses to compete head-to-head against other sports-based Web sites that have no choice but to roll out such a direct-to-consumer model because they don't have ESPN's clout to coerce broadband providers, particularly those who are small, into becoming broadband toll collectors for them. ESPN is exploiting its dominance in its other markets to foreclose competition in the potentially billion-dollar market for streaming sports content over the Internet," Polka said.
Polka added that because Disney's ESPN360 business model is bad for competition and consumers, it should not be exempt from the FCC's effort to establish clear rules of the road for the Internet.
"Disney's quest to extract wholesale license fees on a per capita basis from broadband access providers will drive up the cost of broadband for all existing customers; put the price of broadband service beyond the means of those on the lower end of the income sale; and obviously delay the arrival of affordable broadband access for every American," Polka said. "This FCC Chairman takes Net Neutrality with utmost seriousness, but a holistic examination of the Internet marketplace won't be complete until ACA's ongoing calls for Content Neutrality are given the time and attention they deserve from FCC regulators."