Beware Of Big Cable

I have to comment quickly on an article the Wall Street Journal ran last week titled "Google Wants Its Own Fast Track on the Web." The article points to a shift in the views of politicians and corporations (including both Google and Microsoft) that could transform your and my experiences of the Internet.

For years the smartest technology minds have been advocating a "dumb pipes" policy, which essentially prevented telecom and cable companies from giving preference to some web sites over others. For example, if Internet connectivity companies own the lines into your home, then they could allow YouTube content to get to you more quickly than iTunes.

But doing that today is illegal.

Current law originally emerged to prevent Ma Bell from making it difficult for calls from non-Ma-Bell phones. The worry was that owning the line into the phone was too powerful. Whoever occupied this strategic position would have unmatched strength and would eventually suck out all the value. This would leave little profit or incentive for others to innovate and challenge these monopolies.

Supported by industry interest groups and politicians, companies like Microsoft, Yahoo and Google protected this order of the media world. But their support seems to be waning. They are starting to fall to temptation and the short-term promise of paying cable companies to give their web sites preferred access.

So how does this affect you and me? Let’s take a look at this alterative vision: let’s say you want to book a plane ticket and you typically use Travelocity to buy flights. But because Orbitz pays Comcast more money than Travelocity, the Orbitz site downloads more quickly than Travelocity’s. This instant gratification on Orbitz’s site lures you away from Travelocity.

For cash-rich companies like Microsoft and Google, this path may seem attractive because it leads to a world in which their cash gives them an advantage. In this new land, they can use their size and power to squeeze out smaller competitors.

But history warns that this path continues beyond the bend into a world neither Microsoft, Google, nor Yahoo really want to inhabit. It is the land of limbo that TiVo and Vonage toil around in now…the land where cable companies are king.

The risk of allowing cable companies to sell preferred access is not just that the Internet will no longer be democratic or that small, cool, Internet companies will have to pay potentially exorbitant entry fees to play. But rather, this scenario plays too perfectly into cable companies' hands.

Research shows that it’s rarely the inventor who reaps the profit. Usually the person who controls the access wins. And cable companies have proven this fact over and over again. When TiVo proved it had created something viewers wanted, cable companies installed DVRs into cable boxes. When Vonage convinced people to consider VoIP, cable companies began offering their "triple pay" packages of television, Internet and phone service all rolled up into one bill.

As big and strong as Google and Microsoft are, they must weigh their might against the fundamental patterns of competition. They need to consider the weight of historical precedent. If you allow cable companies to put speed of access on the negotiating table, then a brand new game has begun. And this is a game the cable companies know how to win.

 

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