War! It's the FANGs vs the ISPs -- and We’re All Collateral Damage

Former Federal Confusion Commission (FCC) Chairman Tom Wheeler rammed Title II regulatory oversight of the internet through during his term. That meant that the government could, among other things, regulate prices much as it does with telecom companies. &#160;But then President Trump came on the scene. &#160;His pick to replace Wheeler at the FCC, Ajit Pai, promptly dumped Title II. &#160;Instead, he proclaimed, the FCC would return to the pre-Wheeler &#8220;light-touch&#8221; regulatory regime of Title 1. &#160;Which means (to some extent) hands off the ever-sacred business model.This made some internet players (the infrastructure that provides the connection to the internet, a.k.a. the media nexus) very happy.&#160; It made some others (the FANGs - my shorthand for Facebook, Amazon, Netflix, Google and their ilk) very, very unhappy.&#160; Scared even. &#160;Which isn&#8217;t a surprise given that they have had a pretty much free ride on the internet for virtually all their existence.It also made 50 senators unhappy enough to work hard to overturn the FCC&#8217;s decision. That includes all 49 Democrats plus Maine Republican Susan Collins. &#160;(The 60-day clock for Congress to act starts today, February 22.) &#160;That's obviously not enough to get Title II reinstated in the Senate, and as for the House ... well, really, can you see the Republican majority voting for anything that includes greater government control? &#160;(Except, of course, when it comes to your morals, but that's another story.) &#160;In any case, with D.C. out of the picture a number of states have opted to impose Net Neutrality behavior (a.k.a. back to Title II) on any Internet Service Provider (ISP) that gets any state business.&#160; &#160;A very unusual move against a federal decision.Of course, the FANG&#8217;s Internet Association is all on board with the idea of returning to Title II regulation. &#160;Why? &#160;It's back to that free ride, folks. The edge players of FANG don&#8217;t like the idea that the infrastructure companies could begin to charge them for so-called fast lanes. &#160;They'd much rather have all lanes -- via cable, cellular (5G sometime sooner or later), satellite (yes, really) and legacy telephone company spectrum whether inside a cable, fiber optic cable or open air ISP connection or whatever -- open to anyone, all the time, at the same price.Can&#8217;t really blame them.&#160; Can&#8217;t blame the infrastructure folks (AT&amp;T, Charter, Comcast, Verizon, et al) either.&#160;They'd much rather be able to charge the FANG folks for their prodigious bandwidth use. &#160;And then there's the question of all that data. &#160;The FANG players make a mint off all the &#8220;personal&#8221; information they gather on the 'net which the media nexus folks can&#8217;t, by law, use. &#160;To add insult to injury, the FANGs also have devoured most of the advertising revenue that once belonged to news and media companies (which includes most of the nexus guys). &#160;&#160;And they&#8217;re after more as they develop their own techno ecosystems, which all work over the connection you and I pay for via the media nexus.&#160; Just ask Alexa.In short, all those fireworks you see over the question of 'net neutrality have, at their base, a hard, cold economic reality. &#160;Just consider what AT&amp;T&#8217;s Randall Stephenson said on CNBC a couple weeks ago: "Reality is, the biggest distributor of content out there is totally vertically integrated. &#160;This happens to be something called Netflix. &#160;They create original content; they aggregate original content, and they distribute original content. &#160;They have 100 million subscribers.&#160; Look at Amazon. &#160;They're&#160;doing the exact same thing. &#160;Amazon Studios is creating, aggregating, distributing; Google, YouTube, Hulu, this thing is prolific."Those guys are, obviously, making a killing while riding the internet. &#160;So what's the answer for the infrastructure folks? &#160;Well as I see it, the only way to really challenge the FANGs is to move toward the Comcast model.&#160; Which is just what Stephenson would like to do. &#160;He already has infrastructure: landline, fiber to the node, cellular and satellite.&#160; He wants content, specifically Time Warner, in order to compete with the FANGs.Thanks to some smart deal-making by Comcast&#8217;s Brian Roberts, his company owns Xfinity cable and NBC Universal; that is, conduit (the nexus), content and a theme park.&#160; And Comcast&#8217;s Xfinity has wi-fi and voice controls and is developing all sorts of in-home services such as security -- with more to come.That&#8217;s the model AT&amp;T wants.&#160; Look for Charter, Verizon and others to follow.But, enter the government.&#160; (Remember them? The hands-off business guys?) &#160;The Department of Justice has sued to prevent AT&amp;T from acquiring Time Warner.&#160; That's partly because President Trump threatened to do just that when running from office.&#160; Besides, he really doesn't like CNN, which is currently owned (via Turner) by Time Warner. &#160;Of course, the Department of Justice says politics has no part in its decision to sue -- for the first time ever -- to block a so-called vertical merger of companies that do not compete with one another.&#160; A judge last week denied AT&amp;T&#8217;s request for access to any DoJ/White House correspondence.&#160; No word on whether or not CNN&#8217;s Jeff Zucker will volunteer to testify.Well, the politics over that court case should provide some interesting fireworks. &#160;Unfortunately, that is the case for most everything these days.&#160; In the meantime, we have a schizophrenic government with Federal Confusion Commission Chairman Ajit Pai versus President Trump and his Department of Justice.&#160; What do you think?&#160; Any chance they actually see the irony is all this?Random NotesFrom the bury-the-lede model of reporting comes the news that America&#8217;s intelligence services suggest you do not buy your phone from Chinese companies Huawei or ZTE because of, you know, spying.&#160; There was no mention, though, of the number of cable ISPs which use Huawei or ZTE amplifiers and other equipment.&#160; Probably nothing to worry about, though.&#160; (Full disclosure:&#160; I skied -- badly -- for the Huawei team at an Adaptive Spirit meet once some years ago.)The software behind the crypto-currency explosion is coming to a cable system near you.&#160; Comcast has created a task force to look at the blockchain technologies for managing infrastructure.Click the social buttons above or below to share this content with your friends and colleagues.The opinions and points of view expressed in this content are exclusively the views of the author and/or subject(s) and do not necessarily represent the views of MediaVillage.com/MyersBizNet, Inc. management or associated writers.&#160;

War! It's the FANGs vs the ISPs -- and We’re All Collateral Damage

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Paul S. Maxwell

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