When
one of the two mega-wireless carriers in the U.S. announces a mobile streaming
service, the FCC soon will have to confront head on what carriers can and
cannot do by way of advertiser supported data consumption.
At first impression, what’s not to like about Verizon’s Go90 gambit? See http://www.nytimes.com/2015/09/08/business/media/verizon-to-offer-free-mobile-tv-with-an-eye-on-millennials.html?emc=eta1&_r=0. The smartphone surely has the capability of offering a competitive alternative to other screens in the video marketplace including television sets and PC monitors. If a third party wants to subsidize my consumption of “must see” video, well thank you very much! I am a classic free rider likely to consume the video content without necessarily paying for the advertised products and services.
In
class I regularly make references to beer, one of the essential food groups for
my students. Most get the economic concept
of free ridership when I explain how much I enjoy the Clydesdale advertisements
for AB Inbev Budweiser, without having to buy the beer.
Free
rider opportunities notwithstanding, there is a closer question whether
sponsored data constitutes permissible price discrimination. Bear in mind that carriers like Verizon and
Comcast can absorb the cost of content carriage, or receive advertising
revenues making it possible for consumers to watch content without seeing their
often skimpy data allocation evaporate.
Netflix has not banked on competitors having the same zero cost of
content delivery.
So would Netflix have a legitimate (and lawful) complaint about how sponsored data violates the FCC’s Open Internet Order? In the Internet Service Provider tilting the competitive marketplace for information, communications and entertainment (“ICE”) by taking the cost of content carriage out of the consumer’s cost calculation?
At first impression, what’s not to like about Verizon’s Go90 gambit? See http://www.nytimes.com/2015/09/08/business/media/verizon-to-offer-free-mobile-tv-with-an-eye-on-millennials.html?emc=eta1&_r=0. The smartphone surely has the capability of offering a competitive alternative to other screens in the video marketplace including television sets and PC monitors. If a third party wants to subsidize my consumption of “must see” video, well thank you very much! I am a classic free rider likely to consume the video content without necessarily paying for the advertised products and services.
So would Netflix have a legitimate (and lawful) complaint about how sponsored data violates the FCC’s Open Internet Order? In the Internet Service Provider tilting the competitive marketplace for information, communications and entertainment (“ICE”) by taking the cost of content carriage out of the consumer’s cost calculation?
I
part with my network neutrality true believers on this issue, because not all
price and quality of service discrimination violates the Communications Act of
1934. The practice has to be “unfair”
and the discrimination has to be “harmful.”
I can envision plenty of instances where sponsored data enhances
consumer welfare, particularly free riders distributed throughout the range of
incomes.