Thought Piece

[Net Neutrality suffers another ignominious defeat at the hands of technology; however, The NY Times and the Wash Post recent Op-Ed pieces on preserving Net Neutrality demonstrate how small bore political thinking has become. Clearly, the importance of broadband and wireless far exceeds the politics of many editorial boards.  Steve]

A Trumpian Green Shoot Is Broadband

Wireless carriers just zero-rated the internet. Get ready for a revolution in cheap, ubiquitous data.

By: Holman W. Jenkins, Jr.

Feb. 24, 2017 6:24 p.m. ET

The nation hasn’t stopped advancing just because a president in Washington has fallen off his training wheels. The evolution of the internet continues to blow up the “net neutrality” agenda bequeathed the country by the Obama administration.

This ever-pliable pseudo-principle most lately has been weaponized by activists against the innovation of zero-rating. That’s the practice by which highly competitive wireless carriers seek to woo customers by offering access to certain streaming services without worrying about data caps or usage penalties.

But wait. If the carriers are highly competitive, why apply a net-neut rule premised on the possibility of monopolistic abuse? Good question. But, like most net-neut obsessions, zero-rating is now dying a market death before the government can get around to considering whether to ban it. Verizon and AT&T last week joined their fellow wireless carriers in offering unlimited, uncapped data plans. T-Mobile, the unlimited pioneer, responded by allowing unlimited treatment for high-definition video, rather than just standard-definition video.

Basically, the wireless industry just zero-rated the internet. What does this mean? To a whole bunch of Americans on a budget, they’ve just received a giant incentive to dump cable at home now that they are entitled to unlimited video over a mobile connection.

We can also predict the next chapter: “Net neutrality,” though a slogan increasingly bereft of meaning, will experience a last hurrah in the mouths of activists opposing a forthcoming flurry of major media realignments that these developments foretell.

This wave can be expected to break as soon as April, when the mandatory “quiet period” around a current government spectrum auction ends. Verizon and Charter Communications, the big cable operator, already are reported to have been nosing around each other. Comcast, the even bigger cable operator, is considered a likely bidder for T-Mobile—unless T-Mobile merges first with fellow wireless operator Sprint. And multiple carriers, both wireless and cable, are eyeing Dish Network, thanks to its large hoard of unused wireless spectrum assembled by boss Charlie Ergen.

Whether we get wireless-to-wireless mergers first, or go straight to wireless-to-cable mergers, it’s important to understand why such deals are inevitable.

Wireless operators are “densifying” their networks by shrinking cell size. Cable networks increasingly distribute their own content wirelessly via Wi-Fi. The two networks are becoming interchangeable. Today’s unrestrained wireless free-for-all will leak into the fixed broadband market dominated by cable. Eventually it will be regarded as a primitive abomination that consumers once were required to pay two broadband bills, one for home and another outside. And gone will be the quasi-monopolistic power of the local cable operator, long the only peg on which net-neuts could hang their hats.

Perhaps the most confounding potential deal of all to the net-neut obsessive would be the regularly bruited tie-up of Netflix and Disney.

Netflix is partly proposed as a solution to Disney’s succession quandary as Bob Iger nears retirement. Which raises perhaps the real question: Do Netflix’s Reed Hastings and Ted Sarandos want to run Disney? Our answer: Sure they do. Attaching a Netflix-Disney brand to all things that now carry the Disney brand—the theme parks, the studios, the cartoon characters—would be a fitting statement of the ambition that surely resides inside Netflix, to be the world’s premier entertainment brand. Why spend 10 years getting to your goal when you can get there overnight?

For fetishists who thought net neutrality was an idol for the ages, such a deal would puncture the pretense that content suppliers are weak lambs that must be protected from abuse by broadband carriers. Netflix-Disney would be an “over the top” programming giant fully committed to the post-cable age. As it is, Netflix already has a huge business model premised on being able to reach its customers reliably over any internet provider.

Of course, the Trump administration is a known unknown. AT&T’s pending deal for Time Warner remains to be ruled upon. Ajit Pai, the new Federal Communications Commission chief, presumably is immune from his predecessor’s partisan motive to block such combinations to please a handful of noisy activists.

It’s the populist-leaning Jeff Sessions at the Justice Department, which will also have a say on whether deals get approved, that may be the wild card the markets haven’t factored in.

By | 2017-03-22T20:42:17+00:00 February 26th, 2017|Categories: Thought Piece|Tags: , , |0 Comments

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