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Current Edge Tolls Actually Small
Friday, 22 August 2014 14:17

They could gouge if the precedent is set. I've called the current prices that the carriers are demanding from the video people "a hill of beans," that wouldn't be worth fighting over if they weren't likely to go up. Respected streaming media analyst Dan Rayburn pointed me to this comment from Chris Libertelli of Netflix confirming what I knew from off the record sources.  

“It’s fair to say that the interconnection fees that are being charged here are — and I think our CFO said this at the same conference that Jim alluded too — not as big for example as our content costs, so the price differentiation you’re referring too is likely to be so small that the costs of it would outweigh the benefits because the differences in price wouldn’t be so huge and customer affecting.”  http://bit.ly/1zdFUBg

    Rayburn I think goes too far suggesting that means edge tolls/sender pays are OK. We all know Ed Whitacre said "They are not going to use my pipes without paying."

 

I had in the works the same story from then CFO Randall Stephenson. He's now AT&T CEO. I also have heard similar from a very senior person at one of the largest U.S. carriers who trusted me not to identify him. "Dave, of course we intend to collect." 

    Sender pays is a mistake because the carriers have enormous market power. There's no way to reach 21 million homes without going through Comcast. That's called a "terminating monopoly." Broadband customers typically won't change ISPs for 5 years or more so Comcast's control will continue. A video company can't make it if blocked from a quarter of the customers in the U.S., especially if the other ISPs do the same. With no choice, video providers will have to pay even exorbitant rates. Some of that inevitably will be passed on to consumers. 

    There's also a prima facie antitrust case if the ISPs charge high tolls. They make it much harder for new video entrants to compete with the carrier's own video package. I don't think Comcast would do that but other ISPs likely will. A Charter VP once emailed his pr person "we keep download speeds low to make it harder for the customers to get video except from us." It was accidentally cc'd to me. This was a long time ago, when cable speeds were around 3 megabits. It's now so long ago I'm comfortable putting the company name on it. I choose to keep his comment "off the record" but it confirmed everyone's worst fears.

.   It would be stupid for the carriers to spend so much money fighting neutrality unless they saw a big payoff. Randall Stephenson and Lowell McAdam aren't stupid.

 

 

Last Updated on Sunday, 24 August 2014 23:32