Content Companies Demand Subsidies From ISPs… While ISPs Demand Subsidies From Content Companies

from the regulatory-silliness dept

It’s sometimes quite amusing to watch how various economic ecosystems grow, where multiple companies have symbiotic relationships, and then start to freak out when they think that other companies in the ecosystem are somehow earning “too much.” That, of course, is at the heart of many recent battles we’ve seen — from net neutrality (where the ISPs think Google is earning too much) to the music industry (where record labels think ISPs and Apple are earning too much). But sometimes it leads to rather amusing contrasts. For example, up in Canada, the entertainment industry is complaining that ISPs earn too much, and therefore are pushing for laws that would require broadband providers to pay money to the entertainment industry to develop new content.

But contrast that to the situation in the UK, where there’s an ongoing push for content companies to pay extra to help subsidize the cost of broadband deployments. The argument there is that all the content that’s being put online is creating a drain on broadband network resources. But, isn’t that exactly what the content creators in Canada are saying is a “free ride” for the ISPs?

Basically, it’s yet another situation where each side of the debate overvalues its own contribution. The ISPs think that it’s the network that is the most important thing, and the content providers should be paying their way to use it. Meanwhile, the content companies think that it’s their content that makes the networks valuable, so the ISPs should be paying extra to offer their content. In reality, they’re both wrong. The two things work together just fine in a market where each side pays its own way and doesn’t have to subsidize the other. Now, if we could just see such contrasting regulations proposed and passed in the same country, we could have an amusing situation where the cross-subsidies cancel each other out.

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Comments on “Content Companies Demand Subsidies From ISPs… While ISPs Demand Subsidies From Content Companies”

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20 Comments
Eric Samson (user link) says:

Yes

In Canada, it’s actually the CRTC (Canadian-FCC) who’s trying to make the content creators pay the ISPs to subsidize their content because the government is trying to cut all spending on arts and culture.

Unfortunately, ISPs and internet creators are getting the brunt of the govt spending cuts and it reflects on their outlook on their business. We need to look further and realize that internet content creation will grow without borders if, and only if, the content is worthwhile.

Weird Harold (user link) says:

Mike, I am trying to figure out if you are just having us all on with this website.

“The two things work together just fine in a market where each side pays its own way and doesn’t have to subsidize the other.”

Yet you support massively P2P protocols that massively shift the costs of doing business from the content providers (torrent sites, companies using BT to transfer their content) to the ISPs, knowing that the ISPs are not in the position to charge true market value for thier connectivity. P2P distribution of commercial software is the ultimate in not paying your way. So how can you support it?

Anonymous Coward says:

Re: Re:

Weird Harold are you on drugs? Where does Mike say he supports anything? He is just saying that neither the content creators or the ISPs are benefiting more that the other, and even if one were, neither should have to pay the other.
Besides, the P2P is not just the issue. Ever hear of HULU or any of the perfectly legal streaming media sites?

Weird Harold please either quit trolling, quit doing illegal drugs, or quit drinking and posting. Maybe see a doctor and get a prescription for real drugs like lithium or something to make you less crazy.

Expatriate Canadian says:

The Canadian situation is quite different. The CRTC is seeking a levy on broadband users to be distributed amongst Canadian content providers, in much the same manner as the CD levy (on blank media) is distributed. It is not a tax inasmuch as the entire proceeds go to the intended source instead of to government general revenue and it is intended to be passed on directly to the consumer.

The rationale is that Canadian Internet content producers cannot compete directly with U.S. content and need the financial assistance. If the CRTC could figure out how, they would mandate a minimum amount of Canadian content that would have to be passed by Canadian ISPs just as they mandate minimum Canadian content levels on broadcasters and cable companies.

The fun part will be watching how this ill-gotten booty is distributed. How do they expect to determine who is and who is not a worthy content producer?

This is not a case of market economics but rather a case of government meddling.

inc says:

wtf does one have to do with another. stop trying to suck the money from others. ISP’s should only worry about providing a dumb pipe. The content creators should only worry about getting eyes on their content so they can advertise. There is a lot of content on the net and not much of it is worth downloading. why should I pay the ISP to pay them to create garbage. they should work to make good stuff.

Anonymous Coward says:

Mike Masnick wrote:

Now, if we could just see such contrasting regulations proposed and passed in the same country, we could have an amusing situation where the cross-subsidies cancel each other out.

I’m not sure it would be that amusing. The consumer would be expected to pay for both subsidies. Whether the elephants are making war or making love, it’s always the grass that suffers.

RIchard Sexton (user link) says:

Re: I need one too!

I agree and will go further. I think they should all buy me a Mercedes coupe if any of them expect me to use any of their stinking stuff or I’ll just go back to reading the newspaper, walking the dog and puttering about in the garden.

I’d have to get a dog and learn how to not kill all things green but you get the point.

TW Burger (profile) says:

Result of the Separation of Content and Distribution

This argument of one side subsidizing the other is due to the separation of content and distribution. When media companies controlled everything all was well. Now that more and more content is distributed through the Internet it’s only those media companies that have no idea how to use the internet that are asking for payment rather than taking control.

It would seem that both the paying of the ISP by the content company and the ISP paying for content is silly. Each needs the other – the relationship is symbiotic.

Wouldn’t it be silly if a small record label has to pay a multi-billion dollar Internet telecommunications giant like AT&T because someone AT&T customers downloaded free samples of some songs the label produced from the music label’s site.

It’s also absurd that a huge media company like EMI would have to be paid by a small rural ISP that had a customer that connected to an EMI site and downloaded music samples from EMI.

Anonymous Coward says:

If anything – this flip-flop situation simply demonstrates that both ISPs and content providers are spending far too much time thinking about the other guy. In the UK, BT has been REPEATEDLY warned about insufficient planning and investment into their broadband infrastructure. It’s almost amusing in a sad way that they now demand subsidies from public coffers such as the BBC TV license bureau – I say ‘almost’ because as one of the people who must pay into that license, I feel as though BT has been caught with it’s pants down and now we must ‘bail them out.’ Not exactly a phrase taxpayers like to hear these days.

If BT feels as though they are short of money – perhaps they should recoup some cash from their overpaid exectives.

Pope Ratzo (profile) says:

Snake eats its tail

The funny thing is that the big ISPs and “Content Providers” are two of the few industries that are still doing well in this global recession.

And when you say they are “demanding subsidies” from each other, what they’re really doing is “conspiring to raise prices on consumers”.

Let’s not mess around here: class warfare is real, and the corporate class has been perpetrating these acts of economic terrorism on us for years.

Vastrightwing (profile) says:

The pay off makes total sense. Consider the benefit of the recipient who effectively lobbies a government for any payout (no matter how ridiculous). The energy (risk) is low compared to the payout (reward). Which ever group can convince a government to reward them, wins a lot of money for relatively little effort. This is very efficient.

The reverse is not true: the tax payers are stuck with paying for this but at such low amortized amounts that fighting back is not worth the trouble. In effect, it’s like a million mosquitoes swarming around biting you. It’s not effective to fight all of them, you can’t win.

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