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Does OTT Video Seek Congestion-Free Lane to Consumers?

20 Mar, 2015 By: Erik Gruenwedel

A Wall Street Journal story says yes; a Frost & Sullivan analyst says no

In the crush to deliver video content direct to consumers, some over-the-top services reportedly are trying to negotiate favorable deals with multichannel video program distributors. And it’s not about fiscal terms, but rather special channels used for smoother streaming video distribution.

HBO, Sony and Showtime reportedly have approached major cable, telecom and satellite operators about classifying their budding subscription streaming platforms as “managed” services, according to The Wall Street Journal, which cites sources familiar with the situation.

While such action by MVPDs remains at the discussion level, actual implementation could incur ISPs with hundreds of millions of dollars in special infrastructure costs for a single Web service, according to the publication.

As a “managed” service, OTT video platforms could sidestep increasingly congested public broadband channels and reduce the impact on monthly data-usage caps of binge-viewing subscribers. Cable operators such as Comcast employ special broadband channels for on-demand programing and voice in to avoid buffering and dropped calls, according to the report.

Such agreements would appear to fly in the face of new net neutrality guidelines established by the Federal Communications Commission. But in the agency’s recently disclosed open Internet order, special distribution agreements between commercial interests were not outlawed so long as they are available to all business interests.

To the FCC, paid prioritization refers to the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.

For MVPDs in the United States, marketing third-party OTT video services via special distribution channels could help retain pay-TV subscribers, lure “cord-cutters,” and generate incremental revenue.

It’s still a bad idea to Roger Lynch, CEO of Sling TV, the nascent Internet TV service launched in February by Dish Network.

“It’s a bad thing for consumers and a bad thing for innovation,” Lynch told the WSJ. “It makes a mockery of net neutrality.”

To Frost & Sullivan analyst Dan Rayburn, the entire concept of “managed” services among ISPs is ambiguous and silly.

In a March 20 post, Rayburn accused the WSJ story of being inaccurate and filled with empty buzz words. He said that in discussions with ISPs the general consensus was that no third-party streaming service could pay for preferred access to subscribers.

Rayburn has also been critical of alleged inaccurate media reports surrounding Netflix’s interconnection deals with ISPs, which the subscription streaming pioneer characterizes as added taxes.

The analyst contends The Journal may have confused the idea of caching content inside an ISP’s last mile to subscriber homes – a point of distribution he said doesn’t come with “special treatment” or prioritization of any kind.

“The WSJ story uses a lot of generic undefined words that sound very scary, but when you look at the details rationally, you can see that they simply created controversy where none exists,” Rayburn wrote.


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