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Without net neutrality, what stops HBO from turning the internet into cable?

Without net neutrality, what stops HBO from turning the internet into cable?


If any company is getting in the 'fast lane,' it's going to be HBO

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Several years ago, someone came up with a potent worst-case scenario for an internet without net neutrality: it would look like cable TV. With the option to slow down or block individual sites and programs, ISPs would give you the internet equivalent of basic cable, then charge extra for "News" and "Hollywood" bundles with Digg and YouTube instead of CNN and Showtime. There’s no subtlety, but it gets the point across. So what happens when, after almost a year with no net neutrality rules, a company whose name is synonymous with premium cable jumps online?

Earlier today, HBO and its parent company Time Warner announced an internet-only subscription program, letting customers use the HBO Go streaming video app without first buying a cable or satellite package. This has been a major request for years, and HBO has openly acknowledged that many cord-cutters are sharing account passwords with friends, not heading back to the television. Since it hasn’t laid out the details of its plan, it’s possible we won’t get a real substitute for cable, just a better version of its Amazon Prime back catalog. If it’s as good as fans of Game of Thrones, Girls, or Boardwalk Empire hope, though, cable companies could be losing one of the few things — alongside ESPN and other sports channels — that keep customers from dropping TV altogether. But that traffic is still going to be running through those same companies’ internet pipes, and if Netflix hasn’t been able to get by without paying to connect to Comcast and Verizon’s networks, cable companies are going to push as hard or harder to keep making money off a defector.

'Fast lanes' can be flexible, but they make everything else a slow lane

"I think cable operators are aware that more and more content is going to move online," says John Bergmayer of pro-net neutrality group Public Knowledge. "Instead of trying to stop that trend, I think cable companies would just like to find ways to control it — either by offering the online content themselves or coming up with ways to get online video services to pay them." The most extreme version of this would be throttling a particular internet service: if you don’t pay a little extra, HBO Go slows to a crawl, and the cable-fication of the internet begins. This is, simply put, not likely. It’s far more probable that HBO will come to a Netflix-like agreement to directly connect to an ISP, or that it will partner with cable companies for a competitive advantage, like the right to offer service that doesn’t count against users’ data caps.

More generally, there’s a battle going on over whether the FCC should ban internet "fast lanes," in which ISPs would speed up certain sites or software for a price. While they wouldn’t be allowed to actually degrade service for anyone else, improving the internet for specific, popular products arguably makes it easier to skate by without improving the baseline network that new companies use. The more data-hungry a service is, the more noticeable a speed gap would be, so a high-profile streaming-video company that managed to get in the fast lane would have a noticeable advantage. With a strong catalog, backing from Time Warner, and existing relationships with cable operators, HBO is well placed to be the one that does it.

And so far, it seems happy to be in that position. "Every night in the United States, a big piece of the broadband capacity of the country is being used, probably, by Netflix and Youtube," said HBO chairman and CEO Richard Plepler when asked about net neutrality. "If you add a lot more programming ... there's gonna be a strain on that system," he continued. "There's gonna need to be an evolution of financial support to continue to maintain the ability of the broadband infrastructure" for digital video. "One way or another, that's going to work out." Reading between the lines, it’s an endorsement of deals between streaming-video companies and ISPs, whether that means a connection fee or a "sponsored" deal for free data. Plepler said that HBO planned to continue working with its current partners and would "explore models with new partners," echoing the language ISPs use to discuss "fast lanes."

"If you add a lot more programming ... there's gonna be a strain on that system."

To some, fast lanes aren’t categorically bad. "There are good reasons to think even an exclusive sponsored data deal could be good for consumers — and even for Netflix. But it really depends," says Berin Szoka of TechFreedom, which tends to oppose net neutrality. Exempting HBO from a data cap, for example, could free up bandwidth for other video sites. Granted, the higher video resolution goes — Netflix is already looking at 4K — the more precious each gigabyte of data becomes. "As quality levels improve, there might come a point where refusing to allow Netflix to participate in a sponsored data program might well make it harder for Netflix to compete with other video providers," he says. "But we’re certainly nowhere near there yet." The point, for Szoka, is that the FCC shouldn’t rule out possibilities that aren’t clearly anti-consumer, as long as they don’t already fall under antitrust law.

Regardless, plenty of these deals could exist even under the most stringent FCC net neutrality framework. Netflix’s negotiation with Comcast over internet backbone service, for example, doesn’t fall under its proposed purview. Time Warner and an ISP could both fairly undercut competition by offering free HBO Go to customers. Overall bandwidth costs might have to be passed on to consumers, which ideally would incentivize more efficient networks but seems as likely to jack up prices. Could the internet feel more segmented as a result? It’s possible. But as long as ISPs aren’t meddling with the actual speed of data as it flows to their customers, it’s not a net neutrality problem.

Whether or not the FCC adopts meaningful net neutrality rules, as it’s promised to do this year, HBO is still a step towards a world where everything lives on the internet by default. Even if it sides with ISPs instead of Netflix, it’s no longer literally tied to traditional television. Is the internet heading the way of cable? "I don’t know. I think today it looks like cable," says Matt Wood of net neutrality advocacy group Free Press. "It sounds to me like this is probably an improvement."