Cable Company’s Video Plan Recalls AOL’s ‘Walled Garden’

Time Warner made another interesting announcement, just a few days after confirming an experimental project to consider charging Internet users more for intensive Internet bandwidth use.

Guest Post by Marvin Ammori, Free Press General Counsel

On Monday, Time Warner announced a new Internet site called HBO on Broadband. Through this new site, HBO cable subscribers can download about 400 hours of HBO’s movies and original shows each month. Time Warner is rolling out this service to HBO subscribers first in Green Bay and Milwaukee, Wisconsin, and will “slowly” expand it elsewhere, according to the New York Times.

But there is a catch. Well, maybe more than one.

The big ones are that you have to be an HBO cable subscriber with HBO On-demand; and you have to be signed up for Time Warner’s “Road Runner” high-speed Internet, which seems available only where Time Warner provides cable service. (There are also DRM restrictions – no transferring shows to portable devices, and the downloads only last four weeks.)

So let’s unpack this a little.

On the positive side, it’s nice that this HBO on Broadband service provides a convenience to some HBO subscribers in Time Warner regions. And hopefully, it will encourage competitors to make their content available online, without as many “catches.”

Unfortunately, the negatives are more numerous — and complex.

It’s not really online distribution.

First, HBO on Broadband works only for people who already pay to access HBO On-demand on Time Warner Cable. So it’s only useful when these people are on the road. Or if they have a bigger computer screen than TV screen at home.

You see, you can’t cancel your cable service and simply watch HBO online. So HBO on Broadband doesn’t actually compete with cable or broadcast television. To get some online downloads, you have to continue paying for the cable digital basic tier plus the rate for the premium HBO channel.

And that’s only if you live in a Time Warner region. So, at best, for those in Time Warner areas, HBO on Broadband further distinguishes HBO from other premium channels, like Showtime.

It encourages discrimination.

Time Warner announced it may start charging consumers more for using a lot of bandwidth. While this is somewhat better than blocking competitors outright, like Comcast is doing, it still raises Net Neutrality issues.

When it comes to HBO on Broadband, Time Warner owns both the pipe and the content. So it’s probably safe to assume that Time Warner wouldn’t want to apply its new high-bandwidth surcharges to its own product.

But favoring its own content over other channels or programs like BitTorrent would be discriminatory. The company would be using its gatekeeper power to steer users toward content it already owns.

It’s a new walled garden.

Remember the old America Online model? They tried to build their business by keeping users within AOL’s “walled gardens” of content rather than elsewhere on the Web. It didn’t work. But that’s basically what Time Warner (which was once called AOL Time Warner) is still trying to do.

As the company has acknowledged, Time Warner wants to distinguish its broadband offerings from those of its local phone competitors based on exclusive content. They’re betting that HBO-lovers will switch from a rival DSL service to Time Warner so these HBO-lovers can get unlimited access to Taxicab Confessions.

But what happens when other network providers do the same? We get a “balkanization” effect, where each network provider begins to wall off content that it owns for the exclusive use of its subscribers: Time Warner subscribers can get HBO and CNN online. Comcast users get exclusive access to G4 an E! online. And then the phone companies will start cutting their own deals with Hollywood, wooing them with promises of the best “copyright filtering.”

Time Warner might argue that all this represents wonderful competition. But it’s wrong. This content-grabbing by two local giants isn’t nearly as valuable to society as the wide-open application and content competition made possible by Network Neutrality.

The customer is always right.

And — most importantly — this is not what consumers want.

In other countries, thanks to smart policies, consumers do have a choice of Internet providers and a truly competitive market. Internet providers elsewhere have to compete based on things consumers actually want like greater openness, more bandwidth, higher speeds and better value. In countries with real competition, consumers get far higher speeds, guaranteed openness, and more bang for their krone.

But U.S. network providers are trying to avoid costly upgrades that might actually bring us world-class speed, bandwidth, and openness. Instead of investing in the network, they’d rather block sites, discourage Internet usage, and kick users off their networks. Since there’s so little competition here, they can get away with it. We have nowhere else to turn.

Rather than using content add-ons and walled gardens, Time Warner should have to invest in its network offer the openness and choices consumers really want. Better competition policies, like that found abroad, would require Time Warner to make those investments and respond to consumers’ real demands.

But such policies require political leadership — and lots of public pressure to make sure our elected officials don’t get too distracted by all the campaign cash and high-priced lobbying clout the phone and cable companies bring to the table.

This much is clear: Better policies and enforcement — not blocking or metering — are the best way to solve America’s broadband problems.

This entry was posted on Friday, January 25th, 2008 at 2:31 pm and is filed under Time Warner.-->