VIDEO SERVICES SEE NEED FOR SPEED
By Stefanie Olsen
LOS ANGELES--The video-on-demand and Net access industries
are engaged in a tug-of-war over broadband connections, sparking
debates about when an Internet connection should be considered "high
Video-on-demand (VOD) companies need speedy Internet
connections to keep their high-end services alive. But broadband
providers increasingly are dropping speeds and prices to attract
"Video-on-demand providers are afraid the free gravy train
for cable modem users is going to end," said Dylan Brooks,
an analyst at Jupiter Media Metrix. "Consumers have been used
to getting as much bandwidth as the network will provide. Now cable
providers are effectively saying that VOD-quality bandwidth is a
higher level of service, and people will have to pay more."
The Federal Communications Commission defines broadband as a 200kbps,
always-on connection--a standard that falls far below the level
needed to deliver crisp, uninterrupted video to a computer. Some
video-on-demand companies say that standard is too slow.
At the Streaming Media West conference here last week, Intertainer
CEO Jonathan Taplin called on regulators to set a bandwidth minimum
of 750kbps for service to qualify as broadband. Intertainer, one
of the few companies to offer a commercial streaming-video service
on the Web, recommends its 100,000 customers connect at 580kbps
The arrival of high-speed access has been heralded as a watershed
moment for the Net, enabling a variety of new services from streaming
music and video to interactive gaming and videoconferencing. But
the reality has been somewhat different, as Internet service providers
have struggled with costs, weak demand and a dearth of bandwidth-intensive
The problems of broadband were crystallized with last year's collapse
of Excite@Home, then the world's largest high-speed cable network.
Despite signing up some 4.1 million subscribers willing to pay an
average of $46 a month, the service was unable to avoid bankruptcy.
Cable companies offering broadband service have responded by raising
prices for high-bandwidth users and creating a slew of cheaper options.
Atlanta-based Cox Communications has several high-speed access
plans, including a $26.95 service offering 256kbps as a downstream
speed. Its original "flagship" service offers 1.5mbps
downstream for $34.95. Charter Communications, meanwhile, has three
levels of service: a 256kbps downstream for $24.95 to $29.95, a
512kbps to 768kbps downstream for $34.95 to $39.95, and a 1mbps
to 1.5mbps downstream for $49.95 to $75.95.
These cheaper bandwidth packages and most DSL (digital subscriber
line) services fall below speeds recommended by video-on-demand
companies. And that's making VOD providers nervous.
According to Taplin, the issue is truth in advertising. Cable and
broadband providers need to be held accountable to consumers for
claims of high-speed access, he said, pointing to quality-of-service
problems that can sometimes cause broadband to slow to a crawl.
The government needs to step in to ensure that consumers get what
they are promised, he said.
Others, however, said the pricing schemes reflect nothing more
than weak demand for cutting-edge services. According to Jupiter's
Brooks, VOD ranks far down the list of things consumers say they
want out of broadband, behind features such as an always-on connection
and the ability to surf the Web and download files more quickly.
Brooks said VOD providers are making the push partly to cash in
on the cable industry's lobbying efforts to win federal subsidies
for broadband service.
"Tiered pricing ultimately will help VOD providers,"
he said. "It pushes the cost of bandwidth onto the people who
are using it and helps ISPs meet quality-of-service standards."
Companies offering VOD services include Lions Gate Entertainment-backed
CinemaNow, which recently signed a distribution deal with Metro-Goldwyn-Mayer.
In addition, partnerships created by the major U.S. film studios
have been created to tap into this market. MovieLink--a partnership
between Sony Pictures, Viacom's Paramount Pictures, MGM, AOL Time
Warner's Warner Bros. and Vivendi Universal--is expected to launch
in the latter half of the year, although a date has yet to be set.
A rival service from Walt Disney called Movies.com is also in the
works, although it suffered a setback last week when partner 20th
Century Fox, a Viacom subsidiary, pulled out.
Internet vs. TV
Cable's growing entry into the Internet-access business has raised
other concerns for providers of high-speed Web content.
In an interview last week, Taplin weighed in on a contentious FCC
decision last month to treat cable modem providers as "information
services," as opposed to "telecommunications services"
subject to regulations under the Communications Act.
The ruling, which frees large ISPs from sharing their independent
networks with smaller competitors, has been viewed as the leading
wedge in a policy shift underway in the FCC's oversight of broadband
providers--a change that could eventually trickle down to the Baby
Bells and DSL providers, giving them much greater leeway to strike
access deals with broadband resellers.
Taplin argued that the decision may inadvertently give cable providers
the power to choose what content customers can view on the Internet.
Cable companies already charge the likes of ESPN or the History
Channel to be included in a cable TV package. By granting the same
rights on the Internet, cable providers could create a similar structure
for Web sites, which would have to pay to reach customers, Taplin
The National Cable & Telecommunications Association (NCTA),
which represents cable operators serving more than 90 percent of
the nation's cable TV households, said it supports the FCC decision,
calling Taplin's assessment "a very creative interpretation
of the ruling."
"The FCC's decision had absolutely nothing to do with content,"
said NCTA spokesman Marc Smith. "The FCC's decision was about
creating a consistent and national framework for broadband services
delivered by cable."
But Taplin said the decision could make content disputes with cable
operators more common. He pointed to a high-profile spat last year
between Walt Disney-owned ESPN and Charter as one hint of turf battles
on the horizon for Internet content companies and broadband providers.
ESPN pulled its programming from Charter's cable TV network after
Charter objected to ESPN's plans to broadcast the same programming
The Internet should "remain an open system," Taplin said.
"Or we might wake up to find that cable and broadband providers
have turned the Internet into walled gardens."