Satellite-TV operator Dish Network announced plans this week to deliver a stripped-down, low-priced version of its service through the Internet. With a growing number of consumers eschewing expensive pay-TV packages, the time seems ripe for such an Internet-based alternative. But unlike conventional pay-TV operators, Dish's Sling TV will rely on broadband networks it doesn't own — in fact, it will have to connect to its customers through Internet services provided by cable and telephone companies, whose pay-TV services it will be challenging. As it happens, the Federal Communications Commission is mulling new rules that could help ensure the ability of Sling TV and similar innovators to compete.
Slated to launch early this year, Sling TV will offer a basic package of a dozen channels, including ESPN, CNN and TNT, for $20 a month. It's the first of several online TV services expected to hit the market. They'll have a tough time succeeding, however, if ISPs such as Time Warner Cable or AT&T prioritize the traffic from other sites and services in exchange for fees. That's why the FCC needs to adopt enforceable net neutrality rules that bar ISPs from paid prioritization deals that favor some sites at the expense of their competitors. But those rules would cover only the way “last mile” ISPs manage traffic on their own systems, not how they connect to the networks that deliver data. A second important piece is making sure that ISPs don't create artificial bottlenecks at those interconnection points.
The latter issue is growing in importance as ISPs consolidate. If the FCC approves Comcast's proposed acquisition of Time Warner Cable, the company would serve about 40% of the U.S. homes with broadband, giving it enormous leverage when negotiating interconnection agreements. ISPs should be able to collect fees from networks that send a disproportionate amount of traffic — that's the way the Internet has always worked. But they shouldn't be able to play favorites or gouge the companies trying to reach their customers online.
The goal of net neutrality and interconnection rules should be to preserve the status quo that has produced so much innovation and growth online. An important part of that status quo is the incentive ISPs have to invest in their networks, providing extra capacity to handle such bandwidth-hogging services as high-definition television. And the more consumers shift their TV viewing from cable to broadband, the more capacity ISPs will need. The FCC can't afford to impose rules that are so broad and restrictive that ISPs can no longer raise the money needed to invest in their networks. That would defeat the purpose of having the rules in the first place.
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