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But what's really at stake in all this - is the war for Net Neutrality. And it comes down to the data bottleneck problem in the pipes. The core issue here has Big Telco versus CE manufacturers not only in Korea. But everywhere. Example.
Netflix is taking up well over 30 percent of all US bandwidth during primetime in USA and that's increasing. The internet can handle it - but not on the last mile. If five of my neighbours are using Netflix along with three people in my house... chances are extremely high we are not going to have a good experience due to lack of adequete infrastructure at the end point.
This is a more-than-ripe opportunity for Big Telco to throttle bandwidth and create tiered pricing - in effect creating a digital class system.
Is the stage for being set for ISP's to push back? With video streaming via the Internet pipes increasing dominance in bandwidth consumption, the Internet service providers might push back on at some point. The streaming video using the Internet Protocol (IP) business model into homes, relies on — essentailly — poaching bandwidth. And the Net Neutrality issue will simply exacerbate the situation. If you back net neutrality, it's a lose-lose situation. If ISPs are forced to grant Netflix free reign, the response will simply be to raise the price on your Internet service. That is, if they can't "tax" the outsized impack back to Netflix, they'll bill you for it whether you use it or not. Be careful what you wish for as you just might get it.
But it's not just Netflix. It's all the new connected devices coming off the shelves this holiday season. From Connected TV's to Tablets to more Smartphones to your Xbox, Your PS3, your Wii, your Roku, your Boxee box, your Set Top Box... all which are capable of streaming video from the Internet, all which are capable of streaming Video on Demand. Now consider what might occur in January... when the massive gadget-giving season is over — when it's all unwrapped and plugged in, and — perhaps 20 per cent of the population start streaming video off the Internet.
The backbone of the Internet will not suffer lockdown anytime soon according to experts. No, that's not the problem. The trouble is the last stretch of the Net — the skinny pipes in the cable or telephone line to your house not built for this kind of traffic. Today it's easy to view an HD streaming movie. But the thin local plumbing could quickly become overwhelmed once all your neighbors couch down for watching the full series of Lost or all the Harry Potter movies in a marathon session streaming over the Internet to their TV. The ISPs won't just sit back and take it. The will also likely choose to go after more of the money that content providers such as Hulu, Netflix, Lovefilm and Google are running with. They want a piece of the pie and they happen to own the 'last mile' of wires into the home where bottlenecking is expected to occur.
And I touched on it again in 2011:
My biggest worry about the evolutionary marriage of the Internet and TV? Net Neutrality. On one hand governments in the West are honing in on an innovation-driven economy – which will need the massive transfer of knowledge that an open and free internet for all provides. On the other hand, I mean those hands that feed them – the sycophantic lobbyists who play political poker for corporate interests, have sway in the other direction. Retaining the status quo, fending off disruption, keeping margins where they are, and beating back third party innovation are viable tactics.
How long do you think it's going to take before the ISP's really start screaming as Netflix (and other emerging VOD platform running on IP) suck up larger percentage of bandwidth (they already take 30 percent at primetime in the US).
In my opinion, the key to driving the new economy is making it accessible to everyone, not creating a digital class system. Canada is going through a phase right now, with a number of ISP’s such as Bell Canada, Eastlink, and Rogers throttling of certain protocols around Hi-Speed Internet. On January 25, 2011, the CRTC (Canadian Radio, Television, Telecommunications Commission) ruled that usage based billing could now be introduced. Some think it’s a protective move again Netflix’s entry into the Canadian market with a streaming only solution. And don’t think Comcast does not have similar aspirations in the US. Consolidation… err… monopolization… err… the marriage of broadcasters and ISP’s a reoccurring theme in North America.
And it's going to be a Battle Royale. The main reason why lobbyists and industry pressure has not yet killed Net Neutrality is pretty simple. The future economies of the West (and the world for that matter) hinge largely on the Internet - and the more accessible it is to everyone, the more vibrant those economies will be. If governments buckle under and allow a digital class system and artificial scarcity, it will only fuel exclusion and shrink the market. I am sure most economists would agree with my point.
Fortunately in my adopted home of Holland, the majority of the Dutch parliament voted for new net neutrality laws in June 2011, which prohibits the blocking of Internet services by any telecommunications provider, usage of deep packet inspection to track customer behaviour and otherwise filtering or manipulating network traffic. We won the battle here.
As in any conflict where a lot is at stake, there is no bandwidth limit on the hyperbole. KT claims research shows smart, or connected, TVs use five to 15 times the bandwidth of managed IPTV (a sector in which KT has had mixed success). While a high number of integrated apps, HD services and the tendency for TVs to be left streaming even when no one is watching (less likely on PCs) will use up bandwidth, the claim of up to 15x more than over IPTV seems unlikely.
KT is singling out Samsung’s Smart TV and has suggested it should share the profits made by set makers and service providers like Apple and Google. The fact the world’s biggest set maker is also a Korean company is a clue to why the argument is crystallising there. Interestingly LG, number two in connected TVs and also a Korean company, hasn’t been directly threatened and is rumoured to be negotiating about paying for guaranteed network availability.
...Much more likely is that today’s premium prices for superfast broadband will become tomorrow’s commodity costs; the consumer will pay a slightly higher price and the network will swallow a slightly lower margin. The OTT providers will make more money and major popular rights owners will be handed yet more licences to print it.
As did Alexandru Ion at Gizmocrave:
This is not the first time this kind of an issue has occurred. Remember what Ed Whitacre said when he was the CEO of AT&T? Here goes:
How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?
John Petter, managing director of BT Retail’s consumer business has also said we can’t give the content providers a completely free ride and continue to give customers the service they want at the price they expect. In this case, Samsung Electronics announced that it is mulling over legal actions to take against KT: a lawsuit for compensation of damages or an injunction. But the larger question remains if other ISPs go in the line of KT, would Roku, Boxee or even Smart TV makers such as LG or Vizio be in danger of a block?
The final result? Both KT and Samsung may face punishment for cutting Internet to TVs according to the Korea Times:
The Korea Communications Commission discussed possible punitive measures against KT Corp., which limited Internet access for Samsung-made smart televisions for five days, during a regular meeting of its leadership on Wednesday.
The state-run telecom regulator also decided to seek ways to punish Samsung for causing the service shutdown as it refused to talk with KT over the network use of its smart TV owners.
As part of their agreement announced Tuesday, KT resumed Internet services like video-on-demand and smart TV applications immediately, while Samsung withdrew a lawsuit against KT.
Even though the harm from the incident, which affected an estimated 300,000 TV sets nationwide, was considered moderate, criticism is growing against the two companies for dragging their customers into their failed negotiations.
“It’s not right that business operators hold their users hostage when they fail to reach an agreement,” said KCC commissioner Shin Yong-sub.