ON THE COSTS OF VIDEO DOWNLOAD SERVICES BY GOOGLE ET AL
(UPDATE: Fred Wilson has a good post titled "Jealousy" on this subject)
With all the focus over Google and Yahoo! focusing on Video (NY Times), AND the Wall Street Journal reporting on new video download services being introduced Google at CES, (with similar offerings by all the GYMAAAE companies), it's important to remember that there is another battle brewing behind the scenes. And it's likely to really determine how successful these video offerings will be and how soon.
And that's the increasing efforts by the telco and cable companies to get both the content providers and potentially consumers to pay more for "higher quality broadband delivery" of these video streams.
The Wall Street Journal has another article on the subject titled "Phone companies set off another battle over Internet fees":
"Large phone companies, setting the stage for a big battle ahead, hope to start charging Google Inc., Vonage Holdings Corp. and other Internet content providers for high-quality delivery of music, movies and the like over their telecommunications networks.
BellSouth Corp. said it is in early talks with Internet movie companies and at least one gaming company with the aim of striking agreements on fees to guarantee fast content delivery over the Internet. Movielink LLC, a joint-venture of five major movie studios that offers movies to consumers over the Internet, said it has discussed the issue with BellSouth.
Meanwhile, AT&T Corp. executives have expressed support for charging companies to ensure that their content gets priority delivery, and Verizon Communications Inc. Chief Executive Ivan Seidenberg yesterday said he might favor reaching deals with companies to do the same. "We have to make sure they don't sit on our network and chew up our capacity," Mr. Seidenberg told reporters."
It's a subject that I've posted on a lot late last year, with the most recent discussions here and here. I've also touched on the notion that portals like Google and others may have to step up their efforts and spending on the infrastructure side of their businesses a lot more in this cycle than portals had to do in the last decade.
Ironically, the best hope for consumers AGAINST possible surcharges, is on the regulatory front. As the article explains:
"But it has already sent ripples of concern through Washington, where regulators and lawmakers are sensitive about any proposals that could affect Internet access.
"We need a watchful eye to ensure that network providers do not become Internet gatekeepers, with the ability to dictate who can use the Internet and for what purposes," said Commissioner Michael Copps of the Federal Communications Commission.
He helped press to get the FCC enforcement power over issues of "net neutrality" as a condition of recent mergers in the telecom industry. "Net neutrality" is the idea that owners of phone and cable networks can't dictate how a consumer uses the Internet or discriminate against any Internet content, regardless of the source."
Let's not forget that wireless carriers are also spending massive sums deploying wireless broadband networks, and already charging premium prices for content that "chews up" that broadband capacity.
Carriers like Sprint and Verizon Wireless have already announced intentions to charge $2 or more per track of music downloaded over their networks, when the going rate over wired broadband (iTunes etc.) is a buck.
Many have called 2006 to be the year for video services over the Internet. A more correct characterization may be that 2006 is a TRANSITIONAL year for video over the Internet, as the business models and regulatory rules of the road are fought over, re-negotiated, and accepted by the content producers, distribution networks, and of course by consumers.
Heck, it may even take a little longer than a year to sort it all out.
(Update: Om Malik has a good post on this topic)
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