The big U.S. Internet service providers — mostly cable and phone companies — are looking to change the way they sell and manage Internet access. Comcast already messes with its customers’ peer-to-peer transfers, Time Warner Cable is testing pay-per-use pricing, AT&T has proposed filtering out illegal downloads, and Verizon says again it might consider pushing some Internet bits faster than others.
Leaving aside the morality and legality of such practices, if ISPs really do start to regulate traffic, this is good news for some companies and bad news for others.
ISPs: Anything cable and phone companies can do to increase revenue (by charging based on the amount of bandwidth subscribers consume) and/or decrease capital spending (by reducing network capacity used for piracy) is good for their bottom lines. And because Americans don’t have much choice for Internet access, we don’t see many people ditching their ISP for another provider, no matter how angry they get. Many ISPs are also pay TV providers, meaning their video-on-demand offerings — which wouldn’t get the bandwidth surcharge — could get more eyeballs.
Cisco: More complicated bandwidth manoeuvring means more network gear and services to buy. Cisco (CSCO) has spent a ton of money on traffic management technology, including its $200 million acquisition of P-Cube in 2004.
Traffic management companies: These include Sandvine, Allot Communications (ALLT), and Arbor Networks. ISPs will use their technology to filter through their networks and weed out the offending bytes.
VPN providers: Companies offering “virtual private networks” are essentially selling an encrypted tunnel between a downloader and the file they’re downloading. ISPs won’t be able to screen this traffic. But this won’t help in situations where people have to pay for service based on how much bandwidth they use.
Netflix, Blockbuster: DVD rentals still make up the vast majority of their business, and these don’t require any Internet bandwidth to transmit.
Lawyers, lobbyists: We don’t expect the service providers to do anything radical enough to cause a mass subscriber exodus. After all, they need their businesses to grow, not shrink. But when ISPs are inspecting your Internet activity, that raises privacy concerns. And expect the companies on the “losers” list below to ramp up their lobbying for “net neutrality” laws that would bar ISPs from favouring some Internet files over others. It’s already started up again.
Apple: iTunes is the leading digital media store, but if consumers have to pay extra to download big files, Steve Jobs’ $3/$4 movie rentals don’t sound so great, especially in hi-def, where files are even bigger.
Amazon: Likewise, the Unbox store/movie rental service becomes less attractive.
Hulu: The NBC U/News Corp. JV is putting together a great service, but if subscribers have to pay extra to stream video files over the Web, it’s less sexy.
The rest of Web video industry: Everyone from Yahoo to Google’s YouTube. Their video files are usually smaller, but still eat up a lot more bandwidth than emails.
CDNs: Akamai Technologies (AKAM), Limelight Networks (LLNW), and other content delivery networks are betting on a future where more video gets distributed over the Web. Cracking down on piracy is good for these guys, because some of their biggest clients are legit digital media sellers like Apple and Amazon. But if ISPs charge extra for big downloads, CDNs could end up pushing fewer movies over the Web.
P2P companies: Peer-to-peer transfers are already getting tampered with, thanks in part to their long-time connections to piracy. But legitimate companies like Pando and BitTorrent could have trouble using P2P to deliver files for their big-media clients if ISPs’ filters get in the way.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.