Disney, Fox and Net Neutrality: Streaming Bits and Content Delivery

Disney, Fox and Net Neutrality: Streaming Bits and Content Delivery

[Updated 12/16/17] Two very big developments hit the news Thursday that tell us as much about the state of media, entertainment, news and culture as they do the future of media and society.

For one, Walt Disney’s $52.4-billion stock deal to buy a major portion of 21st Century Fox is all about the future of content delivery via video streaming.

And second, the Federal Communications Commission’s 3-2 vote (along party lines) to roll back Depression-era regulations that treat internet providers as a monopoly is about unleashing innovation. In so doing, the FCC order may free up the U.S. to catch up with the world in advancing content delivery networks.

“Walt Disney said Thursday it agreed to buy most of 21st Century Fox Inc. for $52.4 billion in stock, in a deal that would give Disney a dominant position in movies and sports and help bolster its flagging television business as it prepares to directly challenge digital giants like Netflix Inc,” the WSJ reported.

The New York Times called the Disney-Fox deal a move that will reverberate from Hollywood and Silicon Valley to TVs and smartphones around the world:

“Disney has already announced an ambitious plan to introduce two streaming services by 2019. With this deal and the wealth of movies, TV shows and sports programming it provides, the company will now have the muscle to become a true competitor to Netflix, Apple, Amazon, Google and Facebook in the fast-growing realm of online video.

“‘The pace of disruption has only hastened,” Robert A. Iger, Disney’s chief executive and chairman, said in an interview. “This will allow us to greatly accelerate our direct-to-consumer strategy, which is our highest priority.'”

The FCC’s order gets at this trend, saying it reverses the commission’s “abrupt shift two years ago to heavy-handed utility-style regulation of broadband Internet access service and returns to the light-touch framework under which a free and open Internet underwent rapid and unprecedented growth for almost two decades.

“We eliminate burdensome regulation that stifles innovation and deters investment, and empower Americans to choose the broadband Internet access service that best fits their needs.” (Link to full order.)

The Wall Street Journal’s Review and Outlook column picks up on a few more business trends at play with the Disney-Fox deal, and the FCC rule restoring the internet to pre-2015 rules:

“Consumers will also benefit from the slow breakdown of the cable monopoly as they customize “bundles” like Hulu or a Disney stream that may cost less. Americans will also enjoy new distribution options, which could have been barred by the net-neutrality rules.

“This week T-Mobile announced its acquisition of Layer3 TV, a Denver startup that streams high-definition channels online and will compete with AT&T’s DirecTV Now. Verizon Wireless last month said it will start delivering high-speed broadband to homes over its wireless network late next year. Google and AT&T are experimenting with similar services that will be cheaper than digging dirt to lay cable. This could be a boon for rural America.”

Breitbart.com’s Allum Bokhari documents some of the hysteria among netizens who see nefarious motives behind the FCC’s order:

“Opponents of the repeal say that it gives ISPs more power to favor their own content, especially streaming services. Comcast, they argue, might choose to make Netflix and YouTube load slower and their own streaming services load faster. Under new FCC rules, however, any such ‘throttling’ of content must be publicly disclosed by ISPs. Furthermore, if ISPs promise not to throttle, as Comcast has done, and then break their promise, the FTC can impose penalties upon them.”

That’s not enough for socialist Senator Bernie Sanders of Vermont.This is an egregious attack on our democracy. The end of #NetNeutrality protections means that the internet will be for sale to the highest bidder. When our democratic institutions are already in peril, we must do everything we can to stop this decision from taking effect,” went one of his tweets Thursday.

Breitbart’s Bokhari notes: “Yeah, it sure would suck if the internet were dominated by one big corporation with documented ties to an established political dynasty and the power to swing elections with a few algorithm changes. Oh wait.”  The article is a wickedly funny round up of some over-the-top reactions to the FCC’s order.

It’s funny, but serious stuff, too.

Bokhari’s reporting is a chronicle of Twitter, Facebook and Google’s ability to bend content to fit their founders’  left-leaning views, and suppress conservative thought in the process. Anyone who cares about free speech, no matter their political stripe, should be worried about this.

“By the way, Google has vigorously promoted net neutrality in theory but less in practice, adds the WSJ’s Review and Outlook column. “While Google says it remains “committed to the net neutrality policies,” the search engine uses opaque algorithms to prioritize and discriminate against content, sometimes in ways that undercut competitors. Net neutrality for thee, but not me. Google ought to be transparent about its practices.”

It’s not just these dominant software makers of web content platforms who deploy algorithms that reflect their bias.

Here’s one little example with my Firefox browser feature, which reminds me of the sites I visit the most each time I launch a new browser session. No matter how many times during the week that I read Breitbart.com, Firefox’s “Top Sites” feature doesn’t remember Breitbart.com as one of my “Top Sites.”

Firefox is the brainchild of the Mozilla Foundation, the outfit that ousted its CEO over his contribution to California’s Proposition 8 vote on traditionalist views of marriage.

(For what it’s worth, Safari keeps very accurate track of which sites I visit the most and doesn’t try to de-select or select sites for me in that feature.)

But not Firefox. As far as that browser is concerned, I never visit Breitbart.com. It’s annoying, and troubling that my browser software refuses to “heuristically” remember that I have visited a very popular, and highly trafficked news site with a conservative point of view. Now, I can change my features to ensure my most-visited sites are prominent in my browser settings. But Firefox’s default settings go to the issue of  “content neutrality” and baked-in bias with the software that powers our information-consumption on the web.

For those who argue we should have Net Neutrality regulations because of what “could” happen or what the ISPs “might” do – think for a minute about a government’s regulation of the internet in the extreme, as in the infamous “Great Wall of China.” It’s not good.

“China is able to control such a vast ocean of content through the largest system of censorship in the world, aptly known as the Great Firewall of China,” Bloomberg reported. “It’s a joint effort between government monitors and the technology and telecommunications companies that are compelled to enforce the state’s rules. The stakes go beyond China, which is setting an example that other authoritarian countries can imitate.

“While strict censorship is nothing new in one-party China, under President Xi Jinping online restraints have grown tighter, particularly around the time of politically sensitive events like the death of Nobel Peace Prize winner Liu Xiaobo in July. Ahead of the Communist Party Congress in October, China began blocking the WhatsApp messaging service and extended a clampdown on virtual private networks, a commonly used method to circumvent the Great Firewall.”

If only the people who showed up to protest the FCC’s vote would ponder what can happen when governments slap heavy-handed regulations on what companies can and can’t do on the internet.

A light touch is what the FCC’s rollback order is all about, returning us to an approach that should have bi-partisan support. It’s about government getting out of the way of broadband innovation. Right now, the U.S. is middling in the quality of its download speeds. South Korea and many Asian countries are way ahead in network buildouts.

The “US ranks 9th in the world in fixed broadband speed at 70.75 Mbps average download and 27.64 Mbps average upload. Ranking in the top ten is good but the US’s average download speed is less than half top-ranked Singapore’s 154.38 Mbps,” according to Forbes.

“The picture for the US is not nearly as good when you look at mobile internet speed where the US ranks 46th, just ahead of Albania and behind Oman. Average download speed in the US is 23.05 Mbps which is less than half the average download speeds in Norway, the Netherlands and Hungary. Average upload speed in the US is 8.26 Mbps.  While mobile download speed increased by almost 20% from July 2016 to July 2017, the US’s world ranking fell from 44th to 46th. Not good.”

The ISPs have no interest in blocking bits. Comcast tried throttling Bit Torrent back in 2007 and was hounded by the Internet. Congress investigated and ruled the move illegal. Throttling is hard to hide these days. But baked-in, algorithmic bias in the software that runs on top of the web? That’s another story.

ISPs have a vested interest in opening up their pipes – and finding ways to improve an even faster, true high-definition video experience on real broadband.

Disney gets that. So does Fox. And so does the FCC.

MIT Media Lab founder Nicholas Negroponte gets it too. His thoughts on “our transition from atoms to bits” is worth adding to the discussion.

[Updates prior version to add Negroponte’s and WSJ information.)