Forget net neutrality, broadcasters pose a bigger threat to OTT video

Online Video For all the dire warnings from net neutrality supporters that ISPs might block or degrade competing over-the-top video services unless restrained by the FCC, evidence that was actually happening (or even likely to happen in the near term) has been painfully thin on the ground (as opponents of FCC action never tire of pointing out). At the same time, scarce attention has been paid to the far-more immediate and concrete threat to the development of a competitive video delivery market posed by the traditional broadcast networks, despite abundant evidence of the danger.

Even as the FCC was adopting its new net neutrality rules this week that will restrain the actions of ISPs, the broadcasters were claiming two more, high-profile victims, with nary a peep from the FCC or net neutrality supporters.

The first victim was Google TV, which Google asked its hardware partners to delay indefinitely, ostensibly to allow Google time to iron out wrinkles in the software. Having had a chance to play around with Google TV for several weeks now (via the Logitech Revue), I can attest that the software indeed has plenty of wrinkles. But I doubt that the software problems alone would have been enough to cause Google to blow retreat, at an enormous cost to its credibility with CE makers. Software problems can be addressed through updates, which early adopters of technologies like Google TV expect and tolerate easily.

What’s made Google TV a non-starter, especially with consumers, is the universal blockade of the platform by the major broadcast networks. Without access to their online content, Google TV simply cannot deliver on of its main promises, which is the seamless integration of traditional linear TV and web-delivered on-demand content.

Whether you believe the networks’ insistence on being paid by Google for access to their content is reasonable or not, the networks have each taken identical affirmative steps to prevent Google TV from accessing content the networks themselves make freely available on the web (to say nothing of over-the-air), and which remains readily accessible to Google TV owners on their PCs using what is essentially the same search engine and browser.

Collectively, those individual actions by the networks have prevented Google TV from providing access to enough online video to deliver on what it’s trying to sell.

The second victim was the network’s own offspring, Hulu, which according to the Wall Street Journal has been forced to drop plans for an IPO in 2011. The culprit,  as I predicted in a post last month, was Hulu’s inability to secure long-term content license agreements from its own parent companies. Without long-term licenses that assured Hulu’s continued operation, investors would rightly be wary of putting money into the company.

Hulu was hoping to use the cash raised in the IPO both to pay for the long-term licenses from its former parent networks, as well as to secure rights to enough other programming to build a viable, standalone, subscription-based online video service to match Netflix. Those competitive ambitions have now been thwarted, largely at the hands of NBC, Fox and ABC. As I argued in the earlier post, the networks have their reasons, which may be defensible. But there is little doubt that their actions (or in this case inaction) are slowing the development of a competitive market for online video.

Ironically, the FCC’s authority to regulate broadcasters is on far-firmer legal ground than is its authority to regulate broadband internet access. Yet few so far have called for the same sort of application-neutral policy for broadcasters that net neutrality proponents demand of ISPs.

So here’s my question: Do/should consumers have the same right to use any legal application of their choosing to access online video content — particularly where that content exists only courtesy of a government spectrum license — that they now have with respect to their ISP?

Merry Christmas.