BlackBerry’s two-sided view of net neutrality

Say what you will about BlackBerry CEO John Chen’s blog post last week calling on policymakers to include application/content neutrality as part of any carrier-centric net neutrality rules — and the reviews have been brutal — but there is an important insight about the evolution of the over-the-top video market lurking inside what is otherwise an impractical proposal.

classic_black_frontChen suggests that broadband providers today “are like the railways of the last century, building the tracks to carry traffic to all points,” but notes that “the railway cars travelling on those tracks are, in today’s internet world, controlled not by the carriers but by content and applications providers.”

He then goes on to argue, in essence if not so many words, that the latter have at least as much leverage over the consumer broadband experience as the former and ought to be treated similarly by policymakers:

Key to BlackBerry’s turnaround has been a strategy of application and content neutrality. For example, we opened up our proprietary BlackBerry Messenger (BBM) service in 2013, making it available for download on our competitors’ devices. Tens of millions of iPhone and Android customers around the world have since downloaded BBM and are enjoying the service free of charge….

Unfortunately, not all content and applications providers have embraced openness and neutrality. Unlike BlackBerry, which allows iPhone users to download and use our BBM service, Apple does not allow BlackBerry or Android users to download Apple’s iMessage messaging service. Netflix, which has forcefully advocated for carrier neutrality, has discriminated against BlackBerry customers by refusing to make its streaming movie service available to them. Many other applications providers similarly offer service only to iPhone and Android users. This dynamic has created a two-tiered wireless broadband ecosystem, in which iPhone and Android users are able to access far more content and applications than customers using devices running other operating systems. These are precisely the sort of discriminatory practices that neutrality advocates have criticized at the carrier level.

Taken literally, Chen appears to be arguing that OS providers should be prohibited from developing proprietary applications for their platforms, which is obviously untenable, both legally and practically. But he’s absolutely correct that a platform without Netflix and other highly popular services is at a competitive disadvantage to platforms that have them.

And that goes to an important dynamic too often overlooked in the broader discussion around net neutrality. As I’ve argued previously elsewhere, the current balance of leverage between broadband service providers and application providers, which sees Comcast, Verizon and a few other major ISPs able to extract rents from Netflix for access to their networks, is by no means immutable.

Over time, as broadband becomes the dominant channel by which consumers access content, that balance is likely to tip the other way, if history is any guide. Once upon a time, ESPN paid Comcast for distribution on Comcast’s cable TV platform; today, Comcast pays ESPN roughly $6 per subscriber per month for the right to carry the network, regardless of whether those subscribers watch ESPN, or not. As Jeff Jordan of Andressen Horowitz noted in a recent blog post, “In most media businesses, rents typically accrue to the creators.”

And at least as far as OTT video is concerned, broadband is becoming more like a traditional media business every day. While the OTT business may not develop exactly as the pay-TV business has, media companies like CBS and HBO, both of which recently launched or announced linear OTT channels, certainly hope to see a family resemblance.

CBS in particular, has made, has  made no secret of its goal of seeing some of the fat margins cable operators like Time Warner Cable derive from their broadband business accrue to the media companies that provide the OTT content.

That may not be an argument for requiring Netflix to develop an app for the BlackBerry OS. But it’s not crazy to argue that Netflix holds a lot of Cards when it comes to the future of broadband — pun intended.