Video Killed the Radio Star

Remember that song?  It was recorded by a band called the Buggles and it was (ironically, in the true sense) the first song aired on MTV when the video channel began killing radio on August 1, 1981.  I remember when it was first released, as it challenged for a brief moment my then- (and now-) contention that there was nothing aside from Elvis Costello that I wanted to listen to that was recorded after 1971 or so, except for people who made records before 1971 or so.  But fortunately, I decided that aside from the cute hook, it didn’t really challenge my prejudices, and I could go on dismissing the work of an entire generation without concern.

This brief insight into a tortured soul aside, the song came to mind when I read an amazing article in the Washington Post last week.  It reported on a study by the broadband analytics firm Sandvine concluding that Netflix accounts for 30 percent of all broadband traffic during peak hours, and that Netflix,  together with Google’s YouTube and other on-line video services account for 46 percent – almost half – of peak Internet broadband use, and that they’ll account for 55 to 60 percent of all traffic by the end of this year.

It was an amazing article for two reasons.  The first reason is it confirms that video has burgeoned on the broadband Internet, so much so that it already accounts for half of traffic.  Now, to some extent, that’s circular, because video is such a bandwidth hog that whenever users are streaming the most probably will turn out to be the peak period of broadband use.  But it also makes clear that broadband itself is becoming more ubiquitous and more powerful at rates we didn’t anticipate at the beginning of this decade.  I’m sure many of the critics of the pace of broadband adoption – or the folks who advocate that Internet infrastructure providers share their investment with whomever comes along, or that advocated a national fiber network paid for by the federal government — go home and watch high-def videos or use amazing apps on the 4G devices and never stop to consider the contradiction.

But the second amazing thing about the article is that the Post appears to have no idea about the significance of this milestone.  Because the Post’s reporting focused on how cable and telecom companies were going to start billing broadband users according to how much data those users pull down.

Well, duh.  Of course the service providers are going to have to charge users according to how much they use, although I can guarantee you that same outraged souls somewhere are going to complain that broadband infrastructure providers have the audacity to charges users by how much they use (abridging their access to information!) instead of turning their systems into some kind of all-you-can-eat free data  buffet.  But that’s not the point.

The point is that we can’t afford any longer to nurture the dream that everything on the Internet must travel on the same terms and conditions as everything else or, as the dreamers call it, net “neutrality.”  Because the spread of video makes clear that we can’t, and that we shouldn’t.  Some traffic is incidental to the system’s operation.  But other traffic is the equivalent of an eighteen-wheeler on a farm-to-market road, clogging all other traffic and imposing costs on every other vehicle.

And the drivers of these broadband big rigs aren’t the valiant entrepreneurs and the “little guy” that some advocates of “neutrality” claim they’re fighting for.   They’re Netflix and Google (YouTube), who are getting a free ride paid for by the rest of us when they congest the network and impose costs on all other users.

And the free riders know it.  Netflix, as I mentioned in a post last December, entered into a deal with one of the companies that makes up the Internet backbone called Level 3.  Companies such as Level 3, Orange, Comcast, British Telecom and others have arrangements called “peering,” in which traffic jumps from their systems to each other’s on its way to the final user, so long as that two-way flow is roughly in balance.  Level 3 is in other businesses, though, such as being a CDN – a content distribution network, an entity that takes a website’s content to the backbone, where it finds its way to the final user.  And they cut a deal with Netflix under which they would take Netflix’s movie streams to the backbone for distribution to users.

But when Level 3 showed up at Comcast’s backbone system (not its “last mile” system, the one that takes signal to your house – Comcast would have to lose its mind to deny its customers access to the Netflix product) with a massive flow of Netflix films, Comcast told them they’d have to buy more ports to the Comcast backbone network – the volume of traffic Netflix represents went way beyond the normal proportions of two-way traffic that “peering” covers.

Level 3, rather than deal with reality, went to the Federal Communications Commission and complained that Comcast’s refusal to carry as much Netflix signal as Level 3 provided was a violation of the FCC’s principle of “net neutrality,” and wanted Comcast to be forced to carry it.  So now, it turns out that what they wanted to force Comcast to carry – in the name of “net neutrality” and an “open internet” – is at least a part of what makes up 30 percent of Internet traffic.

The Washington Post may not get it, but that’s the real meaning of the burgeoning use of video on the Internet.  It’s a challenge to the doctrine that the content is small and the networks are big, and that the  networks can be told the terms on which they can carry signals without any loss to themselves or their users.  It shows that there are big Websites that want to ride the “neutrality” slogan into a world in which they offload their costs on to everyone else.

And the most outrageous part of the whole thing is the sophistry of the “neutrality” camp.  I think most of the advocates of neutrality aren’t out beating the drum because they think it would be good for the world if Netflix and YouTube can eat up the system’s bandwidth without paying a fair price for it.  That thought probably never occurred to them.

But the reality is they’re being played for dupes.  An amazing column in USATODAY recently claimed that “neutrality” was about “the big guy versus the little guy.”  But the “little guy” they claim to have in mind turns out to Netflix, or YouTube, or the other sources of cholesterol in the Internet’s broadband arteries.

Maybe some of the advocates willing to say this kind of stuff will think twice now that we have a clearer idea of what traffic the Internet carries, and before video kills again.

[Cross-posted from Ev Ehrlich’s Everyday Economics blog.]