Tuesday, March 25, 2014

Why AT&T's Attack on Netflix Might Shoot Itself in the Foot

So Netflix caved in to Comcast and started paying to play in order to have decent internet connections to its subscribers.  It's part of the erosion of net neutrality that has been a dream of ISP providers since they started buying up all the little guys and forming a nice information oligarchy.  Of course, now that Comcast got their cut, AT&T and Verizon want theirs.   As Cory Doctorow points out, this is simply extortion.

But the question in my mind is whether they're winning this war, or if they won a battle they may regret.   Because the cat is definitely out of the bag now.  The big ISP players are at war with the internet as we know it, and forces are lining up against them.  Netflix, itself, might have given in to Comcast just to force the debate, as we can guess from this terrific posting by Reed Hastings:


Of course, AT&T had to reply and make their own argument that net neutrality sucks.   Jim Cicconi tries his best to spin it:


As usual, AT&T only has one argument as to why it should screw over not only it's own customers, but also other business and the the future of technology.  It's the tired and unsuccessful divide and conquer technique.  "Why should those greedy Netflix customers have all the fun?  Don't you hate those Netfix customers, wanting free bandwidth!?  Netfix doesn't want to pay their own share!  Let Netflix pay, and charge its subscribers more!"

It's a spin on the successful welfare queen political tactic where you divide the poor against each other by saying some are getting more than others.  The goal is to get them to hate each other more than the rich people taking advantage of them.  The rich people are obviously AT&T (and the other ISPs) and the poor people are Americans since we pay more for the some of the worst service in the civilized world.

So now, not only to we overpay for third world service, but AT&T wants individual companies to provide it with payola if they want their popular offerings available.  This is classic double dipping, and it should be illegal.  The problem for AT&T is these deals are supposed to be done in back rooms, without the public knowing what is going on.  Reed Hastings is breaking rank by going public about it.  So AT&T feels the need to respond.  But they don't have much of an argument.  Except divide and conquer.  "You think your service sucks now?  You think you're over paying?  Yeah, well if those assholes who subscribe to Netflix have their way, you'll pay even more.  Why should they get a free lunch.  Make them pay.  And maybe… we might not charge you as much for our shitty service."  Hey, it seemed to work for the Republicans, why not?  It's a riff on the old "data hog" argument where AT&T tried to convince everyone that it was a great idea to charge pre-bit (also double dipping) because data hogs were watching too much porn.

The problem is, the Republicans "welfare queen" attack was taking advantage of long standing racism.  I'm not sure AT&T will be so successful whipping up hatred of people who like "House of Cards."  On top of that, the Republicans weren't getting much in the way of a black vote anyway, so covertly blaming them for all the problems in the world wasn't so dangerous.  But Netflix subscribers are probably the best customers AT&T could have.  People who really want to use their service.  So attacking their best customers doesn't seem to be a good business or political move.

Politically, AT&T already lost its attempt to buy T-Mobile and paid a huge price.  I blame it in part their rush to charging a pay per bit model which undermined their promises of great low cost service once the merger was approved.  No one believed them.  AT&T still needs the good will of politicians to advance it's long term interests.  Attacking a large upscale sector of their own customer base probably isn't a good idea.  Netflix customers are voters.  They can write their congressmen.  They can lobby to have their cities provide free internet service or take advantage of Google's fiber efforts.

On the business side, what is AT&T going to do if Netflix decides to pay off everyone… but AT&T?  With a solid deal with Comcast in place, Netflix could make a quiet deal with Verizon and then punish AT&T by not making a deal and making them explain why their Netflix service sucks.  Or by moving very slowly to make a deal, and leaving AT&T out in the cold for as long as possible.

While there is clearly not enough ISP competition in the United States, there is some.  Apple fans are learning that AT&T is not the best place for iPhone customers.  (Try Sprint.)  Does AT&T really want to be known as the ISP you never use if you love Netflix?

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