No Hulu For You!

The war between broadcasters and cable companies has spilled over to the Web.

Once or twice a year, a cable company and a TV network start brawling over “carriage rates”—the fees that the cable company pays to the broadcaster to feature its programming. These fights are tedious for everyone involved. While each side puts on a PR offensive to convince the public that it has the moral high ground, millions of customers see several channels go black. This week, the combatants are News Corp., which owns the Fox network, and Cablevision, which offers TV service to 3 million customers in New York, Philadelphia, and Connecticut. Since Saturday, when Fox pulled its channels from Cablevision, subscribers have missed, among other things, a New York Giants game, two baseball playoff games, and an episode of House. Oh, the humanity!

Before we become overwhelmed with grief, let’s remember that carriage fights don’t have to be as onerous as they once were—if you miss House on TV, you can always watch it on Hulu, right? Indeed, when Time Warner Cable battled Fox last year, it encouraged customers to connect their computers to their TVs and watch blocked shows online. Perhaps that’s why Fox decided to take tougher measures in its fight with Cablevision: In addition to pulling its shows from cable lines, the network ordered Hulu—which is co-owned by News Corp.—to block Cablevision’s Internet customers from watching Fox shows online. Now this is something I can get worked up about: The fight over cable TV has now spilled over to the Internet, the one medium that was supposed to be free from such pay-to-play disputes.

Fox’s Hulu block didn’t last long. As word spread online and among lawmakers, Fox quickly changed course, and within a few hours Cablevision customers could once again watch House on Hulu. But even though it was short-lived, Fox’s move raises several interesting questions about how we’ll access media online. It seems to raise the scary possibility that the Internet could become beholden to the same sort of deal-making that determines what we can and can’t see on TV. And there probably isn’t much the government can do to stop it, either.

Many observers immediately labeled Fox’s block a violation of the principle of “network neutrality“—the idea that Internet service providers should allow subscribers to access all legal content online. Neutrality rules have been the subject of fierce debate in Washington, and activists are constantly on the lookout for perceived anti-neutrality maneuvering.

If Fox’s move violated “neutrality,” though, it wasn’t in the way we’ve long defined that term. Advocates for net neutrality rules have mainly been concerned about the power that cable and phone companies can exert on the Internet. The theory is that in most local areas, broadband companies exist as monopolies or duopolies—you can get the Internet from your phone company or your cable company—and, therefore, are in a position to influence online content. What if, for instance, AT&T demanded that YouTube pay a surcharge every time a customer watches a video? To prevent such abuses, the Federal Communications Commission imposed Internet “openness” guidelines (PDF) in 2005, and since then regulators and lawmakers have been arguing about how to make those guidelines both permanent and enforceable.

But this Fox-Cablevision-Hulu scenario turns the neutrality debate on its head. Here, it wasn’t the broadband company—Cablevision—that blocked customers’ access to content. Instead, it was the content company, Fox, that imposed the ban. Why is that distinction important? Because while it’s easy to think of justifications for imposing neutrality regulations on broadband companies, it’s less clear how we should feel about imposing rules on content providers. Telecom companies are regulated by the FCC, and there’s a long history of the government forcing “openness” rules on public communications infrastructure. If the government can prohibit phone companies from deciding whom you can and can’t call, shouldn’t we have a similar rule preventing ISPs from deciding what you can get on the Web?

For a host of legal and economic reasons, we haven’t traditionally regulated content companies—a category that includes not just studios like Fox but also record labels, newspapers, and Web sites like Google and Facebook (not to mention Slate)­. In general, content creators are allowed to distribute their products however they want—it would be absurd for the government to force the Washington Post to sell its paper on newsstands in Boston, say, or for the Feds to require the Beatles to offer their music on the iTunes store.

Online media outlets already impose a host of restrictions on who can get what, when. If you live outside of the United States, you can’t get Hulu. If you live in the United States, you can’t get Spotify. The novel thing about Fox’s Hulu block was that it was aimed at a particular ISP, not a whole country. But what’s wrong with that? Fox’s entire corporate mission, after all, consists of selling content to people who pay for it. Shouldn’t it have the right to block its shows from a set of customers it believes aren’t paying enough?

All of this suggests a blind spot in the neutrality debate. Activists worry that if broadband companies begin charging content companies for access to Internet lines, only big, established sites with deep pockets will be able to afford a place online. But the Fox incident suggests that we should probably be just as concerned about the opposite problem—that content companies might start charging broadband companies to access their content. This would turn the Internet into something like cable TV—your ISP would carry, say, Hulu so long as it paid the site’s owners a carriage fee. The cost of those fees, of course, would be passed along to every one of the ISP’s subscribers, whether they watch Hulu or not.

This fight isn’t academic. Charging ISPs—rather than individual “end users”—for access to certain Web sites or videos is an oft-proposed business model for content companies. There are, in fact, already some ventures making a go of this model. The most famous is ESPN3, the cable sports network’s video streaming site, which is available only to customers of “participating providers“—if your ISP doesn’t pay ESPN for access, you can’t watch ESPN3. Milking the ISPs has also been held up as a viable way to save both the music and newspaper industries.

To be sure, this isn’t a slam-dunk business model. The Internet is a pretty fragmented place, and with so much choice online, few Web companies have the kind of pull that Fox has on TV. If one lonely Web site—or even a collection of sites—demands that ISPs pay for access, I’m not sure you’d see a lot of takers. But there are a few sites online that most people think of as indispensible—Google, Facebook, and Yahoo, for starters. Of those three, Yahoo could be an obvious candidate for demanding a fee from providers. The company has long struggled financially, but it’s still one of the most beloved sites online. If Yahoo demanded that ISPs fork over $1 a month per customer, would the providers balk? I doubt it. For many people, the Web without Yahoo isn’t the Web at all—if ISPs want to offer the full Web to their subscribers, they’d have no choice but to pay the carriage fee.

For decades, entertainment companies made a killing by conditioning us to pay a huge monthly cable bill. The Internet has long been a haven from this model—we can cut the cable cord, consumer advocates promise, and buy only the TV shows we want. But perhaps Fox’s Hulu block has revealed that this haven won’t hold up forever. Content companies can easily bring the cable model to your Internet line. The only question is, when are they going to start?

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