Posted by: Costas Troulos | April 18, 2008

Can Revenue Sharing settle the Content vs. Access Provider conflict?

Picking up on from a previous post and comment and after reading Michael Geist’s European Parliament Votes Against ISP “Graduated Response” post, discussions set off with some colleagues relating to similar practices (by either access or content providers).

Here’s some personal opinions and food for thoughts and further debate:

I feel pretty much assured that such requests are mostly suggested on a short-term logic and aim primarily in creating impressions. Customer acquisition and retention cost is remarkably high in the telecommunications industry and no access provider would voluntarily jeopardize his reputation (brand name) and subscriber base to protect the profits of an audio-visual content creator, distributor or provider.

The moment, in fact, that the content providers attain high profit margins from electronic content marketing by capitalizing (free-of-charge) on the expensive infrastructure of the access providers, analogous demands sound (in my head) out of common sense, to say the least.

An access providers’ common practice is data traffic shaping based on the type of information circulated in each flow (against core network neutrality principles). [Read: How Network Non-Neutrality Affects Real Businesses, FCC Debates Net Neutrality at Stanford]. Packet shaping is not applied only to P2P traffic rather to other content traffic as well (drawn from the competition of course). However, such practices have a significant long-term negative impact to access providers’ revenues and reputation.

Maybe, under a longer-term strategic perspective for mutual profit and revenue sources development content and access providers should work together, and not against each other. If a new organizational / policy scheme is to be evaluated, which would enable revenues sharing between content and access ends, access providers will have the motivation to supply access services with higher quality level (e.g. availability, jitter, delay bandwidth reservation). Besides, business theory and practice suggests that all segments in a product’s value chain are compensated from product sales. Incentives of access and content providers are so interrelated that we might want to address them as segments of the same chain of customer value and not differently.


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