Thoughts on Google, YouTube, and Leverage in the Net Neutrality Battle
Google is uniquely positioned to monetize the YouTube traffic, which is certainly one major reason (among others) for the acquisition. But that’s not all. Google is also buying leverage in the net neutrality battle. Compared to Google’s core search services, YouTube is a major bandwidth hog. As such, it is a natural candidate for tiered pricing by infrastructure providers. However, assuming the introduction of different levels of service and Google refusing to pay for speedy delivery of its packets, consumers may well consider switching from a “slow YouTube ISP” to a “fast YouTube ISP.” So if offering “fast YouTube access” is, in effect, an essential requirement for a successful ISP, and if YouTube traffic accounts for a significant percentage of packets served by “fast YouTube ISPs,” then the business case for tiered pricing of other content providers might be hard to sustain. As a result, net neutrality might remain the default, even without intervention by Congress.
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October 16th, 2006 at 2:53 pm
[...] Hanno Kaiser at Antitrust Review discusses the implications of Google’s acquisition of YouTube for the net neutrality debate. Hanno opines that the deal may increase the likelihood of a neutrality result even without legislation. While Google’s public pro-neutrality stance is well known, GMU’s Tom Hazlett (my office neighbor and fellow UCLA Economics alum) has a great column in the Financial Times highlighting the difference between Google’s “public policy” stance on net neutrality and its business model. Here’s Hazlett on Google’s now well-known position on net neutrality legislation: The company became the leading champion of the hottest topic in technology policy over the past year, asserting that if web innovation such as theirs was to be retained, new laws were warranted. The specific fear was that internet service providers delivering last-mile broadband would shift their pricing strategies, charging not only end users for their connections but application vendors (say, search engines) for access to their customers. Worse, they might move into content and then favour their own web products over those of competitors. “Network neutrality” rules were needed, Google argued, because the architecture of the internet demanded it. That structure relies on traffic flowing freely over a network that is “open, end to end”. [...]
October 17th, 2006 at 11:55 am
Hanno, you suggest that Google may be “buying leverage in the net neutrality battle.” By the same token, is Google not buying increased exposure? I’m not sure that more bandwidth consumption is a likely upside, unless one is convinced that YouTube content is in such demand that consumers will actually pay more for it (rather than seek out zero-marginal-cost options like turning on the TV).
I think that if consumers are going to pay more for speedy connections, access to Google search or music downloads are the things that will justify the added expense, and not the marginal entertainment value of the clips on YouTube.
Besides, we can all simply return to the now-outdated practice of circulating funny videos by email….