Amazon has plan to storm cable industry’s castle

Amazon.com Inc.’s recent announcement that it would pay $970 million in cash to buy Twitch Interactive Inc., a hugely popular game-streaming service that is just over 3 years old, marks a key moment for telecommunications policy in the U.S. But the reason might be unexpected.
There is nothing more human than the desire to be close to the lives of gladiators and other celebrities, and online interaction will fulfill that need at an enormous scale. What is crucial is that the destiny of Twitch, Netflix Inc. and any other future high-capacity streaming service is utterly dependent on the goodwill of just four companies: Comcast Corp., Time Warner Cable Inc., Verizon Communications Inc. and AT&T Inc.
Each of those four companies, in turn, has the ability and incentive to extract unconstrained tribute from anyone wanting to reach their subscribers. The Federal Communications Commission must intervene decisively to both reassert its authority and help U.S. mayors fix this situation by calling for the construction of open fiber networks without a built-in conflict of interest.
All four of these companies have built moats around their subscribers – mobile wireless subscribers for AT&T and Verizon, wired cable high-capacity Internet access subscribers for Comcast and Time Warner Cable. No one can send information to those subscribers across the drawbridges that cross those moats except on terms set by these companies.
There are very few places in the U.S. where these four giant carriers allow independent networks carrying traffic from the data centers run by Amazon (and future Twitch.tv successors) to put that data on the carriers’ controlled networks. According to a petition Netflix filed last month, by refusing to widen the gates at that handful of locations, the companies can allow the drawbridges to get so crowded that data-center traffic experiences interference, and subscribers inside the moat cannot receive it reliably.
If Comcast is allowed to merge with Time Warner Cable, almost two-thirds of U.S. households will have no choice for high-capacity connectivity other than Bigger Comcast.
AT&T and Verizon are exercising the same kind of power in the mobile wireless market. Interestingly, these two companies are watching Comcast as well; Comcast’s Wi-Fi plans may limit AT&T and Verizon’s scope to that subset of Americans who are willing to pay to connect while in motion.
This is not a story of huge companies fighting one another. This is a sweeping narrative of private control over the central utility of our era: high-capacity Internet access. We, the people of the United States, are the collateral damage in this battle; we are stuck with second-class, expensive service. •


Susan Crawford is a Bloomberg View columnist.

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