The debate about net neutrality – which is really about telecom service charges for media content – is not about any kind of neutrality, but about content value. The media business model, in an environment of fragmentation, saturation, and universal access, has been based on traffic acquisition rather than revenue growth – the expectation being that traffic will eventually lead to revenue alternatives in advertising, data mining, and subscriptions. But these revenue alternatives have been inconsistent, slow to develop, and concentrated on a few, while traffic acquisition is an ongoing expense for everyone. So, as the sector revenue line remains weak, the cost items take on increased importance and even urgency. On a certain level – much less extreme – the “neutrality” discussion is thus not devoid of its financial “bailout” motifs… although nobody previously thought to refer to such things as, say, Wall Street neutrality, for example.
Mind you, this is not to pass judgment on either the pros or the cons of net neutrality, particularly in the context described. It is by no means a given that content value should not be preserved, even if by artificial means, even if the problem has been self-inflicted in a race to build traffic by offering the most product to the most users at the most free of charge terms. Because there is a social benefit which should not be overlooked, and we have no choice but to judge the whole grab-bag on its aggregate merits. For who can really draw the line accurately between the benefit of an AP news story and a Perez Hilton gossip column, or the first and 10 millionth iPhone app?
In the meantime, the telecom service providers have real costs and capital expenditures to finance, and with all this “neutrality” talk they should probably not look to their customer base for support. And what then? Should the telecom service providers seek out their own set of subsidies from their suppliers in turn? Since everybody up and down the value chain is getting used to receiving product for free, maybe the telcos should get free electricity? Free fiber-lines and routers? I exaggerate in order to make a point, as I am not unaware of the healthy profit generated by these companies, which are not in need of bailout money.
Still, is the argument then that the burden should be carried by those who can afford it best? Because if so, there are also a few companies on the other side of the bargaining table who could probably afford to pony up: Google (advertising revenue model that works well), Facebook (ad and data mining revenues increasingly working), and Apple (a variant on the subscription model that seems lucrative enough), to name a core group. I recall, however, some political argument along similar lines a while back, with some plumber guy on one side and wealth spreading palaver on the other. That was different.
As in any case should be obvious, the issues are complex, and there is no easy fix to a fundamental economic problem: bridging the gap between price and value through artificial means. In the case of Wall Street, the markets seem to have been saved, depending on how you define that, by massive capital infusions to fill the value void left in the wake of collapsing liquidity. The long term consequences remain to be seen. In the case of media, value pressure from a broken revenue model may be addressed by an artificial cost structure, as described.
But if market forces in the end prevail, that is, if nature prevails over artifice, then the more lasting solution to the media conundrum will be a consolidation between content, distribution, and infrastructure. The expected union of NBC-Universal and Comcast may be a sign of trends to follow.
