Is BT’s wholesale content connect the end of the world?

There has been a lot of discussion this week of BT’s wholesale content connect product, so I thought it would be helpful to unpack the story and explore exactly what BT’s product is (and is not), and what the views are of those objecting.

BT’s View

Let’s start with BT’s side of the story. BT has a dedicated microsite, explaining the product as they see it. 

Their ‘How’ animation explains that the product consists of local caches for video content, with delivery to the caches via links which guarantee end to end quality of service – this new infrastructure bypasses the internet, which doesn’t prioritise video packets.  Although not stated by BT these caches and associated delivery network clearly have required BT to incur both incremental capital and operational costs.

BT explains their rationale in their ‘Why’ animation as the increasing growth of ‘over the top’ video, particularly to TV screens (as opposed to PC screens).

In terms of benefits, BT explain these for different groups as follows:

  • for users a guaranteed broadcast quality viewing experience with no buffering;
  • for content owners a better user experience, customer interactions and new advertising revenue; and
  • for ISPs more cost-effective delivery of video and the opportunity to provide new digital media services.

What BT don’t explain in their published materials (although it is implicitly alluded to in the description of benefits for content owners and ISPs above) is the commercial model.  For content owners in particular, it is unclear why they would want to either pay directly, or indirectly, for use of BT’s product.  A key issue to watch is whether use of this wholesale product can be used to either increase ISP end-user revenues or content owner advertising / subscription revenues, and if either is true how the cake gets shared between the content owners, ISPs and BT. 

Open Rights Group comments

By contrast (although not surprisingly given relative resources and also as a reaction) the Open Rights Group comments are quite brief, so worth quoting in full:

“We are talking about ISPs competing with the Internet for content delivery. Whether films, music or gaming services, the idea is that ISPs will deliver content better and more reliably than the Internet. That says a lot about the state of investment in our Internet.

The result could be a fundamental shift away from buying services from the Internet to bundled services from ISPs: which would reduce competition and take investment away from Internet companies. That would be bad for everyone.”

Whilst they clearly don’t like BT’s proposal, it is not clear exactly what they are positively advocating.  Is it that BT shouldn’t offer this product at all, which wouldn’t help to enable over the top video viewing, or that BT shouldn’t charge for this service / enable ISPs to cut content deals with content owners?  The former seems like a bad consumer outcome and the latter a decision that would be in direct conflict with BT’s directors’ duty to act in the interests of their shareholders (i.e. only invest capital where a return is likely).

Their objection to ISPs bundling content with access is also worth unpicking.  I can see how this might be objectionable where there is no choice of access provider (which I understand to be driving the net neutrality debate in the US), but where there is effective retail competition between ISPs, underpinned by effective wholesale regulation of BT (as is the case in the UK), it seems to me that bundling and resultant multi-dimensional product competition is a good outcome in terms of driving product innovation and delivering consumer choice.

End to net neutrality?

The first point to make is that BT’s product is not about ‘internet’ traffic management or prioritisation at all – it is a separate content delivery network sitting alongside the internet.  Both ISPs and content owners are able to use the internet for content delivery.

If BT’s product is assessed against Ofcom’s current view of applicable net neutrality rules, provided that BT doesn’t degrade or block video traffic passing over the internet, then from the information available it wouldn’t appear to breach current rules.

Another related development is the proposed traffic light system for the BBC iPlayer, which will enable users to see how ISPs are managing video traffic – this type of user transparency could be turned against the ISPs by the content owners. 

However, this debate will clearly run and run, so I will no doubt return to the issue in future posts.  (With thanks to @mattjphillips for his input – mistakes are all my own).