• by Diane Mermigas , July 16, 2008

Rule No. 1 in tough times: Do not dis the consumer!

It's surprising how simple, yet underestimated that bit of advice is among service and product providers in the media and Internet space. Every day brings a new example of an irresponsible or unresponsive action that creates consumer ill will.

Regulators' attempts to cap service providers' efforts to capitalize on consumer demand will blow open the Net Neutrality debate and temporarily squash some practices. Inevitably, the viral push and pull of digital interactivity will be duked out on a case-by-case basis with consumers, who have and create many alternative choices. It is a new brand of digital consumer vigilantism.

One of the most prominent attempts at regulating Internet behavior is the Federal Communication Commission's proposed ruling against Comcast Corp. for discouraging heavy bandwidth users from downloading movies and mega data files by slowing them down when they comprise half or more of upstream usage. Advocacy groups claim their First Amendment rights are being violated.

Comcast recently made nice with BitTorrent and Vonage on ways of better managing heavy peer-to-peer traffic as an alternative to avoiding paying to create more bandwidth. Consumers complain that they pay plenty for the bandwidth services and should not be penalized for using it. For its part, Comcast refuses to disclose heavy users on its blacklist or to define what it considers to be excessive bandwidth.

The FCC order against Comcast that is expected August 1 will be a double-edged sword for broadband providers and users that intensifies the Net neutrality debate in Congress. Ultimately, newly created laws will as much protect as limit interactive consumers' rights. Where Comcast and other service providers could be fined for future P2P violations, the cost of policing and upgrading broadband networks will surely be passed on to consumers.

This begs the larger issue of whether the power of interactive consumers and the digital universe can or should be restrained. And to whose advantage? That the marketplace will work much of the issues out on its own is a distinct possibility. The most effective checks and balances could be competitive pressures and economics.

Time Warner Cable has solicited much negative reaction to its current tiered pricing for bandwidth trial in Beaumont, Texas, which it may quietly roll out in other venues. Charging subscribers between $29.95 and $54.90 per month, and $1 for each gigabyte over their plan limit, is aimed at penalizing bandwidth hogs. It's up to subscribers to figure out how much bandwidth they are using. Comcast and other bandwidth providers are eyeing pay tiered trials of their own.

Opponents contend that it is akin to shooting themselves in the foot, since the growing consumption of online video and digital content relies on the availability of plentiful, inexpensive bandwidth. The industry is exhaustively pushing HD, which extends to online video and requires more bandwidth. The pay-per-use approach to bandwidth use, while seemingly fair to average or low users, could have some adverse consequences: inadvertently discriminating against certain content producers and distributors and some consumer demos. It also sends mixed signals at a time when Time Warner Cable CEO Glenn Britt has declared that content costs will drop--cited as the reason why cable operators will not continue to pay high license fees for TV networks whose programs continue to migrate online. Can cable operators have it both ways? They sure are going to try.

Messing with consumer pricing and access has become sport everywhere on the digital media landscape--not just the province of cable and telephone companies. (Some subscribers are venting their outrage in well-read blogs). The FCC and the courts are seeking to liberate consumers who want to change their mobile telephone and other digital service contracts before expiration dates without having to pay hefty termination fees. That isn't keeping state government from trying to take their pound of flesh from the Web, such as New York collecting taxes from online retailers and state consumers under new law being challenged by Amazon.com.

A U.S. District Court ruling this week that does not hold eBay and other e-commerce companies liable for the sale of counterfeit goods by independent vendors is being widely perceived as a blow against consumer protection in favor of online capitalism. What about that New Jersey lawsuit that accuses Google of putting profits ahead of online consumer protection by refusing to ban ads for apparent fraudulent mobile services? Once again, the courts will be providing patch quilt slivers of interactive consumer protections.

While generally well-intentioned, congressional efforts to limit the extent to which online service providers can track and disclose information about individual Web users may tie itself in knots before it can put the brakes on such growing practices. Even now, Google's YouTube is being ordered to turn over online video viewer data to Viacom to hammer those who illegally access and pander copyright content. It is likely the first of many more such situations.

Indeed, privacy will be the parallel focus to economic equity online. It may seem unlikely, but the FCC, online service providers or some other crusader will need to save Web consumers from themselves by creating privacy protections--even though the public is willing to sacrifice personal data for convenience. The same consumers who are angry with the new broadband establishment also are giddy with digital power; it's spurring them to spend online even in an oppressive economy. That's something neither digital service and content providers, or consumers, should take for granted.