Analyst questions reports of 'special treatment' deals between ISPs and streaming video providers

The Wall Street Journal created a mild furor with an article suggesting that Internet service providers like Comcast (NASDAQ: CMCSA) may be working out deals with high-volume online video providers like HBO to give their data "special treatment," such as dedicated fast lanes. However, at least one media outlet is questioning the accuracy of the story.

The WSJ article cited unnamed sources familiar with discussions between Comcast, HBO, Showtime and Sony Corp., saying that the two networks and Sony wanted to be treated as managed services "that would move them away from the congestion of the Internet, which they fear will only get worse as more people opt to stream movies and TV shows on the Web," the WSJ story said.

That phrasing caught the attention of at least one analyst.

"After speaking to multiple ISPs and some of the content owners mentioned in the story, they tell me the WSJ post is inaccurate and that they don't expect any ISP would treat their content differently from another," wrote analyst Dan Rayburn, VP at Rayburn routinely looks into the architecture behind online video delivery, and like his sources, found the wording of the article to be confusing.

Terms like "special treatment," "managed service" and "fast lane" are nebulous; what's more, the terms aren't specifically defined by the industry at present. "Again, lots of buzz words, no definitions," Rayburn said.

Forms of "managed delivery" have taken place along the Internet for years--it just hasn't been classified under that term. Components of content delivery include transport and backhaul providers like Level 3 Communications and Cogent Communications; and even CDNs (content delivery networks) can be seen as a form of managed delivery. Services like these already move providers like Netflix (NASDAQ: NFLX) away from most Internet congestion.

However, the WSJ appears to be alluding to dedicated delivery provided by ISPs along their last mile--the part of the Internet that individual consumers access via broadband subscriptions to companies like Comcast, Verizon (NYSE: VZ), Time Warner Cable (NYSE: TWC) and so on. Rayburn found that idea to be questionable at best. "The problem with that argument is that the congestion we see on the Internet isn't taking place in the 'last mile,' it's taking place at network access points outside the last mile," he wrote.

DSL Reports also found the story to be somewhat obscured, but saw possible regulatory repercussions for such managed service deals. "Now it's possible the source or the Journal didn't fully understand the nature of the deal, but it if it's true that Showtime and HBO are looking for cap exemption, that would certainly set off regulatory neutrality bells," Karl Bode said in a post on the website.

Technically, the suggestion that managed services would bypass data caps imposed by some providers also sounds not quite right. "(T)here is only one lane into your house on the Internet," Rayburn noted.

Currently, no deals of the kind suggested by WSJ have been announced.

For more:
- WSJ has this story
- DSL Reports has this post

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