AOL ultimately won, becoming the largest online service provider in the world in the late 1990s. With tens of millions of subscribers, the company continued to bet on its walled garden approach, even as many people merely wanted their services to access the Internet. Over the years, AOL saw its market share shrink dramatically, overtaken by an open Internet that offers infinitely more choice than any single company can.
While others attempted to erect their own walled gardens – Minitel in France, early Internet access on wireless devices that only pointed to company-approved sites and services – consumer demand for open Internet access consistently won out.
Despite the poor track record, my weekly technology law column (Toronto Star version, homepage version) notes that walled gardens seemingly still hold appeal to companies that believe the best way to distinguish their services is to offer exclusive access to content. In recent months, Canada has experienced perhaps the last stab at a walled garden strategy with Shaw Communications’ purchase of Canwest Global Communications and BCE’s acquisition of CTV. Throw in the broadcast assets owned by Rogers Communications and Videotron and control of the major Canadian private broadcasters is solidly in the hands of telecom and cable companies.
This convergence leaves the possibility of either cross-licences to broadcast content among the major players (perhaps excluding Telus and the new wireless companies) or exclusive access that is limited solely to the company’s subscribers [the issue was at the heart of hearings this week at the CRTC on the Shaw acquisition of Canwest Global with Shaw promising rivals access to content and Telus urges the commission to implement a fairness clause]
That may sound like a winning strategy, yet it runs counter to everything we have experienced over the past 20 years. Consumers around the world have consistently rejected services that restrict access, finding suitable alternatives on open platforms like the Internet.
The key to ensuring a competitive environment therefore rests on maintaining open platforms on all service providers. That may prove challenging, since the newly vertically-integrated companies will find it tempting to grant preferential treatment to their own assets. In addition to exclusivity, this could take the form of faster speeds on wireless services for company-controlled broadcasts, allowing users quicker access to the walled garden content.
Alternatively, it might mean excluding walled garden content from the bandwidth caps imposed by most providers. Under such a scenario, subscribers would find that accessing walled garden content would be “free” in the sense that it would not count against their monthly bandwidth allocation. By contrast, competing Internet services would effectively face an additional cost, since subscribers would have to factor in their bandwidth consumption.
These scenarios point to the possibility of greater regulatory intervention to ensure a fully competitive converged broadcast and telecom environment. Indeed, the Canadian Radio-television and Telecommunications Commission expressed concern about this direction in its 2009 New Media decision.
Notwithstanding assurances from the wireless carriers that walled gardens have not proven successful and “the industry is quickly moving toward the open Internet model, whereby mobile users can access content of their choice,” the commission worried that “the ownership structure within Canada’s wireless industry suggests that the potential for unduly preferential treatment needs to be addressed because the industry structure comprises vertically integrated companies with ownership interests in content providers.”
As a result, the CRTC concluded that “the process of selecting content for those services must not subject unaffiliated programming undertakings to undue disadvantage with respect to reaching mobile audiences.” The ground rules for placing competing services at undue disadvantage are likely to sit at the heart of future regulatory battles as independent carriers and online services fight to bring down the latest walled garden.
There are no coincidences ..
@MG – “Alternatively, it might mean excluding walled garden content from the bandwidth caps imposed by most providers … by contrast, competing Internet services would effectively face an additional cost.”
For any doubters out there major Canadian ISPs reduced their monthly bandwidth caps the SAME DAY Netflix announced it’s planned Canadian service.
My Roger’s plan was one of the ones that dropped (thankfully not for me as an existing customer). But chances are, seeing as I tend to watch more online since cancelling Roger’s Cable (far too expensive for what I was actually watching) I’ll switch to an independent ISP that has a much higher cap.
Well, this will basically kill many small ISPs, or at least force them to become differently branded versions of bigger players.
Did I mention oligopolies suck big time?
The quiet collusion of the major players
When the major ISPs (those controlling 90% of the market share) are also content providers and have vested interests in traditional television and video on demand subsciptions, you can bet your mother’s false teeth that they are trying anything and everything possible to protect their cash cows and avoid convergence as seen in other countries.
Over the last 3~4 years they have been quietly colluding to protect these interests. Each one of the players that control the pipes and are also major content providers/BDUs have instituted the following: (oligopoly in most of the country)
1) eliminated unlimited data transfer.
2) introduced low data transfer caps for all their internet tiers.
3) charge exorbitant per Gb overage fees comparative to actual costs (500~5000% markups)
4) are continually reducing the cap size, and increasing the overage fees.
5) selectively applied traffic management practices (throttle)
All in an attempt to protect their other vested interests and at the same time monetize the heck out of the internet.
It all boils down to wanting control of the internet itself. The fully open, unfettered, accessible internet we have come to know and love is slowly and quietly being taken over. The walled gardens are starting up again (as per examples with iphones and wireless devices) and are soon to creep into the hardwired services as well.
Mark my word…….