Should ISPs Pay for Music?

ISPs would do well to offer content to their subscribers, said Andrew Parker, CTO of CacheLogic, a Cambridge, England-based firm that monitors and reduces ISP bandwidth usage.

 

“ISPs can’t squeeze bandwidth because they’re still in a land grab,” he said, referring to the intense competition to offer high-speed Internet. “The emotional relationship is with content. The danger is to become a mere conduit.”

 

And this week’s announcements of Verizon and SBC’s partnerships with Yahoo (see Verizon, Yahoo in DSL Hookup, Yahoo, SBC Team on Music, and Yahoo Fueling DSL Demand) show that ISPs are seeing the value of Mr. Parker’s thinking on the matter.

 

But ISPs and Hollywood are not quite buddies, as high-speed Internet revenues have been largely driven by illegal file-sharing.

 

“At least 60 percent of activity on broadband networks is file-sharing,” said PlayLouderMSP CEO Paul Hitchman. He contends his 18-month-old company is “flipping the traditional relationship of resentment between ISPs and content owners.”

 

PlayLouder is especially focused on replicating the social nature of file-sharing networks by allowing customers to trade songs. However, the DRM details are not yet settled, said Mr. Hitchman. It’s unclear whether subscribers will be permitted to burn CDs, download songs to their portable players, or keep songs after canceling their PlayLouder service.

 

The bargaining power of one ISP may not be enough to get music labels to allow these kinds of flexibility. And Mr. Hitchman notes that his negotiations are limited to the United Kingdom; his company will have to find outside partners to make the deals available internationally.

 

But there does seem to be international support for the idea of ISP-sponsored music, at least in theory. The Organisation for Economic Co-operation and Development (OECD) in Paris advocated such a system in its recent commentary on the digital music industry.

 

“If ISPs charge a few euros or dollars a month, it would be larger-than-average revenues from regular CD purchases,” said OECD economist Sacha Wunsch-Vincent.

 

“Deploying broadband or 3G is a huge investment,” he added. “It needs to be recuperated somehow, and the only way is with value-added services.

 

“There’s win-win situations between the ISPs and the consumer content providers which haven’t really been seized yet.”