HBO Max proves your ISP can make a streaming offer you can’t refuse

AT&T plans to make its newly launched HBO Max streaming service a free ride data-wise for its internet customers, according to the Verge. This means AT&T is effectively favoring its own streaming service over those offered by the competition (Netflix and Amazon Prime Video are among the biggest).

Thanks to the Federal Communications Commission’s (FCC) repeal of net neutrality laws in 2017, there are no restrictions on a company that owns an internet service provider (ISP) in regard to favoring its own entertainment offerings through it. But what does this mean for the future of streaming services?

Behold the new bundle

HBO Max

What AT&T has done should feel very familiar to those with a history of dealing with cable and satellite companies. AT&T owns an ISP and also owns HBO Max. By telling its internet customers they won’t have to worry about the data they’re consuming while watching HBO Max, it’s effectively creating a product bundle: Two or more services that are cheaper when you buy them together than if you were to buy them separately. this, on the surface, seems completely legit. Bundles, after all, are nothing new.

…it’s using the threat of data overage charges as both a carrot and a stick, making the equivalent of an “offer they can’t refuse.”

However, it’s the nature of this particular bundled discount that is so troubling. AT&T isn’t giving its internet customers a break on the price of HBO Max. Instead, it’s using the threat of data overage charges as both a carrot and a stick, making the equivalent of an “offer they can’t refuse.” HBO Max suddenly becomes the safe choice, a streaming service you can watch to your heart’s content without ever worrying about those pesky extra fees.

It’s a classic protection scheme: Buy our streaming service and we won’t charge you the extra money we would be forced to collect if you were watching someone else’s streaming service. Hey, we’d hate to see that happen, you’re such nice people.

Preferential treatment

The Godfather

Godfather-style tactics like this are exactly what you can expect to see from big telecoms no longer saddled with net neutrality rules.

“AT&T is undoubtedly giving HBO Max content preferential treatment,” said Kentaro Toyama, W.K. Kellogg Professor of Community Information at the University of Michigan School of Information,  “and so it goes against a broad definition of net neutrality.”

And yet, despite no longer having to concern itself with those rules, AT&T is nonetheless still living by them, if only by the narrowest of technicalities.

“[It’s] a clever form of preferential treatment. This deal will probably open the door to more and more such cleverness in the future,” Toyama said.

The end of a level playing field

It would be easy to dismiss this “cleverness” as a mere accounting trick — just the moving of dollars from one column to another. HBO Max pays a fee to avoid AT&T’s overage charges, and AT&T collects that fee. Is that something really worth getting excited over?

It’s a practice that could reshape the streaming landscape

In a word: Yes. It’s a practice that could reshape the streaming landscape, with potentially dire repercussions for any on-demand or live TV streaming company that isn’t controlled by an ISP. Here’s how that looks.

Netflix is still the biggest streaming service of them all, and by a healthy margin. It was able to grow and prosper because on the playing field that it almost single-handedly established, it hasn’t faced a competitor that possessed an exclusively beneficial relationship with an ISP.

Amazon Prime Video, Hulu, Disney+, Apple TV+, etc. — they all looked exactly the same to potential subscribers, regardless of their chosen ISP.

But HBO Max is a new breed of competitor. For HBO Max, AT&T’s 14.05 million internet customers are now predisposed to become its subscribers, thanks to AT&T’s safe haven for data overages. AT&T has set HBO Max a 50 million subscriber target by 2025. At the end of March 2020, Netflix had almost 70 million subscribers in the U.S. and Canada combined.

Digital Trends reached out to Netflix, but it declined to comment on this story.

The AT&T advantage

AT&T Store

AT&T’s ability to give its subscribers peace of mind when streaming is important, and it’s not the only company in a position to do so. Tyler Cooper, editor-in-chief of BroadbandNow, told Digital Trends that “tens of millions of Americans” connect to the internet through a service that enforces data caps.

Among the ISPs that impose a data cap is the cable giant Comcast, which services over 111 million internet customers through its Xfinity service. Comcast is also the proud soon-to-be-parent of Peacock, a massive streaming service built on NBCUniversal’s deep catalog of movies and shows.

Comcast hasn’t said if it plans to offer a similar data safe harbor deal to its Xfinity customers, but there’s literally nothing stopping it from doing so. Digital Trends reached out to Comcast, but the company hadn’t responded by the time of publication.

“Streaming a feature-length movie can eat through as much as 6GB, so [AT&T’s announcement] is certainly something that will impact consumers,” Cooper said. “Though some providers have suspended data caps in light of COVID-19, these suspensions are mostly temporary, and the consequences of a post-net neutrality market are likely to continue to crop up for months and years to come.”

Prophecies of doom

Netflix

Is this the end of the road for independent streaming companies like Netflix and Amazon? I doubt it. But the launch of HBO Max signals a new chapter in the ongoing saga of streaming services.

It could lead to even better products and services as the heavyweights battle it out for your subscription dollars. But it could also lead to less choice as the bar to entry reaches ever higher, making it harder for small new services to gain a toe-hold.

Ajit Pai, the FCC’s chairman, once said that the Obama administration’s net neutrality-based rules were based on “hypothetical harms and hysterical prophecies of doom,” according to The New York Times.

Suddenly, the harm Pai mentioned is a lot less hypothetical.

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