FCC Killing BitTorrent? Not Exactly

by on August 9, 2008 · 42 comments

I’m always interested in stories about the unintended consequences of government regulation, but this story from Valleywag (Via a comment from Richard Bennett) doesn’t make a lot of sense:

The prospect of pay-by-the-bit bandwidth had immediate consequences for BitTorrent’s two main businesses: an online-media store delivered via file sharing, and a content-delivery network which competed with the likes of Akamai and Limelight Networks.

For users who would have to pay bandwidth fees to their ISPs on top of paying the usual charges, BitTorrent’s Torrent Entertainment Network store would soon look uncompetitive with the likes of Apple’s iTunes Store and Microsoft’s Xbox Marketplace — which prompted Best Buy to back out of talks to acquire TEN for $15 million.

As for BitTorrent’s content-delivery network, it was premised on the notion that BitTorrent would negotiate with ISPs to get privileged delivery for their file-sharing packets, while Comcast blocked others. With the FCC forcing Comcast to treat all file-sharing traffic equally, the promise of that business evaporated.

The obvious problem with this is that Apple, Microsoft, Akamai, et al haven’t negotiated privileged bandwidth agreements with ISPs either. If users have to pay their ISPs extra to download a 10 gig HD movie from BitTorrent, they’re going to have to do the same to download HD movies from iTunes or the XBox store. BitTorrent’s big advantage is that they face dramatically lower bandwidth costs on the other side of the pipe, because their users share files with each other rather than everyone getting bandwidth from the server. If bandwidth caps and metering doom BitTorrent, then they doom iTunes and the XBox store too. Somehow, I don’t think we’re about to see the end of video download services.

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