May 2014

[Commentary] Venture capitalists believe that, with the hard work of laying those digital pipes now behind us, there’s an enormous opportunity waiting for those who can figure out how to create an endless stream of content to flow through them.

Ken Lerer compares it to the content revolution he watched unfold in the late 1970s and early 1980s. Cable television, at first little more than a punch line to the gatekeepers of the big three broadcast TV networks, had by this time built out its distribution pipes across the country. Soon, ABC, CBS and NBC were joined by dozens, then hundreds, of new channels.

The need for content exploded. New channels -- TNT, TBS, Bravo, National Geographic Channel and hundreds of others -- flowed into the vacuum, satisfying niche audiences and generating billions of dollars in profits.

[Commentary] The Federal Communications Commission’s net neutrality rules are based on the false premise that American broadband services are sub-standard compared to those in other countries.

Advocates who buy this notion believe that network price and quality can only be improved by regulatory action that forces providers to make uneconomic investments. Before we can have a rational discussion about network policy, we need to get the facts straight.

Average broadband speeds in five of the top 10 are actually declining, while those in the US are improving. Chairman Wheeler’s Open Internet rules aim to preserve the goose that has laid these golden eggs while protecting America’s innovators and ordinary citizens from the hypothetical harms than can arise in markets with minimal competition.

In short, the proposed regulations permit a degree of experimentation with the pricing of technical services on the Internet provided that the common, baseline service continues to be adequate for the common, baseline set of applications.

The most common complaint emanating from the fainting couches occupied by (the mainly far left) net neutrality advocates is that the proposed regulations don’t go far enough to preserve the Internet as it has always been. This is an odd standard to apply to a technical system notable for its disruption of traditional industries such as music, journalism, travel, and retail.

Net neutrality advocates also worry that Internet Service Providers have incentives to exploit customers and harm innovation, fears inspired by every profit-maximizing business. But these incentives are counter-balanced by conflicting incentives to sign up more subscribers and to provide richer services.

Comcast continues to paint Netflix as a competitor, as the cable giant keeps trying to make the case that it needs to swallow Time Warner Cable to have a presence on a national scale -- and compete with what it portrays as surging digital-video rivals.

Comcast Chairman-CEO Brian Roberts said that with the TW Cable acquisition and subsequent spinoff of systems to Charter Communications, Comcast will add a net 7 million customers. That would give Comcast about 30 million video subscribers -- and Roberts noted that Netflix now has more than 35 million US subscribers. The merger will give “the industry a better opportunity to have a footprint regionally and hopefully nationally,” Roberts said.

In reality, Comcast and Netflix aren’t really directly competitive: They offer different kinds of content, and Netflix is not a replacement for the broad programming available on pay TV. Comcast does offer a Netflix-like streaming service, Streampix, but that’s bundled with TV and has a much smaller content lineup. In addition, Comcast’s video biz is far larger in dollar terms. Comcast posted $5.18 billion in video revenue for the first quarter of 2014, whereas Netflix generated $1.27 billion.

More and more business value and personal information worldwide are rapidly migrating into digital form on open and globally interconnected technology platforms.

As that happens, the risks from cyberattacks become increasingly daunting. Criminals pursue financial gain through fraud and identity theft; competitors steal intellectual property or disrupt business to grab advantage; “hacktivists” pierce online firewalls to make political statements.

Research McKinsey conducted in partnership with the World Economic Forum suggests that companies are struggling with their capabilities in cyberrisk management. As highly visible breaches occur with growing regularity, most technology executives believe that they are losing ground to attackers. Organizations large and small lack the facts to make effective decisions, and traditional “protect the perimeter” technology strategies are proving insufficient.

Most companies also have difficulty quantifying the impact of risks and mitigation plans. Much of the damage results from an inadequate response to a breach rather than the breach itself. Complicating matters further for executives, mitigating the effect of attacks often requires making complicated trade-offs between reducing risk and keeping pace with business demands. Only a few CEOs realize that the real cost of cybercrime stems from delayed or lost technological innovation -- problems resulting in part from how thoroughly companies are screening technology investments for their potential impact on the cyberrisk profile.