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Profitable to favor your competitor

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Profitable to favor your competitor

DirecTV and Verizon’s FiOS service have recently announced app stores modeled directly on Apple’s App Store, notes the New York Times.
This doesn’t seem consistent with the rationale for the proposed “Internet Freedom Preservation Act of 2009,” (H.R. 3458) introduced by Reps. Edward Markey (D-Mass.) and Anna Eshoo (D-Calif.), which assumes that broadband service providers will discriminate against unaffiliated applications in the absence of heavy-handed regulation.

Internet access service providers have an economic interest to discriminate in favor of their own services, content, and applications and against other providers.
A network neutrality policy based upon the principle of nondiscrimination and consistent with the history of the Internet’s development is essential to ensure that Internet services remain open to all consumers, entrepreneurs, innovators, and providers of lawful content, services, and applications.

But the DirecTV and FiOS app stores illustrate that, in fact, openness is in the economic interest of broadband service providers.

“The beauty of the iPhone is that there are a lot of applications that Apple would not have imagined people want,” said Sree Kotay, chief software architect for Comcast. “We want people engaged with television in ways we haven’t thought of yet.”

The article points out that the cable and satellite industries have experimented unsuccessfully for years with interactive news, weather and sports features through their set-top boxes, “leading many in the industry to conclude that all most people want to do with their TVs is watch.” Turns out they were wrong.
Their only viable solution is to open the door to independent applications developers.
This is not to argue that firms do not have an economic interest to discriminate, only to point out that it is simplistic to conclude that is their only economic interest. The app stores illustrate there are times when it is not in the interest of vendors to discriminate.