Remade FCC Sets The Stage For Creation Of New Ad Tech Giants

eric-berryData-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Eric Berry, CEO at TripleLift.

The conditions created by the new regulatory posture of the Federal Communications Commission (FCC) under President Donald Trump are ripe for broadband providers to blossom into dominant ad tech players.

The FCC has significant authority over broadband and telecom regulation in the US. With the changing administration, significant structural foundations of the current media, ad tech and broadband industries may be unwound.

Though Ajit Pai was originally nominated by President Barack Obama, Trump elevated him to the head of the FCC three days after taking office. In his first 100 days in office, Pai has taken steps that will significantly change the media and digital advertising landscapes.

Net Neutrality

President Trump’s initial moves at the FCC can be bucketed into a few categories: net neutrality, zero rating and data tracking.

Net neutrality is the idea that internet bandwidth and content distribution should be handled in a fashion similar to electricity, telecommunications (excluding broadband) and other utilities. This means providers can neither discriminate against certain users nor create tiers of enhanced service.

This idea was successfully promoted under the Obama administration, and in 2015 broadband was deemed to be a utility, meaning that net neutrality would apply. This is now being rolled back by Pai.

There are arguments both ways. Some worry that net neutrality will inhibit corporate freedom of speech and stifle innovation, while others believe that losing it may lead to censorship or tiered information availability. It also means that, in theory, internet service providers (ISPs) could vary pricing by the nature of the content and its distributor. So, in theory, the fees for advertising bandwidth may be higher or could be borne by the ad tech provider – a material change in the fee structure compared to today.

Naturally, if the bandwidth provider also provides the ads, it would enjoy a significant savings, creating a material advantage.

Zero Rating

Zero rating is directly related to net neutrality. It allows a content provider to exempt data from counting against usage caps or fees. Under true net neutrality, zero rating cannot be sustained. The FCC under President Obama did not ban zero rating, but conceded that it probably violated net neutrality.

When President Trump took office, there were several investigations into the zero rating services offered by Verizon, AT&T and T-Mobile. Ajit Pai quickly terminated the FCC's investigations and, in so doing, provided them cover to continue these practices. Allowing zero rating allows broadband providers to increase the value of their own services by offering special content – including their own content – in a significantly more cost-preferential way.

Traditional rules separating distribution and content are, indeed, decreasingly relevant as platforms like Apple and Google have developed their own distribution channels – and they are not regulated in the same way. It is reasonable to expect that the telecoms will use their position and leverage with zero rating to develop exclusive or interesting content packages that may challenge existing content distribution models. We already see the groundwork being laid through tie-ups, including Verizon-AOL-Yahoo, AT&T-Time Warner and Comcast-Universal, especially given Comcast’s rumored cell service.

Exclusive content at scale – especially if it’s high-quality video content – combined with accurate subscriber data effectively creates an entirely new channel for digital monetization.

Data Tracking

The FCC under Obama introduced a measure that would have required ISPs to obtain consent from users before selling data about their behavior. Pai's FCC suspended this rule before it took effect this month. Pai has publicly questioned why Facebook and Google can track and monetize user behavior without user consent while broadband providers cannot. In other words, why should there be different sets of regulations?

As a result, broadband providers theoretically could track user activity, develop profiles and sell advertising. Over time, Verizon, Comcast and other broadband providers could develop formidable data sets about their users that, when combined with subscriber data, could enable them to become genuine competitors to Google, Facebook, Amazon and others for scalable behavioral data.

Broadband providers will grow significantly stronger under the new Trump administration. Weakened net neutrality rules provide a lever to wield tiers of service that could possibly favor their own advertising content. Allowing zero rating means broadband providers can similarly bias toward their own content and ad offerings, potentially creating a huge pool of exclusive, quality inventory to monetize. And data tracking provides the means for these players to develop high-quality advertising offerings.

If the broadband companies play their cards correctly under the current administration, it seems inevitable that they will become significant ad tech players.

Follow Eric Berry (@ezberry), TripleLift (@triplelifthq) and AdExchanger (@adexchanger) on Twitter.

 

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