Major UK Internet provider BT opened up yesterday on the discriminatory traffic throttling it applies to streaming online video under certain plans. BT's John Petter says that the "free ride" is over for popular streaming services like the BBC's iPlayer and that they need to pay up for "developing very profitable business models" by using BT's pipes.

It all sounds depressingly familiar. AT&T boss Ed Whitacre—the new head of General Motors—leveled the same charges at popular websites like Google back in 2005:

How do you think [websites] are going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

AT&T never got around to charging websites for access to its customers, due in large part to a public outcry, the start of the "network neutrality" war, and interest from the Federal Communications Commission. But the idea never died in the ISP community, and Petter now says "that the quid pro quo of payment from content owners might be guarantees of picture quality," according to the Financial Times.

The argument here has evolved slightly since Whitacre first made it, and BT appears to be saying that high-bandwidth video streaming, in particular, is just too expensive to offer without limits on its cheapest plan.

That plan, called "Option 1," offers 10GB/month of data transfer, imposes throttling on P2P connections during parts of the day, throttles anyone who's a "heavy user," and places a limit of 896Kbps on video streaming services between 5pm and midnight.

BT's own "fair usage policy" spells all this out, which makes the discrimination legal in the UK. But the policy justifies the bandwidth cap by saying, "We do not impose any restrictions that affect the viewing quality of services such as BBC iPlayer or Catch Up on Channel4.com or ITV.com, as these stream at up to 800Kbps."

This is patently untrue. The iPlayer offers several different streaming levels, including one at 1.5Mbps. In April 2009, the Beeb added a 3.2Mbps HD streaming option. With HD streaming burning through 1.5GB/hour, though, Option 1 users can't watch for long without bumping up against their monthly cap.

Innovation impact

Such restrictions certainly have an impact on innovation, especially when they are implemented by the largest ISPs in a country. After covering this issue last week and raising the question about whether a "company will try to launch a new HD streaming site, for instance, if it knows that several of the country's largest ISPs will throttle the service during peak hours," the founder of Highdefnow.com contacted us and said that this was his exact problem.

Kieran Kunhya said that throttling isn't as big a deal for established services and brands, but for startups like his, it can be killer. "It's different for smaller startups because the onus is on us to demonstrate that our product is good—i.e., if the service is running slow [customers] will blame us for the poor service even though it might be ISP throttling (or poor ISP connectivity). Some of our users I've spoken to have experienced throttling and do feel that it is us offering a poor service when in fact we have relatively large amounts of bandwidth... All in all this unlevels what was the level playing field of the Web, making it difficult to innovate."

But BT says it's losing millions by giving content owners "a completely free ride." Content owners pay big bandwidth bills for the privilege of putting their material on the Internet, though; if BT doesn't see those fees directly, that's only because it "peers" (exchanges traffic freely) with other ISPs of similar size, a move that benefits BT just as much as the other party.

The UK allows such behavior from its ISPs in large part because of the more competitive landscape there. The last-mile copper network is controlled by a company called OpenReach, which resells to every DSL provider who wants to buy access. The end result has been that, instead of a duopoly commonly seen in the US, many UK residents have access to four, five, or six ISPs—and can go elsewhere if unhappy.