Verizon To Purchase AOL For 4.4 Billion


Having trouble seeing the link between the Verizon-AOL deal and the need for net neutrality regulations? Some new reporting by the Financial Times should help clear things up for you.

The FT’s Robert Cookson revealed Thursday that at least one major European mobile network is planning to use technology from Shine, an Israeli startup, to block ads from showing up on mobile-phone browsers. The technology can stop ads on web pages and most apps transmitted through the cellular network.

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The idea is remarkably anti-competitive, not to mention disruptive to a key business model for free content online. One can only imagine the conversations between a mobile-phone operator using Shine’s ad-blocking technology and a major brand or online advertising network: “That’s a real nice display ad you’ve got there. I’d hate to see anything bad happen to it on my network.”

Cookson found one, unnamed mobile network operator in Europe to say that it planned to block ads, as did some of its rivals. In the short term, Cookson reported, the operator planned to let subscribers opt in to an ad-blocking service.

“But it is also considering a more radical idea that it calls ‘the bomb,’ which would apply across its entire network of millions of subscribers at once,” Cookson wrote. “The idea is to specifically target Google, blocking advertising on its websites in an attempt to force the company into giving up a cut of its revenues.”

To repeat: That’s a real nice ad network you’ve got there. I’d hate to see anything bad happen to it.

This is what net neutrality rules are designed to prevent. The company providing the pipe shouldn’t mess with what’s traveling through it.

The top executives at the leading U.S. Internet service providers insist that they cherish this principle. At the same time, though, analysts and tech providers within the industry note that potential for ISPs to dip into the data flowing across their networks in order to compete for advertising dollars.

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“As today’s subscribers do almost everything on their mobile devices, giving operators better insights into their likes and dislikes than any other Internet company, the potential for operators to become important players in the marketing and advertising space is only going to increase,” said Guillaume Le Mener of Tektronix Communications, a company that sells big-data tools to mobile operators.

The main prize for Verizon in its $4.4-billion deal for AOL is the latter’s advertising technology — specifically, AOL’s One, a platform for delivering ads to a broad array of viewers. The purchase appears to put Verizon in direct competition with Google and other major online advertising networks.

Le Mener sees the deal as a good thing, at least for Verizon, because it “promises to create entirely new business models and a platform for Verizon to drive video services and mobile advertising.” He added, “Operators are already making use of the wealth of data their networks hold to support marketing initiatives. Yet by monetizing this data, operators are also opening the floodgates for new business models, products and services all based on real-time and precise information about subscribers and their interaction with the network.”

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New FCC net neutrality standard leaves ISPs guessing
That’s a little unnerving. Assuming regulators approve Verizon’s purchase of AOL, though, the company will have a new incentive not just to create profiles of its customers, but also to distribute ads in place of the ones sold by online advertising networks.

Many Internet users might have trouble caring what their ISPs do to advertisements online, as long as they don’t show more of them. But they have a stake in the Internet continuing to be a healthy market for advertisers; it’s those dollars that support all that free content online.

The net neutrality rules that the Federal Communications Commission adopted in February give the commission the authority to review complaints by advertisers and ad networks if their pitches were blocked or altered. Here’s the exact wording of the applicable provision:
“Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.”

Verizon and every other major ISP is challenging the neutrality rules in court, arguing among other things that the FCC exceeded its statutory authority. The courts will eventually decide if it did. In the meantime, the evidence mounts that ISPs may no longer be content to deliver content to their subscribers without making their mark on it.