If ISPs Want to Take on Gaming Consoles, They Might Want to Fix Their Existing Products First

By Nathaniel Mott , written on September 28, 2012

From The News Desk

Earlier this week Bloomberg reported that some Internet providers, including AT&T, Verizon, Time Warner Cable, Comcast, and Cox Communications, are going to partner with Web-based gaming companies in an attempt to snatch some marketshare away from video gaming juggernauts Sony, Nintendo, and Microsoft.

Great! Now they just need to work on almost every aspect of their existing infrastructure and pricing models to make it possible.

Hell, I would have responded to this announcement a bit earlier if my home Internet connection, courtesy of Verizon, wasn't so goddamn slow. Download speeds tend to average around 1.5 megabytes per second (though I am paying for 3.0 mbps speeds, oddly enough) – glacial by many standards, but much faster than what I was used to in Upstate New York.

This isn't an isolated issue. CNN reported earlier this year that the average US download speed, 6.7 mbps, puts the US, with the notable exception of a portion of Kansas City and Chataanooga, Tennessee, behind South Korea, Japan, and 10 other countries. Some states can pull down faster connections – surprisingly enough, the state with the fastest connection is Delaware, not California or New York – but for the most part download speeds in the US are a total crapshoot.

Even if these download speeds improve, and they're going to have to if cloud-based gaming is ever going to catch on, gamers will then have to worry about upload speeds catching up as well. The infrastructure simply isn't in place yet.

Then there is the fact that many people don't have Internet connections at all. As Hamish pointed out in an earlier article about a non-profit's efforts to extend Google Fiber's high-speed goodness to the poorer parts of Kansas City, even if high-speed Internet does become available, many people won't be able to afford it.

A family might be able to swing a game console, which tend to average around $300, but having to pay fees like the $95 per month customers pay for Verizon's fastest FiOS connection is outside of many household's reach. Prices would have to fall to an affordable level while connection speeds rise to accomodate these Web-based games. Though that may happen eventually, it certainly won't happen by 2013 or 2014, the years Bloomberg claims many of these products should be ready to ship.

So why introduce the product at all, then? The short answer is the same as always: money. The long answer is that doing so would give these companies control over how games are delivered, played, and paid for.

“It makes perfect sense why they would want to go after this market,” Mitch Lasky, a partner at Benchmark Capital and former executive at Electronic Arts, told Bloomberg. “Streaming games use a ton of bandwidth and really benefit from good networks. But it’s a gnarly execution problem they’re trying to solve.” By adding a new product – the gaming service – these companies are making money in two different ways. First is with the gaming service itself, which in turn could lead to customers paying more for faster Internet connections and larger data caps.

If the Internet providers are charging for the gaming product, keep their prices at a similar level (or even simply within a decent range), and then move to introduce or reinforce data caps, they stand to make what is best described as a fuckton of money. To run with the popular "Internet providers are like roads, and content is like housing" metaphor, selling this product is like owning the road, the house, and, if they "need" to sell a set-top box, the car. Did anyone just hear a million ka-chings?