Friday, February 22, 2008

The Road to High Def

When I got my new laptop just over a year ago, it included a feature that was not among those I felt were essential: an HD-DVD drive. I could have bought a laptop with almost duplicate specs excepting that it had a Blu-Ray drive, but it would have cost an additional $900. Besides, I was pretty sure that Blu-Ray would go the way of the Betamax. How could something with such a huge price differential compete?

It turns out I was wrong, and Sony was right. The war between the two high definition disc formats is over and Blu-Ray has carried the day. But it won’t impact me a great deal. While I have used my drive to burn regular DVDs, I have only actually viewed an HD-DVD disc on it once. I once watched five minutes of the disc that came with the laptop, but I frankly don’t watch much TV. Unless it’s an extremely compelling flick, I just can’t seem to find the time to sit down and watch it. So after five minutes, something else came up and I never went back to it.

Until Blu-Ray disc burning gets cheap enough to be included as a common laptop feature, it won’t matter to me that my laptop doesn’t have a Blu-Ray player. And probably by that time, it will be time to replace my laptop anyway. For me, the high-def disc wars were kind of like the cola wars. Since I don’t drink cola (and rarely drink soda of any kind), I just don’t care.

Even though Blu-Ray has won out, don’t expect Americans to run out and plop down $400 for a new disc player. They’ve come down a lot in price, but they’re going to have to get a lot cheaper. And when will Blu-Ray recorders become inexpensive enough for average folks to buy them?

In the meantime, this WSJ editorial suggests that the long disc war may have opened the door for “other home-viewing options -- from high definition video-on-demand cable offerings to digital downloads off the Internet.” Sony’s victory, which is seen as sort of revenge for its Betamax defeat, may turn out to be a pyrrhic one.

On a related note, the ability to get high-def content via the Internet is the topic of this WSJ op-ed by the Discovery Institute’s Bret Swanson and George Gilder. By 2015, the institute estimates, Internet traffic will exceed “1,000 exabytes, or one million million billion bytes.” This, they say, “will require some $100 billion in new Internet infrastructure in the U.S. over the next five years.”

That kind of investment will only occur if the market is sufficiently free. It will not happen if we have a “digital traffic cop … policing every intersection of the Internet.” The current push for what regulation supporters call net neutrality, Swanson and Gilder argue, would mean that “Every price, partnership, advertisement and experimental business plan on the Net would have to look to Washington for permission.” It would be a bureaucrat’s dream, but a consumer’s nightmare.

So how do we deal with the fact that infrastructure companies in the U.S. have been slow to implement newer technologies and more favorable pricing plans? Swanson and Gilder suggest, “New pricing schemes that charge per byte consumed might also help to manage supply and demand on the Internet.” A similar approach sort of works for the wireless phone industry.

It would also help to open up the field of competition. Jesse Harris says here that the government involvement in the teleco industry has been a steady string of bungles. He says that we need “a wholesale telecommunications network that remains retailer-neutral.” I’m not sure I agree with Jesse’s proposed solutions, but I am sure that the path to substantial improvement of our current systems does not run through the slaughterhouse of more federal regulation.


Jesse Harris said...

I was pretty surprised that Sony carried the day in the high-def disc war. The PS3 has been vastly outsold by the XBox360 (which supported HD-DVD) and Sony seems to have more restrictive licensing terms for content producers.

As far as Internet services go, the driving argument behind net neutrality is spurred mainly by hidden policies and deceptive marketing. Cable and phone companies have been selling their broadband products as "all-you-can-eat" with no stipulations such as "you can only use X applications". For them to then say "well... maybe it isn't really unlimited like we said it is" or "gee, we don't want you using BitTorrent because it costs too much money" is an egregious breach of contract. (I think the official term is "bait and switch".)

If these companies have decided to start restricting usage to reduce costs, fine, but tell us what the terms are. Shutting off users for "using too much bandwidth" without telling them how much they used or even what the limit is? Not cool. Neither is degrading specific applications that can have legit uses. BitTorrent, for instance, is used to distribute patches for World of Warcraft in addition to most major flavors of Linux.

Until telecommunications companies are more up-front on these policies, they're going to be endlessly hounded by the net neutrality argument.

Scott Hinrichs said...

Good point. But net neutrality is not going to fix the public-private mess that we have. It will only introduce a new set of problems.

Scott Hinrichs said...

This op-ed by Andy Kessler is a nice follow-on to this discussion. He says, "Haven't we learned that advancing technology is never served by arbitrary rules to divvy up scarce resources? Look at the dearth of good cell phone applications: Rules make incumbents lazy."

The answer, says Kessler, is a "policy to help cut a path for more competition, rather than protecting incumbents -- a Bandwidth Competition Act of 2008, not bogus net neutrality. All takers should be allowed access to poles or underground conduits. This is where neutrality should be enforced, instead of being a choke point."

The whole net neutrality thing is little more than a ploy to protect incumbents in the market. They have made big investments and they want to protect their market share, even if it means stifling innovation. Kessler says, "The Internet will only expand based on competitive principles, not socialist diktat. The more we can do to clear a path, the greater our national wealth will be."

Anonymous said...

I was beyond disappointment in the way the HD/BR war ended primarily because I chose to invest in HD, but more importantly HD was always better-priced. When you compare the technologies BR is superior only in capacity. They are equal in quality. And when you have the same quality and a cheaper price it seems like a no-brainer to me. I guess Warner Bros' recent decision to support BR exclusively prompted Toshiba's rash decision. I suppose in the long-run it will be a "win" for me and other HD consumers as long as BR somehow implements the capability to read HD DVDs. Otherwise I'm stuck with 30 HD DVD titles that will eventually be worthless.