Comcast: to Defend or Not to Defend

Is Comcast's recent action against L3 really an attempt to stifle competition for its value-added services? I made that case Tuesday, but Computerworld blogger Richi Jennings has a counter argument: Chill, he says, L3 really was trying to get away with something, and it should pay a premium just like any other CDN does.

He makes a good case. Perhaps L3 is getting too good a deal on its peering agreement relative to others with CDN-scale traffic. But on this side of the Atlantic, at least, we have good reason to worry about moves to charge for content delivery from a bigger picture standpoint.

As Richi points out, the cost of broadband is very expensive in the U.S. and many Americans can choose from just one provider. That gives companies like Comcast quite a bit of control over access to the customer - and pricing. Consider:

  • Comcast keeps a la carte pricing high for broadband service unless you take their value-added services (television and telephone services) as well. Incremental services delivered over broadband, such as Vonage VoIP or streaming video, become that much more expensive if you break the bundle and have to pay through the nose for broadband.
  • Comcast can control demand for competing content and other value-added services by charging third parties more to deliver that content to its broadband customers. If it closes the deal with NBC, which it will, and if net neutrality goes nowhere at the FCC, which is a real possibilty, what happens then?
  • Comcast can limit competition in the streaming space for high resolution video by keeping the end user's broadband bandwidth relatively low. In my area we were promised 20 Mbps for about five years ago. No sign of it yet.

Charging more to deliver streaming content to Comcast's broadband users is another way to control demand because it increases the cost of those services.

Comcast may not have directly targeted competing content services such as Netflix in its dispute with L3. But I do worry that it, and other cable companies, will raise such usage fees across the board for the CDNs that deliver streaming content - which could be viewed as an indirect tariff on competing content.

Comcast has a financial incentive to keep broadband speeds relatively low, to keep rates for broadband service expensive and to keep the prices competitors pay to deliver competing services to its broadband customers over its network high in order to preserve its own value-added business.

Back in the '90s, when the telephone companies were slow to build out broadband, rule changes allowed competitors to install broadband equipment in telco facilities and offer those services to customers. The telcos grudgingly allowed those companies to come in. But they owned the infrastructure on which the companies had to connect. They owned access to the customer. And through tactics such as slow reponse times and poor customer service, they eventually they drove every one of those companies out of business.

It's not exactly the same situation. But the parallels are bothersome.

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