War for the Web
15 02.14

The Comcast Time Warner merger is a battle in the War for the Web

This past week, Comcast announced a merger with Time Warner Cable. This merger would make Comcast far and away the largest cable provider in the United States, and it would catapult them to the fore of Internet Service Provision as well. This has pretty scary implications, but ironically doesn’t alter the field all that much. Time Warner and Comcast are both hated by their customers, they are both essentially monopolies in the regions in which they operate. So this means that people who were stuck with Time Warner will now be stuck with Comcast instead.

Comcast has a data cap on monthly usage, Time Warner doesn’t. That’s the main difference between the two operators. But this deal is much more dangerous than that for a lot of reasons. Americans are already getting ripped off when it comes to Internet access, and David Cohen has already stated pretty unequivocally that this merger will not benefit consumers.

There’s a bigger danger though, and that is that is that we’re giving Comcast control over a much bigger chunk of the Internet itself, through its control of last mile access to consumers. It’s important to remember that while Time Warner and Comcast may not be competing for subscribers on a local level, Comcast is competing with other content providers on a national level. That’s because Comcast owns NBC Universal; and so competes with Google, Facebook, Netflix, and many others to provide content on the Internet. This deal, while it may not look like it’s about cable TV and a few subscribers in various cities, is actually about who gets to dictate rules for offering content online.

In 2008, Comcast and Level 3 communications got into a dispute about Netflix traffic. Comcast and Level 3’s original agreement, before 2008, was predicated on what’s called “Peering,” that is, passing back and forth equal amounts of traffic. Netflix began to use Level 3 as a Content Delivery Network, that is to host and stream their films through last mile networks to consumers. Comcast, as a last mile network, has monopoly access to a large set of subscribers, and used this as a bludgeon to try to change their agreement with Level 3 communications and charge them higher fees to for access to their customers. This sounds a lot like a cable TV dispute, and that’s because it’s very similar but with added complications. See, Level 3 isn’t just a CDN, they’re also an IP transit provider, which means that a lot of websites that are hosted in distant places use them to get to you, the consumer. By objecting to the Netflix traffic, Comcast wasn’t just threatening to cut off Netflix traffic, but also all the other traffic that Level 3 hosts.

Thankfully, it didn’t happen. The FCC acted as arbiter and an agreement was reached. There are still concerns, however. Comcast has a streaming video service that competes directly with Netflix, called Xfinity. Because Comcast has a monthly data cap, Netflix streaming video counts towards that cap but Xfinity does not. This effectively makes Xfinity cheaper for consumers; Comcast can do this because they can use their monopoly control of their customers to essentially undercut a competitor’s business.

The Internet political and business landscape is a remarkably complicated place, especially right now. This merger would give Comcast an inordinate amount of market power as a provider of last mile Internet service to consumers, and would threaten the integrity of the Internet at large in the United States. We haven’t seen a company try to restrict the areas of the Internet that it’s customers can access yet, but as any single company gets more market power, the risk grows exponentially. We would urge the justice department and the FCC to block this merger, for the sake of the future of the Internet.

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