Comcast/Netflix Deal Means Bye Bye, Net Neutrality

For example: Suppose so many large media companies pay for "interconnection" that smaller political blogs like this one are very slow to load? It could happen:

For the past two decades, the Internet has operated as an unregulated, competitive free market. Given the tendency of networked industries to lapse into monopoly—think of AT&T's 70-year hold over telephone service, for example—that's a minor miracle. But recent developments are putting the Internet's decentralized architecture in danger.

In recent months, the nation's largest residential Internet service providers have been demanding payment to deliver Netflix traffic to their own customers. On Sunday, the Wall Street Journal reported that Netflix has agreed to the demands of the nation's largest broadband provider, Comcast.

The change represents a fundamental shift in power in the Internet economy that threatens to undermine the competitive market structure that have served Internet users so well for the past two decades.

The deal will also transform the debate over network neutrality regulation. Officially, Comcast's deal with Netflix is about interconnection, not traffic discrimination. But it's hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.

[...] But in a world where Netflix and Yahoo connect directly to residential ISPs, every Internet company will have its own separate pipe. And policing whether different pipes are equally good is a much harder problem than requiring that all of the traffic in a single pipe be treated the same. If it wanted to ensure a level playing field, the FCC would be forced to become intimately involved in interconnection disputes, overseeing who Verizon interconnects with, how fast the connections are and how much they can charge to do it.

At this point, the FCC doesn't have any good options. Regulating the terms of interconnection would be a difficult, error-prone process. Trying to reverse the decade-old mergers that allowed America's broadband market to become so concentrated in the first place would be even more so. But the growing power of residential broadband providers will put growing pressure on the FCC to do something to prevent the abuse of that power.


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One clear lesson, though, is that further industry consolidation can only make the situation worse. The more concentrated the broadband market becomes, the more leverage broadband providers like Comcast and Verizon will have over backbone providers like Cogent. That gives the FCC a good reason to be skeptical of Comcast's proposed acquisition of its largest rival, Time Warner Cable. Blocking that transaction could save the agency larger headaches in the future.

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