Long live the open internet! That was how advocates and net neutrality supporters reacted to the Federal Communications Commission (FCC) passing its Open Internet Order last week. Net neutrality supporters quickly heralded it as a victory for startups and consumers who would be shielded from having their content and internet access slowed, banned or blocked by broadband providers.
It’s unclear how far the net neutrality rules go — details of the FCC’s plan won’t become public for several weeks — but that won’t stop make internet access cheaper, or even stop fast lanes in all forms hikes from ISPs that undermine the spirit of a free and open internet. Just because internet activists scored a win by getting net neutrality reinstated, doesn’t mean internet services will become any cheaper any time soon.
“Net neutrality doesn’t address the harms that the Comcast merger with Time Warner could create,” Jeffrey Blum, senior vice president and deputy counsel of Dish Network, said on a media conference call Monday. “Over-the-top (OTT) services compete with Comcast-Time Warner, and they don’t want to compete with Sling TV, etc. They have a greater ability to sabotage over-the-top if they merge. Most of this is not addressed at all through net neutrality.”
OTT services include the likes of Netflix and Hulu that stream video content over the internet, bypassing cable companies and instead relying on ISPs to conduct their business. Over the years, ISPs and big companies have become one and the same through multi-billion-dollar media mergers, which have been on the rise in recent years.
Sprint and T-Mobile tanked a merger deal last year that would have created serious competition for top wireless providers Verizon and AT&T. AT&T withdrew its bid to buy T-Mobile in 2011, but is looking to merge with DirecTV. And lastly, Comcast is waiting to merge with Time Warner. The FCC halted both deals to determine how beneficial the deals are to the public interest and is expected to make final decisions in March.
The Comcast-Time Warner deal has one key distinction from AT&T-DirecTV: A merger would make the Comcast not only the top cable provider, but the top internet service provider (ISP).
“Once you’re at that scale, you have the opportunity to do things those other providers can’t do,” said John Bergmayer, senior staff attorney for Public Knowledge, an advocacy group in Washington, D.C., that focuses on the open internet, digital and telecom law. “With Comcast, they can take advantage of the number of subscribers on their network and dictate terms, price on why you should pay more.”
With the merger, Comcast would have a virtual monopoly over and video programming and interconnection. Interconnection or peering, lets services such as Netflix pay an ISP like Comcast or Verizon for direct access to their network. Multiple companies can pay this toll to plug into the ISP’s network, like paying to use a single socket on a surge protector.
But the result is that some traffic is prioritized over others on the ISP’s physical network — a violation of the spirit of net neutrality but completely legal.
“If you’ve looked at what the FCC has done publicly, their directive is broader to see if whether one entity overseeing multiple markets is good for the public,” Blum said. “Sixty-two percent of folks would have no other option other than Comcast if the merger went through for high-speed broadband access.”
But the bigger the ISP, the more they leverage out of these services and demand them to pay up — a cost that gets passed to consumers. “So you have this interconnection point — there are real costs associated with making that happen,” Bergmayer said. “But Comcast will argue that everyone is going to have to pay more. How do you prevent Comcast from going beyond that?”
The FCC did confirm during the net neutrality vote that the rules do tackle interconnection, but only through complaints made on the case-by-case basis. “Interconnection is a complaint process…[it] could take years to resolve while their service is still allowed to compete,” Blum said.
Since the vote, FCC Chairman Tom Wheeler has reassured critics the new rules have a light touch, and won’t be as stringent as the rules used to regulate telephone companies. In fact, the Open Internet rules, are structured so that ISP companies can still have the same revenue stream they had before the proposal goes into effect.
“The big win [last week was] that we have strong legal justification and authority [for net neutrality] — but those ideas have not and may not have yet been implemented. We haven’t done that right thing yet,” said Sascha Meinrath, tech policy expert and director for the New America Foundation, an independent think tank in Washington, D.C.
Part of doing the right thing, he said, is taking a firm stance on interconnection.
“There are massive interconnection problems,” Meinrath said, including “systematic degradation of other people’s systems.” That means a network like Comcast’s get jammed because the ISP has too many deals with apps and services all paying for direct-line access to the company’s network. So even though Comcast is getting paid many times over by companies like Netflix or Hulu, all of their traffic is slowed, a situation that could get worse with a merger.
“The reason why this merger is so horrible, is that it further reduces competition, the checks and balances needed to keep this kind of behavior from becoming dominant,” Meinrath said.
The extra money Netflix pays Comcast then gets lumped into Netflix customers bills, even if they’re not Comcast subscribers. “If I’m not a Comcast subscriber, I shouldn’t have to pay an extra fee to subsidize someone else’s connection to Netflix,” Meinrath said. “Right now, Comcast is taxing all users of Netflix, where Netflix has to pay Comcast an unknown amount of money…This would not be possible if we had a competitive marketplace.”
Netflix has been adamantly against the Comcast merger, saying in a statement that “allows a single company to control over half of America’s broadband households” and “holds up competitors for arbitrary access tolls, an issue the net neutrality rules only begin to address.”
Mergers, namely Comcast-Time Warner, can have a negative impact on consumers that aren’t fixed by net neutrality. “I think some people were trying to come up with an angle, ‘does net neutrality fix all the problems?’ No it doesn’t,” Bergmayer said.
“What we could be looking at is fighting all of these battles on things we take for granted: Non-interference, non-discrimination, paid prioritization. All these things people don’t realize are important until they are abused,” Meinrath said.
These mergers have been happening for decades, but have proven harmful for customers. Analysts warn such partnerships create more hostile market conditions that only include a few major players, making it increasingly difficult for consumers to find services at affordable prices. Fewer providers often means companies have little incentive to invest in better infrastructure or lower prices. Americans have borne the cost of this problem, paying more for television and internet access while receiving services with slower speeds than other countries.
“It’s taking money out of the pockets of people across the country every month: Americans on average are paying at least $20 a month more for worst service, that’s $2 billion a month in overpayments,” Meinrath said, citing New America’s annual Cost of Connectivity report.
The Comcast-Time Warner merger, and others like it, could greatly impact content, what people watch and how they watch it.
In sports, companies have to buy rights to be able to distribute content, said Sports Fan Coalition Chairman David Goodfriend on Monday’s call. If Comcast is bidding for the same soccer broadcasting rights as a smaller startup or other OTT service, they’re going to win out regardless of how much money is on the table: “If you’re not a Comcast subscriber, you can forget it. You can’t watch soccer, unless you pay Comcast,” he said.
Moreover, companies with strongholds in both the cable and ISP realms can dictate how content is distributed. It’s perfectly legal for cable companies to tell content creators like Discovery or Disney, “If you want my customers, you better not distribute online,” Bergmayer said.
“How a broadband provider treats traffic on its network. That’s important,” he said. But it becomes “of greater importance in the case of Comcast because it doesn’t face a lot of competition.”