Comcast’s Latest Zero-Rating Plan Threatens Video Choice

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Zero-rating raises some pretty complicated issues both globally and domestically. For example, Public Knowledge has observed that T-Mobile's "Binge On" program, which doesn't count some video providers towards data usage caps, raises some competitive implications that should be carefully considered. Other zero-rating programs are more clearly anticompetitive. Comcast's continued exemption of its own data traffic from metering fits into that category. Public Knowledge has had a complaint pending at the FCC since 2012 regarding Comcast's zero-rating; this recent expansion of such behavior further illustrates the harms zero-rating can cause in some circumstances.

T-Mobile’s Binge On and Comcast’s Stream TV are alike in that they are both zero-rating programs, but they are different in many ways. T-Mobile would argue that the Binge On program is open to any video service that meets certain technical requirements--although YouTube, apparently, doesn't currently make the cut. It remains to be seen if those requirements act as a barrier to more providers participating. By contrast, however, Stream TV is simply Comcast’s own service, and it is not clear what conditions programmers must meet to be included in it.  And of course, there are four major wireless carriers for customers to choose from, instead of the one or two landline providers that most residential broadband customers have. This lessens Binge On's effects to an extent-- even if a video service gets special treatment on just one of four major carriers, it may not distort the market as much as in other circumstances. By contrast, Comcast is the largest cable company and the largest broadband provider, and most of its customers have few or no alternatives for residential service. Binge On is most worrying in terms of the precedent it sets--if T-Mobile can exempt some video traffic from metering in an (arguably) more open way, can other providers begin to ratchet back the openness? Comcast’s Stream TV appears to be an example of a much less open approach to zero-rating.

Comcast's exemption of Stream TV from data caps presents a straightforward example of the anticompetitive problems zero-rating can raise, and provides little consumer benefit. Comcast is attempting to frame its self-serving, discriminatory actions in a way designed to slip through real or imagined loopholes or exceptions to both the Open Internet rules or its merger commitments, but none of these attempts work.

Comcast maintains that "Stream TV is a cable streaming service delivered over Comcast's cable system, not over the Internet." But Stream TV is being delivered to Comcast broadband customers over their broadband connections, and is accessible on Internet-connected devices (that is, not just through a cable box). From a user's perspective, it is identical to any other Internet service. Comcast's argument is that if it offers its service only to Comcast customers and locates the servers that provide Stream TV on its own property, connected to its own network, that this exempts it from the Open Internet rules. This is an absurd position that would permit Comcast to discriminate in favor of any of its own services, and flies in the face of the Open Internet rules.

In any event, Comcast's consent decree prevents it from zero-rating its own "network traffic." This does not provide Comcast the wiggle room to say that some traffic is from the "Internet" and other traffic is not.

Some observers have suggested that Stream TV might be okay because it is a managed or "specialized" service. But this argument doesn't work either.

First, the current Open Internet rules do not contain an exception for specialized services. This was an unnecessary exemption--either a service is delivered over or part of broadband Internet access service, or it is not. The current rules recognize that you do not need to carve out an exemption for services that are not subject to the rules to begin with. It is worth quoting the Open Internet order at length on this point:

Non-Broadband Internet Access Service Data Services. The 2010 rules included an exception for "specialized services." This Order likewise recognizes that some data services--like facilities-based VoIP offerings, heart monitors, or energy consumption sensors--may be offered by a broadband provider but do not provide access to the Internet generally. The term "specialized services" can be confusing because the critical point is not whether the services are "specialized;" it is that they are not broadband Internet access service. IP-services that do not travel over broadband Internet access service, like the facilities-based VoIP services used by many cable customers, are not within the scope of the open Internet rules, which protect access or use of broadband Internet access service. Nonetheless, these other non-broadband Internet access service data services could be provided in a manner that undermines the purpose of the open Internet rules and that will not be permitted. The Commission expressly reserves the authority to take action if a service is, in fact, providing the functional equivalent of broadband Internet access service or is being used to evade the open Internet rules.

In the first place it does not appear that Stream TV is an IP service like facilities-based VoIP. It is not available standalone; you need a broadband Internet access connection to access it. It is thus readily distinguishable from services like facilities-based VoIP. If Comcast offered Stream TV separately from broadband there would be a better case that it was more like traditional cable TV or a specialized service--but it does not.

But let's assume that an "exception" for specialized services that are delivered over broadband does apply. Would Stream TV count? It is hard to say, because the FCC has never formally defined the concept, and has no need to now. But there are several indicators of whether something is genuinely a specialized service, rather than a broadband service that has been relabelled simply to avoid the FCC's rules. First, is the service something that is in some way impossible to perform over a standard broadband connection? If so, that is a good argument that the service is, and needs to be, treated separately from other services. Streaming video works fine without Comcast's intervention so it's hard to see how it would meet this criterion. Another test is whether the service benefits from special technical treatment, apart from mere prioritization. For example, if video traffic is being delivered via multicast--that is, under a one-to-many broadcast model rather than under the Internet's typical one-to-one model, this could be an indication that the service is a legitimate specialized service. AT&T's U-Verse TV, which is IP-based otherwise similar to cable TV, is an example of an IP video service that gets such distinct technical treatment that it is plainly not a net neutrality violation, and could be thought of as a specialized service.

It is also worth noting that Comcast's consent decree, which was adopted before the FCC decided to stop relying on the concept of specialized services, states that "Comcast shall not offer a Specialized Service that is substantially or entirely comprised of Defendants' affiliated content," and that "[if] Comcast offers any Specialized Service that makes content from one or more third parties available ... [it] shall allow any other comparable Person to be included in a similar Specialized Service on a nondiscriminatory basis." So even if Stream TV is a specialized service it would appear to be out of compliance with the decree.

One final technical point bears mentioning. There may be good reasons for wireless providers to have data caps, while trying to find ways to still allow their users to access some high-bandwidth content. Certainly T-Mobile's actions may call into question the need for relatively low usage caps, if its network is capable of sustaining the higher levels of traffic that Binge On can be expected to produce. That said, wireless networks face capacity constraints due to a variety of factors not present for cable networks and have generally been given more leeway in network management practices. Comcast, by contrast, has admitted that its usage caps are not about congestion management, but "fairness" (i.e., price discrimination). In other words, Comcast has created an artificial and technically unnecessary level of bandwidth scarcity--only to exempt its own services from the system. This is extremely troubling.

But finally, over and above the legal and technical issues, are the competitive issues. Comcast is the nation's most dominant video distributor and the largest broadband provider. Because (unlike T-Mobile) it has a legacy video business to protect, it is easier to see how it might have an anticompetitive motive. Because it is so large, its actions will have a disproportionate effect. Also, most of Comcast's customers do not have other choices of truly high-speed (25 Mbps and up) broadband. That means that if competing video services are disadvantaged on Comcast's network, it's not like they can encourage Comcast's customers to switch to another provider.

Given all the above, although some net neutrality advocates might have a different take on T-Mobile’s zero-rating, Comcast’s program raises a host of issues under the Open Internet rules, the consent decree, and—most importantly—general principles of competition. 

 

Image credit: Wikimedia Commons

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