This is Mistermix’s beat, but I thought I would start the discussion:
Thwarted by the courts, by lawmakers on Capitol Hill and by some of his fellow commissioners, the Federal Communications Commission chairman will try again on Wednesday to devise a new strategy for regulating broadband Internet service providers.
In a speech he plans to give Wednesday in Washington, Julius Genachowski, the F.C.C. chairman, will outline a framework for broadband Internet service that forbids both wired and wireless Internet service providers from blocking lawful content. But the proposal would allow broadband providers to charge consumers different rates for different levels of service, according to a text of the speech provided to The New York Times.
Mr. Genachowski has decided not to use the commission’s telephone regulatory powers to govern broadband Internet service, a move that he proposed in May that would potentially open Internet service to heavier government regulation.
His proposal would also allow broadband providers to manage their networks to limit congestion or harmful traffic.
The framework will form the basis for a proposed order scheduled to be voted on during the F.C.C.’s Dec. 21 meeting.
That seems like it leaves the door open for broadband providers to charge outrageous prices to drive companies like Netflix out of business. Am I wrong?
About the only thing I am sure of is that Comcast will raise my bill no matter what happens.
WereBear
It’s time for a geek revolt.
Nice internet system ya got here. Shame if anything were to happen to it…
me
And they’ll throttle your NetFlix unless they get a pound of flesh from Level3.
NobodySpecial
/sigh
Comrade Javamanphil
Oh please. If Comcast were to raise your rates and deny Netflix access to their system, the free market would dictate we would all migrate to Ponynet and Comcast would be out of business. Surely Comcast will act rationally and with the consumer’s best interest in mind.
Libby
Tiered pricing is the first step to killing internet neutrality. Not really surprised since so many net neutrality supporters got bagged in the last election, but disappointed that FCC couldn’t stop it, so now they’ll sanction it?
Don’t know much about the technical stuff but I thought fiber optics could solve the traffic problem without putting up gatekeepers. IIRC, providers blocked that basically because it would make access too cheap and easily available.
The Corporatocracy rules us. It sucks.
Danny
I’m actually not too upset about all this. This sounds like a standard fee dispute between Level 3 and Comcast over how much Level 3 should pay Comcast to use Comcast’s bandwidth. The part that worries me is that Comcast threatened to cut off Netflix instant play for their customers. I’d like to see the government step in and say that internet providers can’t threaten to throttle or cut off service over a fee dispute.
Silver Owl
Executives today are more egotistical and less business savvy in my opinion. Comcast will treat their customers like crap, think they are totally awesome in the short term and then when “free market” competition actually occurs get their asses kicked to the curb.
I think the American people should increase the fees Comcast pays to use our resources.
Melville
This seems like a fair and simple solution. Bandwidth, however much of it there may be, is still a finite resource. Otherwise resource-intensive content like streaming video in effect would be subsidized by users of lightweight services, like say, blogs. And there is no incentive for providers to be efficient – a Tragedy of the Commons in other words.
The advantage of a consumer-centric cost allocation is that it does not allow a company like Comcast to use the excuse of bandwidth to attack particular companies that it views as competitors or shake down profitable operations whose revenue they want a piece of.
zmulls
Look, I hate Comcast with the power of a thousand suns, but reading the articles closely I think they may have a point on this one.
If I’m reading the articles correctly, Comcast charges providers for content (a toll for using their road to the subscriber). But Comcast has “peer to peer” arrangements with other carriers, so they can use each other’s network. Comcast has a “peer” relationship with Level 3 (the company that carries Netflix’s stream).
Comcast is saying that Level 3 is abusing the peer relationship and is behaving like a provider — saying they’re a peer but dumping huge amounts of content. And they’re saying that if they’re going to send data like a provider they should pay like a provider.
I don’t know enough about the cable business to know if they’re blowing smoke or not, but it does sound reasonable. If nothing else, Netflix is certainly chewing up bandwith.
This doesn’t do anything to assuage my dismay at the cable monopoly, and the answer to the problems do *not* involve the cable companies getting to say who’s a good provider and who’s not, and to charge accordingly (especially with competitive services).
Netflix (and services like it) are the wave of the future, and we have to find the business model that supports it.
I have the 2-disc Netflix service but the basic “streaming only” option is $8.00. That’s a steal, frankly. I would consider it reasonable for Comcast to charge Netflix for the bandwith usage (or, to charge Level 3 and have them charge Netflix); which might mean the Netflix service goes up to $9 or $10 for streaming. Which, frankly, is still a great deal.
So…in short….Comcast *is* a villain, but in this particular case I’m not sure they’re *the* villain.
Agoraphobic Kleptomaniac
Sigh. Either the FCC needs someone in charge who speaks 1337, or the NY times reporting is teh suck.
This sentence is the most important part about net neutrality, and is written in a way that we don’t know if the proposal is a good thing or a bad thing.
This, too also, is either a no brainer, or very dangerous. The details are what is important. Of course you want to allow a company to shape certain traffic (Massive downloads get lower priority than VOIP, streaming gets priority over torrents, etc.) but the FCC needs to say that no matter who provides the service the ISP cannot discriminate one similar type of traffic over another for money. Much like the Comcast Xfinity Vs. Level 3 spat, where Comcast is trying to shake down Level 3 to pay more, because Netflix potentially competes with their own Xfinity.tv service.
In a perfect world, the government would buy up all of the cable laid (or just take back the lines they helped pay more than 50% for) and let any ISP use the already installed lines. But alas, I’m going to be stuck with Comcast forever.
General Stuck
The strange thing about this situation and debate over Net Neutrality, is you have to reverse the concept of less is more and vice versa. Or, what appears like more regulation is actually less. So I don’t know if what the FCC is proposing is what it sounds like at face value. or, that it’s actually corralling Comcast into doing the best thing of not controlling content for consumers with either pricing toll booths or tiered service beyond what exists for beyond basic download speeds.
What I do know is that everyday, it seems, the few big telecoms we have seem to be moving toward monopoly, which never bodes well for schlubs like me. I do suspect there is at least some competitive factors that might restrain the monster Comcast to not require our fist born as payment to surf the net, but likely not enough, as they gobble up everything in their path.
IOW’s , I don’t know wtf is going on here.
burnspbesq
Is it actually in dispute that the marginal cost of providing additional bandwidth is not zero? Once you concede that point, the case against tiered pricing reduces to “somebody else should have to pay for my unlimited access,” but no one ever specifies who that someone else should be.
I sympathize with the notion that ISPs should not be permitted to take any actions to manage their networks that are not content-neutral, but I will never sympathize with people who want a free ride, and the desire for a free ride seems to be lurking just under the surface of this debate.
If you want to argue that reliable high-speed Internet access should be treated as a public good, that’s fine, but do it in the open and in plain English.
And don’t slag Genachowski for trying to do damage control in a bad political environment. He didn’t deal himself the bad hand he’s currently holding.
zmulls
@Danny — yes, that’s the basic point. These guys have a legitimate business dispute and may have to go to court to work it out.
Comcast is trying to use its leverage with consumers to hasten a settlement in their favor (“heh-heh, we’ll just cut off their access, their customers will scream and scream and them, and they’ll cave! Heh! Great strategy, huh?”)
And you’re right, they shouldn’t be permitted to work those levers to get their way — there are slower, more onerous avenues to justice, that don’t hurt the consumers or reward monopolistic behavior.
meh
I thought they are already charging for different levels of service. I pay $60/mo for 25MB down and 5MB up – I could pay $80/mo for 25/25. If I use more electricity, I would expect to be charged more. What am I missing here? This isn’t snark, I’m generally not informed enough on this…
Agoraphobic Kleptomaniac
@burnspbesq:
Comcast sold me “unlimited” service. If they want to add a cheaper package that limits me to 10 gigs/month, they can, and it has absolutely nothing to do with net neutrality.
Net Neutrality is only about ISP’s shaking down companies like google/netflix/amazon to pay more for access to their websites, or throttling access to other sites because they didn’t pay up. Every website on the internet should be allowed equal access through an ISP (traffic shaping taken into account for quality of service issues).
jeffreyw
“FU Hughes.net!”, shouted the old man, shaking his fist at the sky.
west coast
The “information superhighway” metaphor is helpful in thinking about this issue. In this case Comcast runs an “information toll road.” Toll roads are allowed to charge by type of vehicle and by weight, but generally don’t discriminate by what’s inside the vehicle (hazardous materials are sometimes regulated). Families going to the beach don’t pay more than a commuter going to work, for example, nor do trucks of ice-cream pay more than trucks of ball bearings.
Seems to me it’s fair to charge according to the size of connection and the data load put upon the system. A four-lane highway costs more than a garden path, sending multiple trucks across that highway cost more than a single passenger vehicle.
It’s not ok to charge based on the content of the data I send/receive.
There are those who believe that all roads should be free, but that’s another issue.
Dennis SGMM
The internet has become pretty much a utility so I have no problem with tiered pricing. If you use more gas, electricity, water, etc. then you pay a higher bill. The all-you-can-eat model of internet pricing is a relic left over from the days when there were lots of ISPs in all sizes competing to offer dial up service. These days, the people who aren’t heavy users of bittorrent or streaming video are subsidizing those who are.
I do have a problem with last-mile providers discriminating against outside content to promote their own offerings. In this area, it appears that the law is lagging the situation. Any legislation that does come out of this will likely incorporate the desires of whoever spends the most money on influencing Congress and that won’t be Netflix.
Belafon (formerly anonevent)
@Dennis SGMM: The answer to both of your problems it to separate the wire managers from the service providers, regulate the former as a utility, and make it so that a lot of service providers can compete.
burnspbesq
@Dennis SGMM:
“Any legislation that does come out of this will likely incorporate the desires of whoever spends the most money on influencing Congress and that won’t be Netflix.”
I wouldn’t be so sure about that. I assume that the people who run Netflix are smart enough to know an existential threat to its business model when they see one. Spending whatever it takes to buy Congress is an investment decision with a pretty stinking high net present value, even if you have to borrow the momey. That’s why businesses do it.
Dennis SGMM
@burnspbesq:
Maybe. Netflix’ market cap is around $10Bn, Comcast’s is roughly $55Bn, Verizon’s is roughly $90Bn, TIme Warner’s is over $90Bn. It looks to me as though Netflix is simply outgunned here.
Corner Stone
@Dennis SGMM: IMO, Netflix would do better to spend their lobbyist money to scream loudly to their members that the world is gonna end.
Trying to outbuy a Congressperson against Comcast is a losing prop.
MarkJ
@burnspbesq: Actually, the marginal cost is zero, that’s what makes Comcast a natural monopoly. Once the network is built, until the congestion point is reached, the marginal cost of providing service to additional customers is very close to zero. The fixed costs of building the network are high, as are the fixed costs of adding additional capacity to that network. High fixed costs plus low marginal costs = natural monopoly. I’m not saying Comcast is wrong in this particular instance, but they have to be watched like a hawk or they will act like an unregulated monopoly – high prices and crappy service with insane corporate profits.
burnspbesq
@Dennis SGMM:
There are other ways to play the game.
“Hey, Mr. Committee Staff Director, I have to go to my kid’s violin recital on Sunday, so my four 50-yard-line seats for the Skins game are up for grabs. You want? OK, I will drop them off at your office on Friday morning, maybe you can give me a few minutes to talk about something that I’m working on.”
Martin
@Dennis SGMM: That’s not actually their problem. Their problem is that their business model doesn’t address the needs of the important players in the market.
The important players here are the networks and studios. They make the content. They’re what the consumer wants. They’re the ones that will ultimately either force net neutrality to work or kill it.
Netflix simply doesn’t help the networks enough to care if they live or die. They’re still tertiary revenue on their product (after first run revenue and DVD sales). They’re tiny on everyone’s balance sheet. They’re popular with consumers because they’ve done the best job of actually solving the ‘how to monetize on-demand content without totally fucking it up’ problem so far, but they haven’t grown it into something that the networks and studios are dependent on, and so the networks and studios will gladly sell them out in favor of Comcast, who bring them a fuckton more revenue.
It’s really too early to tell if this is a good or bad move by the FCC. Devils are in the details. Tiered pricing isn’t necessarily bad, but as MarkJ notes it doesn’t put revenues as a function of costs, and that’s always a little dodgy. If I consume more bandwidth, the broadband provider might eventually need to upgrade an upstream piece of equipment to solve congestion, but odds are that’s about it. The problem the broadband providers have is that they don’t have a means of growing revenues once they’ve saturated the market, and tiered pricing is their solution. Tiered pricing won’t expand access to broadband or improve service, it’ll merely solve the problem of how to get a business that looks like a utility to get stock market growth that looks like a content provider.
And the motives of the different broadband providers depends on what other pies their fingers are in. In the case of Comcast, the worry is that if they buy NBC that the needs to provide revenues to the content creation side of the business will influence the broadband side. Did the FCC address this? We can’t tell from what we’ve heard so far.
Ed in NJ
I don’t pretend to be informed enough about these Net Neutrality issues, but I do find it troubling that the biggest threat to Comcast’s cable tv business, Netflix, finds themselves in the crosshairs of Comcast’s internet arm. That this is where Comcast decides to draw a line in the sand.
Just last week I canceled my premium cable, since we’ve had Netflix for a few months and never watch anything on HBO/Showtime/Starz when it first airs. So now I guess I will watch the slow rise of Netflix prices until I’m back to paying $30+ a month for premium content, starting with Netflix’s $1 increase this week.
Martin
@Dennis SGMM: Well, there are two big differences.
1) Broadband is largely fixed cost to implement now thanks to fiber and digital switching. Once it’s in the ground, it’s almost nothing but profit. And the equipment costs are fixed for ever larger capacity over time, so even upgrading equipment isn’t a rising expense. If you build a power plant, I guarantee that it will cost more to build today for the same capacity as one 10 years ago. If you build a broadband switching network it will cost you a mere fraction today for the same capacity as one 10 years ago. The expensive bit is getting the fiber in the ground, so expanding the network physically costs. But once that’s done, it’s all gravy.
2) The national goal for all other utilities is to reduce consumption. There are few if any down-the-line industries that we’re interested in propping up. For power that would be coal mining and oil/gas drilling. And so tiered rates serves the goal of dampening consumption. But for broadband, it’s the reverse. We want more consumption. More consumption is more stuff bought at Amazon. It’s more shows watched from NBC. It’s more software downloaded from Microsoft. Broadband is the gateway to retail and is the only end-state of the content markets. iTunes is far and away the largest music retailer – much larger than Walmart and Target. The place for growth in these markets is through more and cheaper broadband. It’s in the nations economic interest to not tier broadband use.
Now, the FCC may set those tiers very high, and we don’t know if there is an upstream/downstream distinction. Nearly everyone has tiered power but the majority of people stay in the bottom rate, so the tiers are only supposed to target people that are outliers. Same could go for broadband. The tiers could penalize heavy upstream users (file sharers, mostly) and that would be okay as well. It’s really too early to tell what’s going to happen here.
Martin
@Ed in NJ: Netflix has a flawed business model as I noted above. The all-you-can-eat pricing for non-ad supported content, if it becomes the standard, has no choice but to return us to cover the revenues that currently flow through cable. The networks need about $200 per household per month to cover the cost of producing everything they produce. Ultimately, whatever model we get will have to generate that kind of revenue.
Netflix produces 5% of that from subscription fees, and with no ad support, provides no more. Netflix cannot replace cable. The service that solves the on-demand content model will be the one that provides that $200 to the networks, be it through subscriptions or ad support or some other subsidization. My money is on a combination of per-show ad-free rentals, and non-skippable ad-supported streaming. It’s the only arrangement capable of generating the needed revenues, and as GoogleTV has discovered, without the revenues the networks simply won’t play along.
In the end, we’re not going to be paying less in aggregate over what we pay the cable companies. What we’re more likely to gain, however, is on-demand for all programming and the ability to control our consumption with revenues flowing to those content providers that we are interested in, and that content being fully portable, so you’ll be able to watch first-run content in the airport terminal on your phone. No more broad subsidies for the networks, they’re going to have to earn every dollar on every bit of content. It’ll be more good shows, less crap, less overall content, and a shitload more competitive. But if some people aren’t paying *more* for what they watch than they are now, then the networks will never agree to jump off of cable.
JW
@burnspbesq:
Dammit! I already pay for internet access! WTF?
CaffinatedOne
@Martin:
Netflix doesn’t provide the networks broadcast content as Google TV is, they provide DVDs over the internet. The producers get their money direct from Netflix who has to pay them for the rights to provide the content in this manner (far from all Netflix available DVDs are available on demand). So, it’s not like Netflix is abusing or even using the networks broadcast content. If people prefer the Netflix model to the network’s model, isn’t that the network’s problem?
That comcast is willing to abuse it’s network provider status to derail a competitor to it’s (soon to be) network’s revenue stream is a problem obviously since it’s directly abusing an effective monopoly on it’s network provider side for profit.
The larger context is, of course, that the monopoly network providers are looking to create a second revenue stream to supplement the current one from end users who pay for service. If they can shake down Amazon and Google so they have to pay for access to comcasts’ captive customers, that’s pure profit. They make money at both ends of the pipe, and heck, how could they not love to be able to say “Hey Amazon… wouldn’t it be a shame if something happened to your packets on cyber-monday? You might need to pay us a bit for insurance…” It’s a straight shake-down.
zmulls
Comcast wants to own the cables *and* the content that goes over them. This will not end well.
The studios, hopefully, see the writing on the wall. Instead of stopping Netflix’s business model they should be looking to co-opt it.
It’s only a matter of time before streaming becomes one of the main — if not *the* main — delivery systems. I’m predicting that we’ll see a day when the studios control their own streaming libraries. You’ll buy a subscription to, say, Universal Studios Online, and you’ll be able to watch anything in their library. They’ll provide additional content (closed captions, video extras, commentary tracks), the sorts of things currently on DVDs but which Netflix isn’t always licensed to broadcast.
The studios will probably experiment with first-run streaming. Instead of running to the octoplex to watch the new Harry Potter movie, you’ll buy the right to watch it streaming on your home entertainment system (with huge screen and surround sound). Maybe you’ll have a passkey good for three days, so you can watch it when you want, and even pause it; or watch it again. (The studios are going to try to figure out how to stop people from buying the pass and inviting people over to watch with them).
Imagine a Sundance Festival Online. You can’t go to the festival, but you can buy tickets to watch streaming films, maybe even get to vote on an Audience Prize.
It’s coming, in some form.
Bill Murray
@Silver Owl:
That’s why more or less every large company does what they can to make sure the only thing approaching a free market (ie governmentally well-regulated markets) will never again happen
Frank Wilhoit
It’s not about “congestion” or “harmful traffic”. It never has been.
It’s about censorship.
Censorship. Censorship. Censorship. Censorship. Censorship. Censorship. Censorship.
It has never been about anything else and it cannot be about anything else. Do not allow anyone to frame it any other way, ever.
DPirate
Tiered pricing is happening now and has been in effect pretty much from the beginning. Some companies limit usage by total data. I know of two, personally, and it is a total data usage by month or a schedule of fees if you exceed that limit. I see absolutely nothing wrong with this.
Net neutrality has nothing to do with how much you are paying for the service (unless you are Finnish, I guess). Net neutrality is about content, and tiered pricing is about white noise. Net neutrality says you can stream a 2Gb movie if I can stream 2Gb of porn and anti-everything propaganda. Tiered pricing says if you stream 4Gb of data you may have to pay more than if you stream 2Gb of data. That’s it.
So, yes, you are wrong. However, watching videos is bandwidth intensive and affects everyone on the pipe more than surfing through blogs or something, so in the end video/multimedia viewers will certainly pay more than those who don’t use that content. Seems fair to me. As it stands today, intermittent users are subsidising heavy users (not really, because economics is a crock of shit, but that’s what they’ll tell you)..
Of course, that is if the laws are written correctly.
DPirate
Want to add that I see nothing wrong with dedicated wires for individual purposes per se, but I would have caveats concerning where the bandwidth is coming from and how it is funded. Tapping into bandwidth that customers are paying for for private use, for any purpose, ought to be a no-no, whereas privately funded static lines ought to be available for anyone with the wherewithal to implement them.
Still, you know that Mr. Fat Cat is going to be sharing the passwords for the federally funded and customer subsidised medical emergency channel with the 5Tb pass with his golfing buddies.
DPirate
@zmulls: Probably so. I see a day further on from that when we return to the starving artist and the rich patron, because absolutely everything is pirated and copied and flooded immediately (and that’s not necessarily a bad thing). Though, I don’t really expect we are going to get that far this go round.
liz
Frankly, I hate them all. Necessary evil, but I have never had a good experience with any of them.