The cable provider was ordered by the agency to provide access to “a reasonably priced broadband option to consumers who do not receive their cable service from the company” under the Commission’s Order approving the Comcast-NBCU transaction in 2010. To further show its ire with Comcast, the FCC also said Comcast would have to provide the stand-alone reasonable broadband-only package for another year — until February 21, 2015.

As part of Comcast’s 2011 agreement to buy NBC Universal the FCC tacked on several conditions that ranged from not prioritizing Comcast or NBC traffic over other packets on the Comcast network, to requirements that Comcast allocate channels for minorities. Comcast has touted its success including a new channel from Sean “Diddy” Combs, but entities ranging from individual technologies to Michael Bloomberg have complained.

In this case the FCC investigated complaints that alleged Comcast was hiding its “Performance Starter” service from customers. From the FCC release:

Under the order the Commission required Comcast to offer standalone broadband services on terms equivalent to packages that bundle broadband and video cable service. Comcast was ordered to offer a broadband service with a download speed of at least 6 mbps at a price no greater than $49.95 for three years. The Commission also prohibited Comcast from raising prices on the required broadband service for two years. Finally, Comcast had to “visibly offer and actively market” standalone broadband Internet access service to highlight the availability of this special service and other standalone broadband services.

Comcast didn’t admit fault as part of the settlement, but it did lay out some cash and pledge to make its cheaper stand-alone service more visible. It will train its call agents, make sure the offering is visible on its web site and it committed to a major marketing campaign around the Performance Started service for 2013. Ironically this comes at a time when Verizon is pulling back on offering stand-alone DSL.

However, the actions taken by the FCC may help convince folks like Senator Al Franken who wrote the DoJ and FCC a letter claiming that the agencies were letting Comcast run roughshod over its conditions. This move is one small step toward showing that the FCC isn’t some toothless regulator beholden to the very industry it regulates.

Update: Here’s Comcast’s response:

“Comcast has incorporated the extensive commitments and conditions from the NBCUniversal transaction into the DNA of our business practices, including the commitment to offer standalone broadband Internet. We are proud of our standalone broadband offering of ‘Performance Starter’ service – we rolled this product out in just one month, the fastest Comcast has ever deployed a brand new service simultaneously throughout its footprint.

As is often the case with services associated with government orders, the FCC had questions on how the service might have been rolled out in a different or even better way. We are pleased that Comcast and the FCC were able to address such issues cooperatively and constructively in a consensual manner. We look forward to continuing to offer and market Performance Starter in additional ways and with additional outlets. We believe this product offers a choice consumers want in the marketplace.”

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Comcast Tower

Comcast plans to raise its broadband cap to 300 GB per month as it trials two new ways to deal with managing traffic on its network, the nation’s largest cable operator said in a blog post today. The move is a welcome one for those who have hit the existing 250 GB cap, but it neglects to address some of the earlier complaints that have arisen in the last few weeks about Comcast exempting some of its own video on-demand trafficand allegations that the company is prioritizing that traffic in violation of federal rules implemented when it bought NBC-Universal.

What Comcast plans to offer

Comcast says it plans to trial two types of plans in unnamed markets. The first will offer customers a higher cap at higher tiers of service. So the Internet Essentials, Economy, and Performance Tier customers will have a 300 GB cap while those getting higher speeds (and Comcast offers some pretty high speeds at 100 MBps) will have some undetermined, higher cap. Customers under this plan will also be allowed to buy additional gigabytes for a certain amount. Comcast gave the example of $10 per 50 GB block.

The second trial will offer customers a 300 GB cap across all product lines and will offer customers a chance to buy more bytes for the same price. What’s key in both of these situations is that Comcast is allowing customers to buy more gigabytes after they hit the cap. Previously, it cut customers off. In this way it’s closer to capped plans such as those offered by AT&T, which stops users at a 250 or 150 GB per month cap and then charges them $10 for 50 more gigabytes.

The second approach will increase data usage thresholds for all tiers to 300 GB per month and also offer the option to buy more gigabytes. Comcast will also suspend the enforcement of its caps across all of its markets while it tests the new caps and plans.

While Comcast’s decision to expand its caps is good, it’s also sticking to the idea that unlimited broadband is detrimental to the quality of its network. In its blog post and on a conference call discussing the new plans, Comcast repeatedly tied these caps to better network management, but Comcast already has a network management plan that it filed with the FCC after it was caught blocking P2P packets on its network. In that plan, the company noted that when its network became congested it would temporarily slow traffic to customers requiring the most bandwidth. So why does it need the cap?

What Comcast doesn’t talk about.

Many argue that the cap is less about network management and more about protecting Comcast’s pay TV business as customers spend more time watching television via web-based subscription services including Netflix and Hulu. As I said, I’m glad Comcast has raised its cap, but conspicuously missing from the Comcast post is an admission that the cap is problematic when Comcast still offers to exempt some of its services from the cap.

When asked about this, David Cohen, Executive Vice President of Comcast, shut down the discussion, saying, “It is a real stretch to create a discrimination argument here.” He went on to say that the concern over any exempted services should be dramatically reduced because of the increased data threshold. “We’re relieving a hypothetical pressure on usage, here,” he said.

While the cap’s size has created some controversy as more and more customers hit it, the issue is less the size and more the existence of the cap if Comcast continues to offer services that will be exempt from that cap. Even at 300 GB per month, if certain types of traffic don’t count against that cap, then the cap still offers Comcast a competitive advantage over Netflix, YouTube and other over-the-top video services. Cohen repeatedly, however, mentioned a comment from the Netflix earnings call where the CEO of the streaming video provider said that a 250GB cap wasn’t affecting its business.

What Reed Hastings actually said was this:

It’s not a near-term issue with the 250 gigabyte cap. But the core principle [of network neutrality] is important anyway, which is the cap should be applied equally or not at all.

The larger cap also doesn’t address the question of whether or not Comcast is prioritizing its own traffic over other Internet traffic as was alleged earlier this week in a blog post by Bryan Berg, the CTO of MixMedia Labs. Comcast has explained why it believes it is not prioritizing its traffic in a manner that would draw government ire, but in a close reading of its post, what Comcast is describing is highly technical. Essentially it is saying that it is creating a logical as opposed to a physical separation in the traffic, and that it why it is marking packets.

Comcast wants you to feel free to use the web

So while Comcast is trumpeting its forward-thinking behavior on caps, there are a lot of questions about the timing of its announcement. Reporters on the call repeatedly asked Cohen about the rationale for increasing the cap. Cohen said its median usage is between 8-10 GB per month or about four percent of the cap and that the “vast, vast majority of users aren’t hitting the cap,” which does beg the question: why change the cap now?

Cohen’s response was, “It’s a matter of messaging way more than it’s a question of capacity.” He reiterated the idea that this is about encouraging users to use and download lawful content on their Comcast service without worrying about the cap. This implies that customers might find the cap inhibiting their behavior or that people questioning the cap are making some headway. So for now, customers get 20 percent more head room on their Comcast cap, and we’ll have to wait and see when and where Comcast rolls out its new plans.

Meanwhile I’ll leave you with Cohen’s suggested headline for this piece: “The headline today should be, we’re out of the cap business.”

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Comcast categorically denies it’s prioritizing traffic, but the issue is sure to dog the cable provider in the near term, much like the back and forth that ensued back in 2007 when it was caught blocking P2P traffic. Comcast sent me the following statement:

“It’s really important that we make crystal clear that we are not prioritizing our transmission of Xfinity TV content to the Xbox (as some have speculated). While DSCP markings can be used to assign traffic different priority levels, that is not their only application – and that is not what they are being used for here. It’s also important to point out that our Xfinity TV content being delivered to the Xbox is the same video subscription that customers already paid for and is delivered to their home over our traditional cable network – the difference is that we are now delivering it using IP technology to the Xbox 360, in a similar manner as other IP-based cable service providers. But this is still our traditional cable television service, which is governed by something known as Title VI of the Communications Act, and we provide the service in compliance with applicable FCC rules.

After two separate blog posts appeared last week showing that Comcast was labeling packets on its network with different quality of service marks, many folks in the industry raised their eyebrows and a few started feeling around for people to conduct reliable tests. I spoke to people in ISPs, Washington circles, and at web companies about Comcast’s actions. They noted that it did look like Comcast was marking packets, but proving that it was prioritizing them in defiance of the FCC and DoJ merger conditions wasn’t obvious.

Proving prioritization is no easy task.

Meanwhile Bryan Berg, the Founder and CTO at MixMedia was making a mess in his living room trying to prove that Comcast wasn’t just trying to mark its traffic for counting elements of it against a cap, but was indeed giving its Xfinity service delivered via the Xbox precedence over normal traffic. From the blog:

What I’ve concluded is that Comcast is using separate DOCSIS service flows to prioritize the traffic to the Xfinity Xbox app (so that I’m using consistent terminology, I’m going to call this traffic “Xfinity traffic” in the rest of the post). This separation allows them to exempt that traffic from both bandwidth cap accounting and download speed limits. It’s still plain-old HTTP delivering MP4-encoded video files, just like the other streaming services use, but additional priority is granted to the Xfinity traffic at the DOCSIS level. … In addition, contrary to what has been widely speculated, the Xfinity traffic is not delivered via separate, dedicated downstream channel(s)—it uses the same downstream channels as regular Internet traffic.

He then offers some speculation that Comcast is actually paying more per bit to send its Xfinity traffic via the Xbox and back around to the end consumer, which means that this prioritization isn’t done to save Comcast money. The obvious reason he implies, is because Comcast wants to create an unfair advantage over other video-streaming apps that will fall under the cap. An argument that I and several other people have made.

Berg’s chart showing Xfinity over Xbox traffic getting prioritized despite Berg flooding the connection.

Berg’s post is detailed (it has pretty charts!) and Berg lays out his methodology and offers the code he used, so others can replicate his experiments. I’d be curious to hear if others have tried to prove that Comcast is prioritizing traffic, and what they are discovering. Comcast clearly says it is not, but it also vehemently denied that it was blocking P2P packets back in 2007 and 2008 even though the results of it’s actions ended up in P2P downloads getting blocked.

Comcast’s actions violate two principles.

So, if Comcast is prioritizing its Xfinity traffic going over the Xbox, there are two problems that will have to be addressed: one related to Comcast and the other related to the FCC’s regulations covering network neutrality.

For Comcast specifically, when it received approval to purchase NBC-U, the DoJ and FCC said it would have to follow certain merger conditions. Those conditions explicitly state it can’t treat its own traffic differently under its cap, and many people believe that its decision to exempt Xfinity traffic streamed via the Xbox was alone a violation of the agreement.

Now, however, if the FCC can prove that Comcast is prioritizing certain elements of its own traffic, then it is clearly violating those conditions. Of course, then the FCC or the DoJ, would have to take some kind of action against Comcast, and so far both agencies have proven slow to react to other allegations that Comcast was violating its merger conditions. From the conditions:

If Comcast offers consumers Internet Access Service under a package that includes caps, tiers, metering, or other usage-based pricing, it shall not measure, count, or otherwise treat Defendants’ affiliated network traffic differently from unaffiliated network traffic. Comcast shall not prioritize Defendants’ Video Programming or other content over other Persons’ Video Programming or other content.

The second issue is a larger problem for the overall industry, and deals with a loophole in the FCC’s network neutrality regulations that were proposed in 2010 and are currently the subject of a lawsuit filed by Verizon. The regulations don’t forbid what Comcast is doing specifically, but exempting Comcast’s own Xfinity service delivered via the Xbox (and TiVo) from its data cap is a roundabout way to discriminate against other traffic that isn’t exempt. In that sense it violates the spirit of the regulations. Which means that the merger conditions are largest stick that opponents can wield against Comcast’s actions.

So what’s next on the regulatory front?

Most of the people I spoke with who have experience in politics expect that if Comcast is challenged it will be on the economic advantage is has created for itself because it owns both the last-mile access, a cable business and a content company. Unfortunately such a challenge ignores the fundamental problem with U.S. broadband: it’s not very competitive and the agency charged with regulating it has classified cable Internet as something that lays outside of its authority (for the details on this fight see this GigaOM Pro report (sub req’d).

Ironically the fight that stripped the FCC of much of its authority to regulate cable services, and still to this day puts its network neutrality rules on somewhat shaky legal ground was Comcast’s lawsuit against the agency, after the FCC had censured the cable company for blocking P2P traffic. Comcast is playing a long game here, and it’s unclear how far the FCC can push to protect consumers against its behavior even if it wanted to close that loophole in its network neutrality rules. For now the best bet for enforcement is the NBC-U conditions. Too bad they expire in January 2018.

Comcast van image courtesy of Flickr user Titanas.

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He lists several examples where the agencies have delayed their response to complaints about Comcast behavior, explains that those complaints are a direct result of Comcast’s growing power as a content owner, a distributor and last mile pipe owner, and then points out that Comcast’s actions are anti-competitive and are exactly what the agencies were trying to prevent when they imposed those conditions. The bulk of the letter concerns disputes on what content Comcast offers to its pay TV subscribers and where certain content is placed in various cable tiers.

However it also brings up the problems we have already laid out with regard to Comcast letting certain providers of its Xfinity service bypass the Comcast bandwidth cap. There is also the matter of  Sony’s decision to hold off on offering a streaming video service due to concerns about the inherent advantage Comcast has in delivering its own online video. For details on the conditions Comcast is violating as well as a technical breakdown of why Comcast is basically lying to consumers and regulators when it says the Xbox traffic is different and thus shouldn’t count against the cap, check out this post.

As a a parent, Franken’s letter strikes a familiar chord. Franken is basically telling the agencies that they are allowing their spoiled and ill-behaved child to walk all over them and the innocent bystanders that are consumers, and maybe they shouldn’t give it what it wants this time around because Comcast is likely to hurt consumers again. From the letter:

If your agencies are going to approve large telecommunications and media mergers based in part on the conditions that are imposed on the transaction, the public needs to be assured that your agencies are carefully monitoring and reviewing these transactions to ensure corporations are complying with the obligations you imposed.

Much like you want to applaud the person who steps in front of a rampaging child in a restaurant and tells him or her calmly to sit down and stop screaming, while the child’s’ parents ignore their kid’s behavior and continue their dinner as if Junior weren’t driving other diners crazy. At least in that situation anyone has the power to stand up and stop the errant child, but unfortunately when it comes to Comcast, the number of participants who can shake some sense into the child or the parents are few. Hopefully Franken’s letter has some effect.

Image courtesy Shutterstock.

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Unfortunately, Congress didn’t do all of that. It danced around the problems of pipe owners also owning content providers and pay TV distribution businesses. It didn’t ask about caps on broadband and how that serves the interests of the pay TV business, and despite the fact that network neutrality was brought up several times and was cited by Barry Diller, the chairman of IAC, and Amazon’s public policy lead Paul Misener, the way that Comcast is sidestepping network neutrality by not counting content streamed over the Xbox against its data cap was never mentioned.

So what was the Senate’s tangent today?

Netflix is 27.6 percent of broadband traffic in the U.S. according to a new report from Sandvine.

Instead the call during the hearing was for a rewrite of the 1996 Telecoms Act, which deregulated the telecommunications agency, helped establish the rules that let the Internet grow and brought about the rise of competitive local exchange carriers. But in an election year, such a rewrite seems unlikely, and frankly, worrisome given the power that ISPs and content companies have in Washington at the moment. Instead, the law that might make headway is the The Next Generation Television Marketplace Act, which was proposed in December, and was the basis for the hearing today.

The proposed act deals primarily with deregulating the broadcast industry to eliminate some required coverage mandates and to allow broadcasters to negotiate retransmission rates with pay TV providers just like cable programmers such as ESPN or AMC do. As a consumer this would likely lead to higher cable costs and the loss of public interest programming. The fundamental question that should be asked with regard to this legislation is whether or not the broadcasters’ access to public airwaves means they should have limits set upon them to serve the public interest? (The FCC gives them their airwaves in exchange for following certain rules and carrying certain types of programming.)

But that wasn’t really the focus of the hearing, despite a few questions asked of Diller, who is an investor in Aero, one of the most interesting startups to come out of the convergence of the web and television. Aereo, provides access via the web to over the air content for a fee. Consumers pay a set amount each month and then can get access to over the air television from any device. The value-add is that consumers who can’t receive the over-the-air signals from their broadcaster can still get access to the programming, can record it for later consumption and can get it on any device. Of course, it’s being sued.

So what is the real issue?

The hearing did clarify a fundamental issue about both television and broadband. The two are now intertwined, so from a regulatory perspective the fight will now be about who holds the power in terms of relationships with consumers and in terms of their relationships with content companies. On one side, we have the broadcast industry and the ISPs, which also own broadband and in many cases pay TV service access. On the other are the startups and online behemoths that want to deliver TV to the consumer when and where they want it using a variety of business models. In the middle are content creators trying to walk the line between finding an audience today and finding one tomorrow. And consumers just want to pay for exactly what they want, when they want it without spending money on superfluous channels or content.

As Barry Diller testified, the Internet is ready to provide a new platform for content distribution but the interests of pay TV providers and content companies that are linked to distribution companies also want to interfere with how content is accessed. He said eliminating the distribution companies as middlemen given content creators more creative freedom and they wouldn’t have to sign away as many of their rights, adding,”How can that not be in the public interest?”

When Blair Westlake, Corporate VP, Media & Entertainment Group at Microsoft explained that he saw TV changing more in the past 18 months than it had in the last five years, he focused on some of the cool things Microsoft is doing with the Children’s Workshop, the producers of Sesame Street. He described children of the future interacting with the characters using the Kinect and even seeing themselves onscreen. This is cool, but sidesteps some of the issues the hearing didn’t really delve into.

Where Congress, and regulators must focus.

The Internet has become a platform for services and TV is just one of those services. We need to start thinking about TV in terms of who can deliver it at a transport layer (the pipes), how it gets delivered (via a pay TV subscription, YouTube channels, Netflix subscriptions) and where the value is and who gets to charge for that.

There is no question that the content is valuable. There is also no question that consumers find value in access that content online from any device whenever they want as Susan Whiting, vice chairman of Nielsen, testified.

So Congress should focus on who will capture the value of the new means of delivering TV, and whether or not certain players have an advantage that Congress or the FCC should investigate. Many of the Senators asking questions have come pretty far by recognizing the importance of broadband access when thinking about the future of TV.

Some questions Washington should be asking

Here are a few questions they can — and should — ask to take the conversation further:

• If broadband is a platform for TV, should broadband providers also be TV distribution providers and content companies? How can they use that horizontal integration to their advantage? Are monthly data caps a method for them to stymie competition?
• Do deals to provide services to specific devices without counting against a cap sidestep network neutrality?
• Should the dearth of independent broadband providers (those providing the platform only without a pay TV business) concern Congress?
• What rules and regulations does a horizontally integrated broadband/distribution/content player need to follow to preserve access to real competition and inovation? Are the merger conditions associated with Comcast buying NBCU enough?
• Where is the value in the new TV business? Is it content? Access? Distribution?
• What are the most promising new business models that can support the industry?
• How many of those business models will require the end consumer to give up their privacy?

I can think of several more questions, including those related to protecting the rights of content creators in a completely digital world, ensuring that children’s programming meets certain standards or even mandating accessibility for all on the Internet. However, to ask these questions requires Congress to view the Internet as not just a new way to communicate and share ideas, but as a new platform that will subsume the older industries of TV, voice communications and publishing and transform them into even richer mediums to share ideas, consume entertainment and even change how we work.

It’s not an adjunct, it’s a replacement. Or it can be, if we prevent the old-line industries that will see some of their lines of businesses replaced by IP technologies from walling up the promise of the web with data caps, friendly deals with certain hardware makers and over-inflated concerns about piracy and content theft.

Congress could help by asking tough questions or doing a real overhaul of the Telecommunications Act with this framework in mind, but I don’t think it’s viewing the web yet through the right lens. It needs to think of the Internet at two levels — the transport mechanism for the bits and the services that ride on top of them. We need a regulatory conversation that recognizes this divide and encourages it.

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Fox is seeking more money from Cablevision, about $80 million more a year, in order to keep the cable company’s 3 million customers watching episodes of The Simpsons and Monday Night Football NFC football games. Retransmission fights have been getting more contentious lately, and this one is no exception, with Fox threatening on Friday to cut off Cablevision’s subscribers if a deal wasn’t reached by midnight.

Apparently, Fox decided to go one further and brought its web properties into play. A Hulu spokeswoman told All Things D:

Unfortunately, we were put in a position of needing to block Fox content on Hulu in order to remain neutral during contract negotiations between Fox and Cablevision. This only includes Fox content. All other Hulu content is accessible to Cablevision [I]nternet subscribers. We regret the impact on Cablevision customers and look forward to returning Fox content to those users as soon as possible.

Although Fox’s online television content is now restored, the action may have further repercussions, especially as the Federal Communications Commission debates the merger of Comcast — the nation’s largest cable provider — and NBC Universal, a contributor to Hulu and also a huge provider of content. Opponents of the deal are concerned it could limit the voices available in media, but there are also fears that Comcast would become much too powerful. A statement from the Free Press Public Knowledge explains this point of view:

“This case shows the dangers of unchecked media consolidation and of a retransmission consent regime badly in need of reform. Consumers should not have their access to Web content threatened because a giant media company has a dispute over cable programming carriage. The anti-competitive aspects, particularly when it comes to online video programming, are glaringly obvious.

“The migration of a programming dispute to the online world should also raise red flags for the merger of Comcast and NBCU. If the combined Comcast were to attempt such a maneuver, millions of consumers all over the country would be hurt. Those government agencies evaluating the merger should be alert to the possibility as they decide whether the merger should be approved and, if so, with what conditions.

Photo courtesy of Flickr user comedy_nose.

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Essentially Comcast, which is about to finish laying the groundwork for a fast wired network, is focused on reaping the benefits of mobile broadband. Along the way it will also use Xfinity, the NBC-Universal deal and interactive advertising as a means to forestall becoming a dumb pipe for users. I have no idea if all of those efforts will succeed, but I applaud it for looking ahead and seeing the future of ubiquitous and fast broadband as a necessary platform in a way some of its rivals may not.

Its priorities reflect the growing awareness of a converged communications world. It’s attempting to provide the underlying infrastructure of fixed and mobile broadband as a bundle for the consumer as well as find ways to monetize and control the content running over those pipes in a way that won’t draw an outcry from consumers or regulators. However, regulators are already scrutinizing Comcast’s control of NBC-Universal and will likely spend some time on Xfinity as well.

But if we step back and look at the big picture, it’s clear that Comcast understands both the opportunity and the threat that ubiquitous broadband presents to its business. For Comcast, 2010 is when it will finish laying the groundwork for delivering ubiquitous broadband, and when it will build up the arsenal of tools to answer the threat that an all-IP network represents to its core video delivery business.

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