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The technical and legal realities of Comcast’s Xbox cap spat

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Comcast (s cscma) said Monday that the content streamed over Microsoft’s (s msft) Xbox won’t count against user’s 250 gigabyte monthly usage cap prompting outrage among cap-hating websites and consumer groups. But the reality of the situation is that Comcast is within its rights. While we can lament the FCC’s failure to implement network neutrality rules that didn’t give Comcast a legal loophole, the regulations don’t ban such behavior directly.

The technical realities.

Comcast says streaming its video on demand service via the Xbox won’t count against its monthly caps because the traffic doesn’t go over the public Internet. And that’s true. Because Microsoft has ceded a lot of control to Comcast in order to get the authentication and other technical pieces it needed to make the Comcast Xfinity service available through its console, the traffic routed through the Xbox is fully managed by Comcast. It comes directly from Comcast’s private IP network to the authentication hardware inside the console and then is played on the TV.

Unlike content coming in from a service like HBO Go or Netflix (s nflx), which does go over the top using the public Internet, this travels from Comcast’s servers over its network, to hardware authenticated by Comcast to your TV. If you used your password to connect to Xfinity via an iPad in your home or on someone else’s home network you leave the Comcast network confines and those packets will count against your cap. Technically it’s an argument that holds water, but should it?

The legal waffling that led to this point.

What Comcast has done through its agreement with Microsoft is to create a specialized path through the public Internet. By conceding to Comcast’s demands over authentication and whatever else, Microsoft has extended Comcast’s network onto its device and created a fast lane over which Comcast bits can travel. I wrote about the theoretical worries with these managed services back in 2009, when the FCC was weighing whether or not those services should exist on a neutral Internet. From that post:

For example, AT&T allocates a chunk of its pipe for delivering IPTV and won’t let other web traffic interfere with that. In practice, this means a set percentage of AT&T’s pipes are walled off from regular web traffic so customers paying for the telco TV product get a great service. But it also means that when the percentage allocated for the regular web is congested, regular service degrades. …

If taken too far, then carriers could protect their revenue streams and get around any net neutrality provisions by allocating more of their network for managed services rather than for the public Internet. The FCC is worried that a neutral public Internet that gets forced through a smaller pipe so that carriers can invest more on upgrades and capacity for managed services won’t be able to support the innovations of tomorrow.

The FCC gave up the fight on managed services because it’s hard to regulate a theoretical, especially one with so many potential benefits for subscribers. Instead the net neutrality rules punted on the managed services topic, focusing on the definition of broadband access which left wireline providers free to offer managed services for enterprise customers. On the consumer side offering specialized services seems okay provided it was on a limited number of a devices and in a few other special cases.

So where will this fight take consumers and the net neutrality rules?

Managed services can carve one big pipe into many, tiny ones.
But opponents looking at Comcast’s decision are focused instead of the section of the net neutrality order that deals with discrimination, as opposed to what constitutes the broadband services actually protected by the regulations. For example, Michael Weinberg, from Public Knowledge says it’s important to look at how to adapt the rules going forward as the web changes. “If managed services can mean anything as long as you can imagine them in the cable landscape circa 2010 it becomes this huge loophole.”

He stressed that Public Knowledge isn’t done forming a legal argument to fight Comcast’s behavior, but in his view it’s clearly a violation of the spirit, if not the letter, of the net neutrality regulations: In this case Comcast’s private IP network used to stream Xfinity packets is only private because Comcast owns the last mile. And the reason Microsoft may have ceded some control over to Comcast — and will enforce the pay TV status quo —  is because it realized that without Comcast’s participation it might never get the chance to add value for Xbox buyers by bringing them the content they want.

For all of these reasons, any legal action that could stem from this spat will be worth watching. It will not only help define how network neutrality will work in an evolving broadband ecosystem, but it will show us where the power will lie in the new TV landscape governed by IP.

18 Responses to “The technical and legal realities of Comcast’s Xbox cap spat”

  1. minimalist

    Comcaast only “owns” the last mile because municipalities have allowed them to install their cables within public rights of way. Comcast, like most other cable companies, has traditionally demanded exclusivity contracts with the municipalities they serve.

    So if they want to claim the pipes are theirs and they can do prioritize their own content then they need to share the right of way with competitors.

  2. Jeff Turner

    I have to agree with Richard. Tim Wu is mostly responsible for this mess.

    I also think that Comcast is behaving very rationally. If they can’t be open about selling prioritized service, then why not play these games. The real question is whether Level 3 and its customers (such as Netflix) can get the same deal as Microsoft. I suspect that won’t come to fruition because Microsoft is probably doing a complex deal using a profit split rather than just paying for bandwidth. Therefore, Level 3 and Netflix can’t play. However, as any good anti-trust attorney knows such a “profit split” deal will almost certainly be challenged civilly and perhaps by the DOJ, itself.

  3. Paul Sweeting

    Comcast seems to have changed the wording in its FAQ. The earlier reference to a “private IP network” is gone. Here’s the new language:
    Q: Will watching XFINITY TV directly on my Xbox 360 use data from my XFINITY Internet monthly data usage allowance?
    A: No; similar to traditional cable television service that is delivered to the set-top box, this content doesn’t count toward our data usage threshold. The Xbox 360 running our XFINITY TV app essentially acts as an additional cable box for your existing cable service, and our data usage threshold does not apply.

  4. The decisive factor in deciding whether Comcast can distribute its own tv-like services uncapped by way of the xBox might not be the 2009 FCC NN rules, but the Comcast-NBC Universal take-over approval last year.

    The “Comcast rules” set out there that any Comcast service involving “caps, tiers, metering, or other usage-based pricing shall:
    1. not treat affiliated network traffic differently from unaffiliated network traffic” (p. 38).

    2. Offers the same facilities and capabilities to others on commercially equivalent terms(p. 38);

    3. Even Comcast’s set-top boxes must adhere to the “broadband Internet access service rules” (pp. 38-40).

  5. You completely forgot the Comcast NBCU merger conditions that prohibit content favoritism.

    Read those before you proclaim Comcast is being legal. It is NOT.

  6. Comcast claims they run a private network, and they can charge for service and prioritize traffic any way they want. If you don’t like it, you can buy your internet access from someone else with a different set of policies. With every vendor, there will always be policies for network management and maximizing revenue that are not “neutral” to all content.

    • James Gerber

      Mike, that is truly funny and you should continue to fine tune your comedy act as you will do very well with material such as this. On the small chance you are serious, how the heck can you justify your reasoning. The majority of Comcast’s customers have no choice because they are the only game in town. I don’t believe they should be allowed to do whatever they want and neither do the vast majority of their customers. This is like advocating for the removal of all traffic lights.

  7. What does any of this have to do with net neutrality? And how is it any different than delivering cable TV and Internet access over the same access connection? Is the presumption that we will now start dictating the proportion of the access link that shall be dedicated to each service the access link provider wishes to make available over it?

  8. Richard Bennett

    Take a few minutes to read Tim Wu’s seminal paper, “Network Neutrality, Broadband Discrimination”

    This is precisely the scenario that Wu exempts from anti-discrimination provisions. Public Knowledge and Free Press have decided that net neutrality is a general purpose hammer that they can use to pound any nail at all, but if it’s a coherent doctrine this deal is exempt. Not by a technicality, but by the very essence of net neutrality as Professor Wu defined it.

    • Phillip Dampier

      As we’ve argued repeatedly since 2008, Internet Overcharging schemes like usage caps and throttled speeds are just end runs around Net Neutrality, and Comcast’s Xbox service is proof-positive.

      If you cannot openly discriminate against traffic you don’t own/control, just slap usage caps on the other guy and people will choose your service to avoid eating into their allowance.

      Only Comcast’s entire argument for the 250GB usage cap was to control last mile congestion. But Xbox’s service travels over the same last mile network as everything else, yet Comcast invites you to consume all you like!

      If Comcast wants to do this, simply take the usage cap off the rest of their broadband service. They’ve just demonstrated they don’t really need a usage cap, because the company has zero problems meeting demands… when they want to.

      Phillip Dampier

  9. Don’t Comcast and Level3/Netflix have a peering agreement in place that essentially treats Netflix traffic the same way as this, without involving the public Internet?

    How is it not anti-competitive for Comcast to create a service with significant market advantage over a functionally-identical 3rd party service?

    Don’t kid yourself that this isn’t 100% about trying to make Netflix an unviable option.

    • I am not kidding myself, but in this post I was trying to stick to the facts and arguments we’re going to see. However, I am fundamentally in awe of the strategies being put in place by ISPs to confine and profit off IP. The business models will change, but the idea those those changes will result in lower prices and a fundamentally different consumer experience are proving to be flawed. I think many people will find their faith in IP fundamentally altering the content landscape to be tested and then proven a mistake.

  10. WaltFrench

    Isn’t it essentially the case that the XBox/Comcast bundle is a Comcast service that is priced and provisioned differently than other traffic?

    Presumably, Comcast has seen a way to provide a “value added” service (where the value add is in part the fact that its data doesn’t count), and customers could get their video-on-demand some other way.

    Which points out the REAL problem: in households with Comcast, very likely there is at most one realistic competitor. Many have no choice. Despite de facto monopolies that city governments encourage, the FCC doesn’t regulate monopoly prices.

  11. Ok. I am an xbox live gold member and I must say, we pay for everything. So paying for it AND being limited is just an outrage. I’m glad that we won’t be limited. I do, however, have a feeling that we will not be able to press the A button without being deducted Microsoft points. It is going outta control and this proposed “cap” on data limits is just further proof.