Weekly Update

Comcast’s long game

Net neutrality landed back in the news with a bang last week. Comcast announced that it is finally rolling out its Xfinity app for the Xbox 360, allowing subscribers to access all their Comcast on-demand content through their game consoles and navigate the offerings using their Kinect gesture-and-voice controlled interface. In its FAQ page on the new app, Comcast also said the new on-demand service would not count toward broadband subscribers’ 250 GB per month bandwidth cap because it will route traffic to the new app over its own “private IP network” rather than the “public Internet” used by Netflix, Hulu and other over-the-top services.

That selective routing touched off outraged cries that Comcast was subverting the FCC’s net neutrality regulations by giving bits for its own app preferential treatment over those of competitors. As Columbia University law professor Timothy Wu noted on NPR’s Marketplace report, “The whole idea of net neutrality is to try and guarantee that similar content gets treated similarly, and if you think about it for a second, if something doesn’t count against your cap, obviously it’s getting a preferential treatment. You’re more likely to stream that instead of someone else’s.”

Whether Comcast is violating the actual letter of the regulations, however, is another question, as my GigaOM colleague Stacey Higginbotham points out in her excellent overview of the legal and technical issues at stake. It’s quite possible that what Comcast is doing falls within the “managed services” exception the FCC carved out from its regs back in 2009. (Nonetheless, Comcast seems to have changed the wording of its FAQ, dropping reference to its “private IP network.” The new language describes the Xbox traffic as “similar to traditional cable television service that is delivered to the set-top box.”)

Others raised questions about whether the preferential routing might violate the conditions Comcast accepted in its consent decree with the Justice Department to win approval for its acquisition of NBC Universal. Those conditions stipulate that “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.”

Ultimately, those are questions the lawyers will need to sort out. But the emphasis by Comcast’s critics on the near-term regulatory implications of its Xbox strategy may be misplaced in any case. Rather than challenging net neutrality rules directly, Comcast seems to be playing a long game against its over-the-top competitors based on quality of service and premised on the coming, inevitable bandwidth crunch as ever-more video traffic tries to crowd onto the Internet.

As Scott M. Fulton, III, notes in his useful explainer on ReadWriteWeb, the “private IP network” Comcast referred to is the proprietary content delivery network (CDN) it has been building in partnership with Alcatel-Lucent for the last four years to support multi-screen delivery. The network is essentially a closed, end-to-end local loop (on a nationwide scale) that gives Comcast absolute control over quality of service from headend to whatever device is receiving its video bits.

Contrast that with the situation facing non-facilities based online video providers trying to leverage the public Internet, as explained in a recent whitepaper by engineers at Akamai:

Designed as a best-effort network, the Internet provides no guarantees on end-to-end reliability or performance. On the contrary, wide-area Internet communications are subject to a number of bottlenecks that adversely impact performance, including latency, packet loss, network outages, inefficient protocols and inter-network friction. In addition, there are serious questions as to whether the Internet can scale to accommodate the demands of online video. Even short term projections show required capacity levels that are an order of magnitude greater than what we see on the Internet today. Distributing HD-quality programming to a global audience requires tens of petabits per second of capacity – an increase of several orders of magnitude.

Comcast, not incidentally, is also doing its best to increase “inter-network friction” wherever it can for everyone else, as its ongoing dispute with Level 3 over Netflix traffic makes clear. Another advantage of relying on its own network, in fact, is that Comcast does not have to engage in peering negotiations with other network operators over data loads that might require it to reciprocate.

In short, Comcast believes time is on its side. Over time, delivering high-quality video to multiple devices over the public Internet will get harder and more expensive for the likes of Netflix and Hulu, making it harder for them to compete. Comcast, meanwhile, will be able to control its own quality of service and costs. In the long run, it’s betting that advantage will tell without it having getting outside the legal lines of net neutrality rules.

Question of the week

Will Comcast’s strategy for the Xbox app harm competition?