April 28, 2014 — Today Comcast set forth a plan to ensure it will be allowed to acquire Time Warner. Under the terms, Comcast is to sell 1.4 million subscribers to Charter Communications for $7.3 billion. Ostensibly, this move would allow Comcast to divest customers and appease the regulators. Step 1 — sell customers to competitor (Charter) to reduce market share. Ok. Step 2 — Comcast will form a spin off in which Charter will have a 1/3 stake in “New Co” and Comcast will contribute another 2.5 million subscribers, with Comcast shareholders maintaining a 2/3 stake. Ok. The corporate lawyers and regulators believe this proposal will pass muster and reduce the giant’s market share just enough to allow it to acquire Time Warner. Fair enough.
On the one hand, as a “Philly” guy, I like seeing Comcast win — a strong Comcast is good for the City. On the other hand this deal, and the pending FCC adjustments to Net Neutrality, give me the chills. The domain and Internet community should pay close attention to the game being played. After all, every business we work with, sell a domain name to, invest in or create relies on open and fair online access and competition. These are turbulent and fast moving times. This, coupled with the IANA – ICANN transfer of oversight, is enough to make your head spin. The proposed Comcast take over could mean less competition, and the Net Neutrality issue appears to be tracking toward a “pay to play” for better Internet access. If this is true, we may all be in for a rude awakening.
For those not following this issue, here is a (really) quick bullet point primer:
1) September, 2005 — FCC Internet Policy Statement – to maintain the “vibrant and open character of the Internet,” the FCC adopts 4 principles for consumer entitlement: to access to lawful content; to run applications and use services of their choice; to connect to choice of legal devices; and to competition among network, application, serviced and content providers;
2) December, 2010 — FCC issues its Order requiring Internet service providers to be transparent about control of network congestion and prohibited carrier blocking and discrimination of internet traffic – Net Neutrality;
3) We enjoy 4 years of the “Open Internet” as we know it;
4) January, 2014 — the U.S. Court of Appeals for the District of Columbia strikes down the FCC Net Neutrality Rules, affirming FCC authority to regulate broadband providers, but striking the anti-blocking and the anti-discrimination rules;
5) February 13, 2014 — Comcast announces its bid to buy TimeWarner;
6) February 23, 2014 — After months of reports of slow delivery of its services, Netflix agrees to pay Comcast for “faster more reliable access;”
6) April 28, 2014 – Comcast announces offer to divest customers to reduce market share and allow TimeWarner acquisition to occur; and
7) May 15, 2014 – the FCC will consider a Notice of Proposed Rule Making to Address Net Neutrality – possibly leading to the “pay to play” option. http://www.fcc.gov/events/open-commission-meeting-may-2014
In advance of May 15th it has been reported that the FCC’s new plan, will require Internet service providers to offer a baseline level of service to their subscribers, and prohibit blocking or discriminating against online content. Sounds good so far, however the providers would also be allowed to strike special deals with Internet companies (presumably big content providers) for preferential treatment, as long as they act in a “commercially reasonable manner” and are “subject to review on a case-by-case basis.”
To me, the possibility of this “preferential treatment” concept is nothing more than a “pay to play” option that will benefit those that can pay at the expense of startups and the “little guys” that can’t (yet) afford the fee. This affects me, you, any and Internet entrepreneur or start up seeking to grow and compete.
While this appears to be the case, FCC Chairman Wheeler has stated that there has been no “turnaround in [FCC] policy.” On April 24th the Chairman further stated “[t]o be very direct, the [Net Neutrality] proposal would establish that behavior harmful to consumers or competition by limiting the openness of the Internet will not be permitted.” http://www.fcc.gov/blog/setting-record-straight-fcc-s-open-internet-rules
The new proposal appears to include good rules that will prohibit blocking of legal traffic, and ensure that ISPs “may not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity.” However, reported potential for “preferential treatment” creates concern.
Can you afford to pay to reach consumers at the same speeds as well-established companies? With today’s announcement to clear the way for Comcast to acquire TimeWarner, further industry consolidation could mean less competition. Stronger broadband companies armed with the new proposals floating around Washington could make ISPs the true gatekeepers to their subscribers and content. Sure, you would still be able to access all content, but “other” content may get that “extra special boost.” As I said before, I’m rooting for my hometown team, Comcast, but I’d also like to be sure that Net Neutrality remains truly neutral.