Comcast exec VP David L. Cohen isn’t sure how the FCC’s proposed net-neutrality rules will define broadband providers’ ability to charge for an Internet “fast lane” but said that in any case, the cable giant has the right to offer paid prioritization to partners.
“Whatever it is, we are allowed to do it,” said Cohen, speaking at the MoffettNathanson Media & Communications Summit in New York.
The Federal Communications Commission on Thursday is scheduled to vote on new proposed net neutrality rules. Those will include a provision allowing paid prioritization of Internet traffic under certain conditions — a so-called “fast lane” that has been decried by a wide range of Internet companies, consumer advocates, politicians and Hollywood scribes.
Cohen, who leads the operator’s public-policy and communications efforts, referred to the “almost hysterical reaction” to reports about the FCC’s revised net neutrality rules. “You have the whole world reacting to a document no one has seen,” he said.
Comcast has agreed to comply with the 2010 FCC Open Internet order, under the terms of its government consent decree for NBCUniversal, until 2018 — even though the main parts of that order were struck down by the D.C. Circuit in January.
The 2010 order did not prohibit paid prioritization, Cohen pointed out. In his analysis, FCC chairman Tom Wheeler is trying to reinstate rules barring ISPs from blocking and discriminating against Internet content under the authority the D.C. Circuit ruled the agency has — but in a way that addresses paid prioritization instead of ignoring it.
Wheeler, facing the firestorm of opposition to the “fast lane” provision, has revised language in the net neutrality proposed rules to be more explicit that the FCC will scrutinize paid-prioritization deals and nix them if they are not “commercially reasonable.” In addition, the commission’s notice of proposed rulemaking will solicit comment about whether paid prioritization should be banned outright.
“We are not sure we know what paid prioritization, or what a fast lane, is,” Cohen said. “Fast lane sounds bad… (but) I believe that whatever it is, it has been completely legal for 15 or 20 years.”
Wheeler has raised the specter that the FCC may consider reclassifying Internet access as a Title II service under the Communications Act, which would regulate broadband providers like telecom carriers. Cohen, however, noted that Title II doesn’t prohibit paid prioritization — indeed, he said, “the whole history” of Title II is that carriers are allowed to provide different levels of service at different prices.
ISPs oppose the reclassification of broadband under Title II, because it would give the FCC leeway to impose price regulations, conditions on wholesale access and other controls. Cohen said that if Internet service were moved under Title II, it would be “unthinkable” that Google, for example, would spend billions on expanding its high-speed Google Fiber networks because they would be subject to strict regulations.
As for the war of words between Comcast and Netflix — over Netflix’s agreement to pay the MSO to interconnect to its network — Cohen said the issue was unrelated to net neutrality, and that Netflix simply wants free transit.
“Why should two-thirds of the people who never use Netflix pay for the cost to connect to Netflix?” Cohen asked rhetorically. He added, “I’d like set-top boxes for free. Think how much cost that would take out of our business.”
The interconnection market is “intensely competitive,” Cohen continued. Comcast has settlement-free peering agreements with 40 companies, such as Akamai Technology and Level 3. But with Netflix, which sends far more traffic to Comcast than vice versa, the economic arrangement is different, he said.
With broadband consumption continuing to climb, Cohen predicted that within five years, Comcast will have a usage-based billing model rolled out across its footprint. “But I would also predict that the vast majority of our customers would not be affected,” he said.
Comcast has launched pilots of usage-based billing in several markets, including Atlanta. The MSO is finding consumers prefer a model under which all subscribers have a preset monthly usage limit, then pay for additional data tiers over that. That ceiling might be 350 gigabytes per month initially but increase to 500 GB in five years, Cohen said.
“We’re trying to go slowly, not out of a regulatory concern (but because) we have no desire to blow up our high-speed data business,” he said.
Also at the MoffettNathanson conference, Cohen said he still expects the regulatory review of Comcast’s $45 billion acquisition of Time Warner Cable to be completed by year-end, reiterating the MSO’s position that the deal is “not that difficult” in terms of antitrust implications.
He also discussed DirecTV’s potential takeover by AT&T, which is reportedly in advanced stages of making a bid of about $50 billion for the satcaster. “There will be procompetitive arguments about (AT&T’s) ability to pair high-speed data with DirecTV,” Cohen predicted.
But he also noted that AT&T’s U-verse TV overlaps with DirecTV in 25% of the U.S., which would eliminate a competitor in those markets. Comcast-TW Cable, by contrast, will not reduce the number of options in any market, Cohen said.