FCC Gets Firm with Comcast

A July 11 order concerning network management could eventually affect all ISPs, but a new Administration could change the game in six months

Consumers may be nearing a victory in keeping the Internet open. Under pressure from advocacy groups, the Federal Communications Commission may soon impose sanctions on cable company Comcast (CMCSA), which has been accused of blocking peer-to-peer traffic.

FCC Chairman Kevin Martin circulated an order among fellow commissioners on July 11 that would prohibit Comcast from blocking applications and content on its network—effectively striking a blow against Internet providers' rights to manage their networks however they choose. Comcast has previously admitted to slowing some peer-to-peer file upload traffic. The FCC is separately reviewing complaints on net neutrality violations by other companies.

Martin's proposal does not include any fines, and applies only to Comcast, the nation's largest cable operator. The proposed order requires the company to disclose its network management practices, such as any caps it may impose on the amount of bandwidth a consumer may use. It also would make Comcast submit to the FCC a timetable on when and how the cable operator aims to comply with the order.

The issue is expected to be voted on at, or possibly even before, the commission's Aug. 1 meeting. Based on their past comments, the FCC's two Democratic commissioners are likely to side with Martin on the issue. In a statement, Comcast spokeswoman Sena Fitzmaurice said the company "does not block any Internet content, application, or service. Comcast's customer service agreements and policies have always informed Comcast customers that broadband capacity is not unlimited, and that the network is managed for the benefit of all customers."

In for the Long Haul

If passed, the order would mark the agency's first action against controversial network management practices. It would set precedent for future regulatory and legal rulings and could eventually affect all Internet service providers (ISPs)—cable, telecom, and wireless, many of which also block peer-to-peer traffic. Blair Levin, a former FCC chief of staff who is now an analyst with Stifel, Nicolaus & Co., wrote in a July 11 report that the order "is likely to be negative for Comcast and other broadband network owners."

But Comcast is likely to challenge the order in court, although Fitzmaurice says the Philadelphia-based company hasn't yet decided whether to take legal action. In the near term, details of ISPs' network management policies will remain unclear. "This is one step in what will be a very long road," Levin says.

In the long run, the order could even lead to Americans paying higher fees to cable companies, telcos, and wireless services providers. In the past, ISPs have blocked certain bandwidth-thirsty applications to prevent their networks from clogging during peak hours. (Some consumer groups challenge the notion that networks were clogged.) The heavy usage by some customers represents at least half of all upstream bandwidth, and two-thirds in some areas, Comcast told the FCC.

Finding Loopholes

If cable firms are prohibited from blocking traffic, "the way to deal with congestion will be to upgrade [networks]," says Derek Turner, research director for advocacy group Free Press, which first complained to the FCC about Comcast's practices last November.

Yet such upgrades are expensive, costing billions of dollars. "Comcast may say, 'We need to pass these costs onto our customers,'" says Jan Dawson, an analyst with consultancy Ovum. Another option may be different pricing schemes, depending on network usage. Comcast and other service providers, such as Time Warner Cable (TWC), could expand their trials of tiered broadband pricing (BusinessWeek.com, 1/18/08) to charge higher fees to consumers who download movies. Time Warner expects to test such a plan later this year in Beaumont, Tex.

Alternatively, to avoid new and expensive network investments, Internet access providers could establish stricter usage caps, limiting how much bandwidth an individual consumer may use. That way, they would still effectively block peer-to-peer applications, which tend to require the most bandwidth. And such practices are "perfectly legal," says Turner of Free Press.

The cable company could also try to find loopholes in the FCC's order. It may claim a right to slow down certain bandwidth-thirsty applications, such as movie downloads, during peak hours. In the past, Comcast slowed use of such applications in off-peak times as well as part of an effort, the company said, to improve network performance for every user.

Network Traffic and Neutrality

The FCC order may also not move the needle as Comcast is already well on its way to complying with most points of the order. In June, Comcast published some of its network management policies on its Web site, three months after it pledged to change how it manages network traffic. By yearend, the company will no longer track individual applications, but instead examine total traffic generated by a customer account.

Comcast started testing the new network management technique in two markets in June. Two additional markets, in Florida, shortly will begin testing the new method to track network traffic. Comcast has also struck agreements with peer-to-peer network BitTorrent and, on July 9, with Web-calling company Vonage (VG) to collaborate on ways of managing network traffic.

But here's the most important reason why the net neutrality debate is far from over: The current FCC will be disbanded within months, and the policies and political leanings of new commissioners, to be appointed by a new President, are as yet unknown. "We'll get a new FCC chairman, and we don't think the new chairman will be so aggressively negative toward the cable industry," says Laura Martin, an analyst with Soleil–Media Metrics. "We don't see any near-term economic consequences." In other words, don't think the net neutrality debate is anything but far from resolved.

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