Comcast Streaming of NBC Broadcast Content

            NBC soon will join the ranks of content providers offering a streaming option to cord cutters and mobile consumers.  See, e.g., http://www.engadget.com/2015/03/03/nbc-comedy-streaming-service/.  This future service warrants special attention, because two corporate affiliates within the Comcast family will participate in many parts of the United States: Comcast, as the last mile, “retail” ISP and Comcast, the parent of NBC-Universal.

            Operating as an ISP, Comcast has at least three pricing/interconnection options, each of which raise questions relating to network neutrality and what the company considers strategic, “best behavior” during the time the FCC evaluates its proposed acquisition of Time Warner.

            The Neutral/Non-Discrimination Option treats NBC traffic as nothing special, just plain video bits requiring streaming delivery to Comcast broadband subscribers.  Comcast shows its commitment to network neutrality by refraining from prioritizing the traffic, or claiming that the traffic does not traverse the conventional Internet.

            The Specialized Service Option puts NBC traffic in the same category as Comcast video on demand traffic that gets routed to Microsoft Xboxes.  The company will try to differentiate NBC traffic from conventional Internet-delivered traffic, so that Comcast has the option to engage in price and quality of service discrimination.  Comcast might exempt NBC traffic from debiting a subscriber’s monthly data allocation. The company also might use routing techniques to ensure congestion-free carriage—what I call “better than best efforts” routing and Most Favored Nation treatment.

            The Surcharge Option requires NBC to pay a surcharge to a corporate affiliate consistent with Comcast’s successful demand for more money from Netflix and probably the same type demand the company will make to HBO and other high volume sources of video traffic.

            Many Comcast senior managers have distinguished themselves as the best in the business, but the company often pushes the revenue generating envelop when other factors might have supported a less aggressive posture.  For example, the company has substantially increased its cable modem rental rate (20+%) at a time when it should not call attention to its awful customer service, including possibly deliberate hassles for subscribers trying to activate their own modems.

            If Comcast decides on a prudent, less provocative posture it will refrain from executing the Surcharge or Specialized Service Option.  Critics will quickly note that having brother NBC pay brother Comcast ISP keeps all revenues “in the family.”  The Surcharge Option would maintain consistency with the strategy successfully executed with Netflix and soon to be applied to punish HBO for trying to eliminate the cable television intermediary.  The Specialized Service Option would show what a large loop hole the FCC unintentionally has created, particularly because Comcast would only have to make cosmetic changes to qualify video delivery of NBC traffic, or Comcast premium content to an Xbox, for a network neutrality exemption.

          Both options would show how unrestrained ISP pricing flexibility can harm consumers and competitors.

            Comcast probably will avoid any appearance of treating NBC traffic more or less favorably.  This option would create an exception to the strategy of demanding surcharges from high volume video distributors like Netflix, but Comcast might simply differentiate NBCs’ comparatively low volume vis a vis Netflix.

            In any event, the horizontally and vertically integrated Comcast corporate structure will trigger interesting tensions between affiliates.