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.
