Tuesday, December 1, 2015

Comcast vs. Netflix carrier: Higher fees ahead?

Analysts say Level 3's accusations against Comcast will heat up the debate over "Net neutrality" - with results that will ultimately benefit Comcast and other Internet providers

Comcast vs. Netflix carrier: Higher fees ahead?


Re Level 3 Communications Inc.'s claim that "Comcast threatens the open Internet" by "effectively putting up a toll booth" to impose fees for carrying massive movie traffic to L3 client Netflix's online customers; Comcast's reply, that it's just doing what it, L3 and other networks have long done, charging for moving data without discriminating as to content; and the FCC's pending "Net neutrality" rules:

- Craig Moffett, Bernstein Research: "Obviously, an overt violation (by Comcast) of the Net Neutrality principles would endanger not only (FCC's plan to expand Internet regulation) but would also potentially threaten Comcast's pending merger with NBCU...

"Level 3's implied claims of traffic discrimination... appear unfounded... Still, Level 3's charge is likely to create something of a political firestorm... at least with the general public and, just as importantly, with the technology press. In our view, this is very likely its intent... Whether Level 3's charges ultimately influence the FCC's Net Neutrality eliberations, or the Comcast NBCU merger, remains to be seen."

- Tony Wible, Janney Capital Markets: The L3-Comcast fight "will increase the scrutiny from the FCC and helps bring into focus the looming government proposals for a newbroadband policy that we believe will support Net Neutrality but will also condone Usage Based Billing for data service.

"This move will have a profound effect on the media industry," boosting fees on consumers, especially for the "20% of Internet users (who) account for 77% of the traffic," and thus increasing profits, plus competition, investment, and overall Internet use. Comcast and other Internet providers will gain; Netflix and other Internet users will lose.

- David C. Joyce, Miller Tabak & Co.: "Comcast's view is that it has offered the same terms to L3 as to its rivals, and... L3 wants lower network fees in order to have a pricing advantage" while carrying Netflix movies.

"This payment for Internet traffic is triggering a new round of discussion on Net Neutrality, which has been a political hot-potato this year, but is currently not expected to be translated into any blanket FCC rulemaking." Still, it could take up Comcast "management energy, reporting, monitoring, and FCC verification" if the dispute becomes part of the FCC review of the Comcast-NBCUniversal deal.

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About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, 215.854.5194, @PhillyJoeD. Read his blog posts at http://www.philly.com/PhillyDeals and his Inquirer columns at http://www.philly.com/philly/columnists/joseph-distefano/. Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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