Tech Life: Threats to a competitive Internet

Verizon Wireless strikes a spectrum deal with Comcast. Comcast launches Streampix to compete with Netflix. Netflix complains that Comcast's monthly data caps give Streampix an unfair advantage. Sony drops plans for a virtual cable-TV service, also blaming data caps. Verizon says DSL customers can't save money by canceling phone service and relying on Internet calling.

It's hard to keep up with all the telecommunications headlines lately without getting a bit dizzy. But there's a key thread connecting these recent stories that's worth paying attention to.

All involve threats to the idea of the Internet as an open, level, and competitive playing field. And the threats all arise because a handful of key companies, including Comcast and Verizon, act as gatekeepers and toll collectors and are restrained only by loose regulation and limited competition.

Verizon Wireless' deal with Comcast is a case in point. The wireless company, partly owned by Verizon Communications, wants to buy spectrum worth $3.6 billion from Comcast and two other cable companies. At the same time, it proposes to jointly market service bundles with Comcast and the other companies — even though its parent, Verizon, is, in theory, one of the cable industry's few competitors.

Another case in point: the Streampix controversy. Comcast faces little or no competition as a network operator in most places where it offers its cable-TV, high-speed Internet, and phone services. According to Federal Communications Commission data, just 7 percent of U.S. households have a choice of cable providers.

Netflix represents one small but real threat: It's an "over-the-top" streaming video service that offers an unlimited diet of movies and TV series for $8 a month, which makes it a low-cost alternative for some who can't afford cable TV's prices, and an extra service that competes with cable's premium channels and video-on-demand.

Comcast's response, in February, was to introduce a similar service, Streampix, for $4.99 a month. Teaming with Redbox, Verizon plans to launch a similar offering later this year.

Fair competition? Perhaps, except for one thing. Comcast initially emphasized that Streampix content, which like Netflix can be viewed on TV or Internet devices, would be subject to the same 250-gigabyte monthly cap Comcast imposes on Netflix video and any other data, downloaded or uploaded, by its Internet customers.

But then it conceded there was an exception: Streampix viewed via the Xbox 360, a gaming console that can also be used to watch Netflix and other Internet video on a TV, would not count against the cap.

Why the distinction? Comcast says that Streampix is its own content, delivered over its own "managed network," and that it is being directed to the Xbox much as it's delivered to Comcast's own set-top boxes — albeit via Comcast's Xfinity app and in Internet-protocol data packages, because that's the format the Xbox requires.

Net-neutrality advocates say that distinction strains credulity, and that Streampix highlights the risks to competition created when a network owner also competes as a content provider.

In a letter to shareholders, Netflix CEO Reed Hastings said the treatment violated neutrality. "The only difference between the Xfinity Xbox data and Netflix Xbox data is the Xfinity data is favored by Comcast, exempting it from the cap," he said.

Comcast's monthly cap rarely bites customers, it says. And since Comcast imposed it in 2008, similar caps, including some that are more stringent, have become the norm among Internet providers. Verizon's FiOS is so far one of the few holdouts.

Wireless carriers, which have struggled with surging data loads from smartphones, have also set new limits. Three of the four national carriers (Sprint is the exception) openly throttle the speeds of unlimited-data customers who exceed a monthly threshold, and hit other high-volume users with metered overage charges. Some broadband providers charge for exceeding caps, while Comcast suspends repeat violators' service for a year.

The Washington group Public Knowledge and other net-neutrality advocates don't dispute that heavy data demand can pose real problems. But they question the wisdom of broad monthly caps, especially those that lead to degraded or suspended service, when congestion occurs at particular times and in particular locations and can be managed in other ways.

Some, such as former FCC commissioner Michael Copps, are open to overage charges as a tool.

"I have never said that someone who's eating up all the data shouldn't have to pay a premium for it," says Copps, who retired in December and has since joined Public Knowledge's board of directors. "But you have to be very careful to make sure that doesn't become an excuse for these companies to say, 'I'm not going to invest in new infrastructure, and I'm just going to charge more.'??"

Copps worries, justifiably, about how the United States lags in broadband penetration, and about how our loose regulation and limited competition means U.S. Internet users often pay more for less. He's hoping his former colleagues take a hard look at the Verizon-Comcast deal, which "doesn't appear to be consumer friendly or encouraging to competition."

Above all, Copps warns there's always danger when too much power gets concentrated in too few people's hands. Threats to net neutrality — and to the future of a vibrant, competitive Internet — help show why.

Contact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.