Online Access

Comcast 'Invents' Its Own Private Internet


"... a leashed puppy is still a puppy" —Supreme Court Justice Antonin Scalia

Photograph by Tom Williams/Roll Call/Getty Images

"... a leashed puppy is still a puppy" —Supreme Court Justice Antonin Scalia

Comcast (CMCSA) went public in 1983. Track its share price, and you’ll see that it tootled gently upward as the company expanded its cable television service around the country. Then, in 1997, the share price spiked. This was the year the company began testing a new product—the cable modem, which offered Internet access at a blazing 1.5 megabytes per second, then 50 times faster than dial-up. Comcast didn’t invent the Web. It didn’t invent the cable modem, either. Like other cable operators, it happened to own the right network at the right time.

That history is helpful to remember as the Department of Justice begins an antitrust probe into whether Comcast, Time Warner (TWC), and other cable providers are now trying to manipulate the way customers use the Internet—specifically, whether imposing caps on the amount of data people can download monthly discourages them from using Netflix (NFLX), Hulu, and other rival online video sites and steers them to the cable companies’ own video-on-demand services, which aren’t subject to the caps.

Comcast spokeswoman Jennifer Khoury declined to comment on the investigation. In a May 15 blog post, executive vice president Tony Werner explained how Comcast is offering video over its own “managed network” via Microsoft’s (MSFT) Xbox: “We provision a separate, additional bandwidth flow into the home for the use of this service—above and beyond, and distinct from, the bandwidth a customer has for his or her regular Internet access service.”

Comcast’s defense of this tiered system rests on a semantic distinction: that there’s a difference between watching a movie through Netflix, which exists on what the cable companies call the “public Internet,” and watching the same movie through a provider’s on-demand service, which they say is a private network. In pushing the phrase “public Internet,” Comcast and other Internet providers want customers to accept that they are the proprietors of separate, special Internets. You can see this in the way they’ve tried to rebrand the Web as a private product. Comcast refers to its Web access as “Xfinity.” AT&T (T) calls it “U-Verse.” Verizon (VZ) doesn’t sell Web access, either. It sells “FiOS.”

Of course, these are just fanciful names for … the Internet. “It’s a very slippery thing,” says Michael Calabrese, senior research fellow with the Open Technology Institute at the New America Foundation, a think tank. “It is one pipe—and they control the pipe.”

There’s a reason it’s not called the Comcasternet. The Internet beat out rival private networks because it grew faster and created more value. Comcast was perfectly free to build the Comcasternet, but it didn’t. That’s not an accident. Every network benefits when all networks interconnect. For cable companies to claim now that they did in fact build a private network and that it shouldn’t be subject to the same rules as the rest of the Internet is a tough sell.

It’s hard to blame them for trying. They’ve had luck with this line of reasoning before. In a 2005 Supreme Court case, Comcast, among other cable companies, maintained that the Federal Communications Commission couldn’t regulate them as “telecommunications services”—Internet access providers—because cable companies bundled their Internet access with what the FCC considered “information services,” such as Web hosting and e-mail addresses. The justices agreed, 6-3. But in a dissent, Antonin Scalia ridiculed the argument with a withering analogy. A pet store “may have a policy of selling puppies only with leashes, but any customer will say that it does offer puppies,” he wrote. “Because a leashed puppy is still a puppy.” Now, as then, the cable companies insist they’re not puppies, and they don’t want to be leashed.

The bottom line: The Department of Justice is investigating whether cable companies’ video-on-demand services cripple Hulu and other competitors.

With Jeff Bliss
Greeley-brendan-190
Greeley is a staff writer for Bloomberg Businessweek in New York.

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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $54.26 USD
    • 1.04
    • 1.92%
  • TWC
    (Time Warner Cable Inc)
    • $142.98 USD
    • 2.05
    • 1.43%
Market data is delayed at least 15 minutes.
 
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