The fall of net neutrality: Cable's plot to destroy the internet

Higher costs and worse service loom on the horizon

In other words, operating on the cheap can be very good for business.

Would you like the Democratic Party gift wrapped, sir?

Owning the content as well as the pipes gives Comcast an unprecedented advantage. That's why Senator Franken objected to the company's $13.8 billion purchase of NBC/Universal in 2010.

Acquiring NBC turned Comcast into an entertainment juggernaut with at least two dozen cable channels (Bravo, SyFy, USA), numerous production companies, a movie studio, and theme parks. It even owns one-third of the pay-TV alternative Hulu.

Dr. Andrew Oldlyzko notes that 
the feds stepped in before to save 
the internet
Dr. Andrew Oldlyzko notes that the feds stepped in before to save the internet

Since Comcast owns much of its TV programming, its competitors will always pay more. Meanwhile, due to its sheer size, Comcast can command better prices from other programmers. And by owning numerous NBC affiliates, the company also pockets rich retransmission fees that pay-TV must send to local network broadcasters.

With Comcast already holding the most dominant market position in both cable and internet, a newfound ability to charge extra for faster internet creates tremendous incentive for abuse.

Not that government seems to care. Republicans have shown little interest in thwarting monopolies, and have often been downright hostile to consumer protection. With the cable industry slathering Democrats with money, expect few outside Franken to make a fuss.

Last year, Comcast spent $18.8 million in lobbying, the third-most by any corporation. It's made over $7 million in campaign contributions since the last election cycle, nearly 60 percent of that to Democrats. With mid-term election season coming, politicians aren't typically interested in ruffling the fattest donors.

"The public interest is best served by having an open internet," says Congressman Keith Ellison (DFL-Minneapolis). "Once you start introducing payola, or pay-to-play to have a faster lane, you penalize anybody who can't pay the top dollar.... You're going to have special interests trying to advance their profitability and win friends. I hope my colleagues understand they're here to look out for the public interest."

That's easier said than done when Comcast President Brian Roberts golfs with Presidnet Obama, Executive Vice President David Cohen raised $2 million for the president's campaigns, Wheeler raised an additional $700,000, and former Comcast Vice President David Krone now serves as Majority Leader Harry Reid's chief of staff.

The cherry on top: Comcast also owns MSNBC, the official cheerleader for the Democratic Party.

"Millions of people raising their voice is one thing," says Christopher Mitchell of the Institute for Local Self-Reliance in Minneapolis. "Comcast raising millions of dollars is another.... Comcast is a huge fundraiser for the party and you just can't get away from that."

The FCC takes a dive

The origins of net neutrality go back a dozen years to when then-FCC Chairman Michael Powell (yes, Colin's son) decided to deregulate cable broadband. (The FCC failed to respond to multiple interview requests.)

Powell, befittingly now president of the National Cable and Telecommunications Association, believed this would spur competition and new technology. Instead, it hastened industry consolidation and slowed investment.

The FCC's been trying to walk back Powell's decision ever since. The easy move would have been to regulate all internet providers like phone companies. But the agency chose an industry-friendly path, proposing a series of tender rules that have been sabotaged by lobbying and lawsuits. Twelve years later, the FCC is still trying to corral the industry.

The absence of regulation has allowed ISPs to push the line. In 2007, Comcast was caught secretly throttling the speeds of customers using the file-sharing software BitTorrent. The company claimed it was necessary because they were using too much bandwidth.

This behavior not only violated net neutrality, but prompted the FCC to demand greater transparency in how ISPs manage their traffic. Comcast took the FCC to court and won.

In January the FCC's latest attempt at net neutrality rules were tossed out. They were judged too similar to those governing utilities. If the FCC didn't want to classify broadband as a utility, it couldn't be regulated like one.

As a result, the FCC's only choice was piss off cable by making it a utility, or allow the industry to wreak havoc on the internet.

Time Warner and Comcast have offered Washington their input — in tens and twenties — to the tune of $30 million since the last election. With volume like that, the FCC couldn't help but listen.

Wheeler's Appomattox

In May, Wheeler offered new rules that carve out a loophole for "paid prioritization." All data would still move freely. It will just move faster for those with cash.

Wheeler claims that ISPs will be barred from "commercially unreasonable" behavior — such as Comcast creating a faster lane for its own content.

"If anyone acts to degrade the service... for the benefit of a few, I intend to use every available power to stop it," he promised in an April blog post.

That's great rhetoric, but once loopholes are built, they tend to expand rather than constrict. And it's certainly easier to limit anti-competitive behavior from the start — before smaller companies are already vanquished or debilitated.

Cable industry chieftain Michael Powell has already promised "World War III" if the feds move to utility-style regulation. But the idea is already working in other countries, where American internet service would be considered primitive by comparison.

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