Faulhaber, Comcast, and Antitrust

[David Farber <dave () farber net>]

Begin forwarded message:

From: Dave Burstein <daveb () dslprime com>
Date: January 21, 2009 8:55:05 PM EST
To: dave () farber net
Subject: Faulhaber, Comcast, and Antitrust

Dave
I'm in direct disagreement with both of you on the principles behind  
this one, although I'd agree this case is probably trivial. Comcast  
has enough capacity, I believe, that very few VOIP calls will be  
affected in practice. If Comcast's data service did a poor job  
carrying video over the net to the point their video programming had a  
major advantage, I think we would have a real issue.

    Everything I know - including the reasonable 250 gig cap -  
suggests Comcast is playing fair with video competitors, living up to  
Brian Robert's comment "shame on us if we can't compete." Other  
carriers selling video I believe are taking measures that prevent a  
customer watching things over the Internet, such as Frontier's  
proposed 5 gig cap - two movies a month.

    Consider AT&T's U-Verse IPTV. Through about 2006, some AT&T  
people were saying that if they didn't restrict TV over the net their  
backhaul would be impossibly clogged. The rumor in the industry was  
that  they hadn't put in enough backhaul, whether for capex or to  
limit video competition. If that proved true, then even if I had a ten  
meg AT&T DSL line I'd often have problems watching TV. Dan Berninger,  
Susan Crawford, and others have pointed to that possible problem.

     I took it very seriously because a very senior telco exec (far  
off the record) had looked me in the eyes and said "of course that's  
what we are going to do. They let the cablecos have a walled garden,  
so they have to let us do the same." I heard very similar from several  
other executives, usually as a way to reassure wall street they  
wouldn't be hurt by video competition over the net. That's why I threw  
myself into net neutrality.

   I believe NN has pretty much been won in the U.S. after enormous  
effort, with vigilance still needed. If the networks remain neutral  
and other obstacles (caps, excessive prices) prevented, this will be a  
minor issue in the U.S.

     I had a chance to discuss this with Kevin Martin in 2005. He  
recognized the possibility, but said he hoped the cable-telco  
competition would be enough to prevent serious abuses. In the U.S.,  
among large carriers, it has worked that way so far although Time  
Warner and AT&T have suggested that might change.

     A duopoly often behaves as a cartel/monopoly, but this seems to  
have worked in the U.S. so far. Hopefully, the furor over NN will keep  
them reasonable and Kevin's instincts prove right in the end. (There  
are real problems for smaller networks and in other countries. British  
carriers have threatened to shut down the BBC iPlayer, and DT outlined  
a major business plan to block video providers who didn't pay a  
special fee.)

    Around 2006, AT&T CEO Ed Whitacre and their SVP Jim Cicconi made  
strong statements they did not and would not have any problems like  
that. "We will not degrade a signal coming from the Internet. If we  
get a two megabit video stream at the edge of our network and our  
customer has three megabit service, they will get that two megabits  
reliably." I since have been told the same by Verizon

    In practice, carriers like AT&T, Verizon, Comcast, British  
Telecom and Free.fr have discovered that upgrading the switches, WDM  
and similar gear is cheap enough they can afford to virtually  
eliminate congestion and have happy customers. (Comcast and other  
cable companies do have a problem on the shared local upstream, at  
least until they upgrade. Large DSL and fiber builds rarely do, and  
Comcast in a filing said they had no downstream problems.)

   So my take is that on this Comcast is de minimus, but the  
principle is important because otherwise the carrier has strong  
incentive to give their video a major advantage.

   The best way to avoid the issue is to have enough capacity it  
almost never comes up. Whether that's practical isn't a theoretical  
issue to be solved by models but an empirical one about the actual  
costs of having sufficient capacity. Luckily, routers etc. have been  
coming down in price so rapidly that the bandwidth costs for a large,  
wired carrier are typically less than $1 on a $20-50 service, so not  
an issue. Small carriers who don't have dedicated fiber and the cable  
upstream have issues, although most are solvable.

    In Europe, a survey of senior telco executives found about 80% of  
them wanted to charge competitive and it's a very open issue.  Ed  
Richards at OFCOM has decided NN is not necessary as along as their is  
(limited) disclosure.  Richards is probably wrong where competition is  
weak. Rochester NY is served by Frontier and Time Warner, both  
rhetorically militant against over the top competition. They've both  
suggested charges that would get prohibitive at 3-13 movies a month,  
including a 1,000% markup for any overage. Rochester has no other  
major choice at video speeds if many people wanted to watch Hulu or  
ABC over the net.
db




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