How Comcast's Netflix Bullying Could Cost Us AllS

Earlier today, Comcast and Netflix announced that they'd reached an agreement to help end stuttery Netflix performance to Comcast subscribers. It's actually not a breech of net neutrality; it's a different flavor of trouble and it's going cost all of us.

When a U.S. Appeals Court invalidated the FCC's net neutrality rules, it opened up the doors to all kinds of shady business where ISPs might extort other services for money if they wanted to reach users. This is not what's happening with Comcast and Netflix, though. Not quite. It's something far bigger than just that.

Reasonable discrimination

The Open Internet Order—which Comcast is required to adhere to until 2018 despite its invalidation—doesn't actually prohibit discrimination when it comes to delivering stuff to your computer; it prohibits unreasonable discrimination, which is to say discrimination for purposes of extortion, or for funsies. And when it came to throttling Netflix, Comcast had some reasons to fall back on.

Until now, Netflix's data has been sent through middlemen—companies like Cogent and Level 3—that take data from Netflix and ferry it to Comcast, but that also take data from Comcast and ferry it elsewhere. Those hand-offs generally take place free of charge; data needs to be exchanged both ways, and as long as it's even, everyone wins.

But Netflix threw a wrench in this system by being so big. The handoff points between Netflix-carrying middlemen and ISPs like Comcast and Verizon simply couldn't support exchanges that large. The only way to fix it would be to make the infrastructure at those meeting places more robust, but neither party was willing to foot the bill. So Netflix traffic—ostensibly thanks to its abundance rather than any shady dealing by Comcast—started getting throttled. There was just too much of it. It was reasonable discrimination to scale it back to let other things through instead of paying to fix the problem for its customers.

To solve the issue and save itself from cancelations by Comcast-subscribers, Netflix has ponied up the funds to cut out the middlemen, avoid the choke-points where data was getting throttled, and build a pipe to Comcast directly. A big pipe, just for Netflix. So instead of a harder-fought and probably long-delayed solution that could have resulted bigger, better, public pipes for the internet at large to flow through, we get a quick solution—but also a new precedent for how to handle massive amounts of data and whose responsibility it is to pay for it.

In short, the problem is everyone's but Comcast's.

A brave new world

As Timothy B. Lee at the Washington Post explains, this is where things get troubling, because Netflix and Comcast aren't violating net neutrality by setting up this new pipe; they are stepping around it entirely.

From the Post:

[The] conventional network neutrality debate implicitly assumes that residential ISPs receive Internet traffic from one big pipe. Network neutrality advocates want rules prohibiting ISPs from divvying this pipe up into fast and slow lanes based on business considerations.

But in a world where Netflix and Yahoo connect directly to residential ISPs, every Internet company will have its own separate pipe. And policing whether different pipes are equally good is a much harder problem than requiring that all of the traffic in a single pipe be treated the same.

If there's a precedent for companies with large amounts of data paying to do direct business with ISPs (which there now is), companies like Comcast—the biggest ISP in the United States—has little reason to spend money beefing up that one main pipe that the whole internet used to come through. In fact, Comcast specifically has good reason not to, because once that pipe gets too full of any one thing, it can turn to the company responsible and suggest they pay to set up a new private pipe.

There's an upside

There's an upside to all this; Netflix sending data directly to Comcast—or any ISP—provides a better experience for you. Your House of Cards marathon won't be restricted to choppy SD anymore. In fact, Netflix has a program called OpenConnect where it already offers direct connections to ISPs like Virgin, Cablevision, and Google Fiber, free of charge. And by voluntarily opting for OpenConnect, ISPs get better Netflix service for their customers, at the cost of shouldering the load of more Netflix traffic.

But free didn't work for Comcast, and now Comcast has convinced Netflix to connect directly and pony up cash for the right to do so. A move that it can pull off by being so damn big, and on pace to get bigger.

But carrier politics aside: Comcast users, your Netflix is getting better.

But we'll all have to pay

Still, this new pay-for-direct-connection precedent is bad for you, the consumer, on a whole bunch of levels. With this new deal, Comcast gets paid twice for delivering Netflix. First from you, the subscriber, and then from Netflix itself, for the privilege of being delivered. And what happens to the increased cost of Netflix's overhead if and when other ISPs who opted for solutions like OpenConnect see this deal as an invitation to extend their hands for the Comcast deal? It could ultimately end up on your Netflix bill. We could see the same thing happening to other independent services as well, lending an unfair advantage against any data-hungry service that isn't owned and operated by your friendly neighborhood ISP.

And what about feisty little start-ups who can't afford their own private highway? They won't get throttled on the main internet road unless they really clog it up, sure. But meanwhile, established champs who can pay for a separate tube have the advantage of not having to fight with a bunch of other traffic. It's about to get harder than ever for something like Netflix to come along again.

But the biggest takeaway is that the power to negotiate is no longer in the hands of the consumers, or even the folks with the services in high demand. Comcast didn't bother to try and fix its Netflix problem. It didn't even just sit back and let someone else fix it. It held out until Netflix had no choice but to pay for the privilege of fixing it. And since Comcast is on track to have more weight to throw around, along with an unfortunate new definition of "business as usual" on hand, it's hard to see how things stand to get much better if we all keep playing with bullies. But it's hard to stop when there's no one else around.