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Comcast deal gives it market power on Internet backbone, critic says

Grant Gross | May 9, 2014

Comcast's proposed purchase of fellow cable television and broadband provider Time Warner Cable would give it even more leverage in an Internet backbone market where the company has already begun extracting tolls from competitors, a backbone provider said Thursday.

Comcast's proposed US$45.2 billion deal would "threaten the innovative and entrepreneurial character and future of the Internet," said Dave Schaeffer, chairman and CEO of Cogent Communications Group, a backbone provider recently bypassed in a deal in which Netflix agreed to pay Comcast for faster access to its broadband subscribers.

The proposed merger has "the potential to cause grave anticompetitive and consumer harms for tens of millions of Americans who require access to high-speed, high-quality, affordable broadband Internet access," Schaeffer told the U.S. House Judiciary Committee's antitrust subcommittee.

Comcast Executive Vice President David Cohen dismissed Schaeffer's concerns during the hearing, saying it was Netflix's choice to bypass Cogent and sign a traffic priority deal with Comcast.

Comcast's gain in broadband market share through the Time Warner deal shouldn't have "any impact whatsoever" on the separate Internet backbone market, Cohen added.

The Internet backbone market is "an intensely competitive market with dozens of network operators, content delivery networks, peering organizations, transit providers," he said. "The Netflixes of the world, the Googles of the world, the Internet content companies, the young man working in his garage ... who wants to be the next Netflix, has dozens and dozens of choices on how to get his or its content onto the Internet."

But Schaeffer told a different story, saying Comcast has already used its position as the largest U.S. broadband provider to get favorable peering agreements. Since mid-2012, when Cogent and Netflix signed a deal, Comcast has refused to make inexpensive improvements to its connections with Cogent — and has refused Cogent's offer to pay for those upgrades, he said.

"The result was degradation of service for our customers and for Netflix's viewers," Schaeffer said. "By refusing to augment capacity to reach its subscribers at any time, Comcast is effectively blocking its subscribers from accessing any Internet content they want and for which they already have paid."

Antitrust authorities don't need to look at the Internet backbone peering market, countered C. Scott Hemphill, a professor at Columbia Law School. Payments to exchange Internet traffic are not new, although in many cases, the payment was a simple exchange of traffic, he said.

"What's really going on is a fight about who should pay for what in this highly competitive business of interconnection," he said.

Schaeffer's criticisms of Comcast's interconnection policies echo recent complaints from Netflix and from backbone provider Level 3. While Netflix signed a deal with Comcast, executives there have complained about paying Comcast to deliver traffic and called for the U.S. Federal Communications Commission to pass strong net neutrality rules prohibiting pay-for-priority arrangements.

 

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