The Wall Street Journal reported late Sunday that Apple wants to make the service on its Apple TV as good as cable, but to do that they will need some help from Comcast. Rumor has it that the two giants are in preliminary talks to partner on a deal that would reserve a congestion-free portion of the cable operator’s broadband service to ensure smooth video delivery. Last night the WSJ also reported that such a deal would likely draw close regulatory scrutiny and spark a new debate over whether cable companies can set aside part of their pipe for content providers, according to industry analysts and experts.
The rumors are suggesting that Apple wants traffic to their boxes to be given exclusive bandwidth separate from public Internet traffic using Comcast's domestic cabling, guaranteeing better quality for Apple's TV service than other VOD services. There is a precedent for traffic as a 'managed service' traveling in Internet protocol format, for example cable VOD and phone services, so it's not a given that any regulation could rule out Apple's proposal.
A Threat to Net Neutrality?
Back in January '14, the DC Circuit Court determined that the FCC has no authority to enforce 'net neutrality' rules, since service providers are not identified as 'common carriers'. It did, however, agree that they were allowed to make exceptions for managed services. Managed services get priority over other Web traffic in the 'last mile' of cable connected to homes, and data-use thresholds often don't apply.
We should remember that Comcast previously agreed back in 2011 to abide by net-neutrality conditions to gain regulatory approval for its merger with NBCUniversal.
Supporters of 'net neutrality' argue that approval for the proposed Apple deal would allow Comcast to pick content winners and losers on the Internet, and force innovative companies to pay a toll to reach customers with new applications. Other commentators quoted by the WSJ think the deal could well attract Federal attention but if it's concluded quickly could go ahead unregulated:
"The Comcast-Apple deal could revolutionize the pay-TV business, so it will naturally draw closer government scrutiny," said Guggenheim Securities telecom policy analyst Paul Gallant. 'Comcast and Apple wouldn't need government approval for such a deal, but regulators could get involved if anyone complains that an agreement violates other commitments Comcast has made.
'The FCC is writing new net-neutrality rules. Under its old ones, such a deal might be allowed through an exemption for managed or specialized services, like the VoIP phone service offered by many cable companies.'
Netflix is the obvious complainant to the deal. Chief Executive Reed Hastings pointed out that recently that Comcast was giving special treatment to its own TV app, while not giving the same advantage to Netflix. He is quoted by the WSJ as saying in a Facebook post: 'Comcast should apply [data] caps equally, or not at all. In what way is this neutral?'
The cable industry begs to differ: "As the Commission has previously recognized, consumers benefit not only from a growing open public Internet, but also from the evolution of innovative, specialized services," a spokesman for the National Cable Telecommunications Association said to the WSJ on Monday. "We fully support this conclusion and expect future regulatory proceedings to recognize this fact."
Comcast must feel in a fairly commanding position right now. They have the opportunity to exploit a loophole to start charging media companies wanting to provide consumers with high-bandwidth services in the future. Approval for the Apple deal could start that ball rolling and opens the question of whether other media distributors like Netflix will have to follow the same route to stay competitive.