THE BLOG
09/25/2008 05:12 am ET | Updated May 25, 2011

Comcast Attitude Exposes Fraud of Internet 'Free Market'

It didn't take long for Comcast to ruin once again the mythology of the "free market" in broadband. This concept is an integral part of the philosophy of John McCain and will likely be reflected in the Republican Party platform in a couple of weeks.

The existence of the "free market" in broadband means that there's no need to guarantee that those controlling the networks - the telephone and cable companies - won't impose themselves on what you want to do online, that you, the person at the keyboard, is the person in control of your Internet experience.

Here's the setup. Last week, as the Federal Communications Commission (FCC) was preparing to issue an order smacking down Comcast for interfering with user's online rights by blocking traffic, Comcast came out with a stunning announcement. On Wednesday (Aug. 20), two days before the FCC meeting, Comcast Senior Vp Mitch Bowling told Bloomberg News that in an effort to control traffic, Comcast might slow down the transmission of packets from its heaviest users by "10 minutes to 20 minutes." PC Magazine had the same story.

By Thursday, Comcast had backed off, telling IDG that the company had made "no final decisions" on how to proceed with a traffic management plan.

Apparently, at one point the plan was to delay the traffic of heavy users until, that is, someone at Comcast realized they had another PR disaster on their hands and backtracked faster than a Comcast user with supplemental Powerboost. You remember Powerboost -- supposed to make it easier to download lots of material faster. It will be interesting to see how that enhancement survives in the new era of enforced Internet shortages.

More than Comcast's obvious embarrassment, however, the announcement that it was even thinking about holding up the traffic of heavy users is just another demonstration of how far off the thinking is of those who continue to insist there is a "free market" for broadband. In what other industry could a provider willy-nilly hold up the service of a customer using the bandwidth he or she is paying for without suffering any competitive consequences?

Not in the broadband market. The testing centers Comcast is using are, for the most part, small towns with little or no competition -- Chambersburg, PA; Warrenton, VA; East Orange, FL (nor incorporated) and Lake City, FL -- all have fewer than 20,000 people and in some cases a population with lots of low-income residents. The exception, Colorado Springs, CO, has 360,000 people and some competition that may eventually develop from two other cable systems, Falcon and Porchlight, which have been awarded city franchises to compete with Comcast. But at the moment they still serve small areas and Comcast is still the dominant player.

For an illustration on the malicious evil of duopoly, consider this story from upstate New York. The customer's telephone company, Frontier (formerly Rochester Telephone), imposed a 5 GB/month usage cap - hardly enough for some movies and TV. He might switch, but the cable company is Time Warner, which is playing around with a cap of similar size.

A revealing quote from the story cites an internal Frontier email which says, "The growth of traffic means the company has to invest millions in its network and infrastructure, threatening its profitability." That's a shame for a company that on August 5 reported "Solid 2008 Second-Quarter Results with Strong High-Speed Net Additions." In their financial news release, the company said data and Internet revenue continued to grow, and their capital expenditures were up 14 per cent from second quarter 2007.

Even so, it is much easier, after all, simply to clamp down on your customers than to expand the business. It's easy to concoct an artificial network shortage in a less than competitive environment. That's one interpretation. The other, from the story, is that it shouldn't be hard for the company to keep up if it makes the right investments.

A less-than-competitive market can lead to all sorts of mischief. Usage caps, "deprioritization," even a service which violates every tenet of Net Neutrality can all be "justified" in the name of managing a network in a time of shortages.

The public never gets to see what causes the shortages. There are no cases before the FCC or state regulators in which evidence has to be presented for public view. Every once in a while there might be a data request, as Canadian regulators did recently, finding little need for "throttling."

No, the eventual answer should be something that recognizes the reality of the situation. Broadband now doesn't present sufficient competitive choices for consumers, and the policies should be changed to make certain that those choices can be created. Maybe then will the now-mythical "free market" become a reality. Certainly it won't happen before then.