Studios’ failed effort in 2012 to promote the Stop Online Piracy Act (or SOPA) made it clear: Big Media companies had better not mess with Silicon Valley. Too many people love the Internet, and they’ll crush anyone deemed to be a threat to the medium by its biggest service providers including Google, Apple, Facebook, Yahoo, and Netflix. That’s why Comcast needs to make peace with tech companies as the cable giant promotes its planned $42.5B acquisition of Time Warner Cable — and suggests that the new interconnection deal with Netflix is the first of many agreements with tech world Goliaths. If they’re unhappy, then they may embolden Washington regulators reviewing the TWC acquisition to demand a long list of concessions –and under extreme circumstances could even block the deal.
While terms with Netflix weren’t disclosed, the agreement will ensure that Comcast’s broadband customers receive, as the companies put it, “a high-quality Netflix video experience for years to come.” Bernstein Research’s Carlos Kirjner says this morning that he’d be “surprised” if the Comcast-Netflix agreement “was not conditional on a tacit (if not explicit) agreement by Netflix not to lobby regulators” to demand detailed promises to protect Internet access. Others, including Stifel analyst Benjamin Mogil, are waiting to hear about additional terms with Netflix, including a promise to add the service to Comcast’s set top box so subscribers don’t have to switch to a different input when they want to watch the streaming service on their TV sets.
What’s next? Tech companies will be all over net neutrality, a popular issue where the devil’s in the details. They also are eager to resolve issues regarding peering — the conditions on traffic as it’s transferred to Internet companies before it enters the cable company’s network. “Peering is the biggie,” Georgetown Law School’s Andrew Schwartzman tells me. Other issues will be less straightforward. For example:
- Usage based broadband pricing. Tech giants hate Comcast’s efforts to start putting a meter on broadband usage — making it more like water, electricity, or gas. Regulators don’t want this issue to end up on their laps. Broadband companies and many economists say that all-you-can-eat fees that effectively require light Web users to subsidize heavy ones — including people who frequently watch services such as Netflix.
- Set top box access. Consumer electronics companies will want regulators to force Comcast to relax its grip over decoder box. For example, Apple hasn’t been able to introduce its much-rumored iTV – designed to make it easy for customers to access conventional TV and Web videos – because cable companies make it so difficult for outsiders to unencrypt signals, opening the way for them to insert themselves between the operator and its subscribers. TiVo has had little luck trying to persuade consumers to buy DVRs that use federally mandated Cable Cards to replace the set top box. The cards don’t accomodate two-way traffic, cutting out access to a provider’s VOD services.
- Competition. Internet services fear Comcast’s ability to use its cable and broadband clout, as well as its NBCUniversal resources, to challenge them. Would it enhance competition, or diminish it, if Comcast were to create a national video streaming service that rivaled Netflix or Amazon? How about if it created an online pay TV service similar to the ones that Sony and Verizon plan – and that would also make Comcast a direct competitor to other cable operators as well as satellite and telco video?
- Access to data. Most tech companies crave data – especially the kind that can help them to target ads. As Comcast expands, and the distinctions between its conventional TV and Internet services blur, it will control a precious pool of information that can help advertisers determine what a particular viewer plans to buy next
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