Paying For A Faster Stream?

Andrew Sullivan —  Mar 26 2014 @ 10:29am

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As Comcast and Apple consider teaming up for a new streaming video service, Gautham Nagesh reports that any potential deal “would likely draw close regulatory scrutiny and spark a new debate over whether [a cable company] can carve out a part of its pipe for content providers.” Matthew C. Klein absorbs the news:

According to the Wall Street Journal, Apple is trying to persuade Comcast Corp. to separate its data “from public Internet traffic” by treating it like Comcast’s own video-on-demand service. Consumers would be guaranteed superior picture quality and none of the buffering hiccups found in many streaming services. If the two sides can work out terms, it would be fundamentally different from the recent agreement between Comcast and Netflix Inc. and also different from what Apple had been discussing with Time Warner Cable Inc. before Comcast agreed to acquire the second-biggest cable company. Technically, Apple isn’t asking to have its traffic actively prioritized over that of rival video services, although that is probably what would occur in practice. That means the arrangement may be able to slip past rules meant to prevent residential broadband companies from giving preference to one service over another.

He doesn’t see much of value in the deal for Comcast, noting that they would be drawing a regulatory target on their back and don’t seem to need what Apple could offer them. Derek Thompson is also skeptical:

It’s fairly clear why this deal would be great for Apple – it would officially transform its TV “hobby” into a TV business. People once thought that Apple would build an actual TV, but actual TVs are a terrible, zero-profit product with a high-turnover rate. Others thought it would partner with media companies to offer a fresh take on the cable bundle, but media companies don’t want to partner with the folks who destroyed the record industry by selling songs for $0.99. Therefore Apple’s TV strategy must revolve around its hockey puck. Horace Dediu estimates that Apple has sold about 25 million of these guys. A deal with Comcast/TWC could easily double that figure.

But what exactly is in this for Comcast?

The cable company would have to invest in new network equipment to make this partnership work. It would tempt net-neutrality restrictions by giving Apple preferential treatment along its pipes just as its Time Warner Cable acquisition faces accusations of a law-breaking monopoly. Plus, Comcast would have to give Apple a share of its pay-TV profits in exchange for popularizing a device that’s partially seen as a replacement for pay-TV. Henry Blodget says there is no way this deal is going down. I say he’s right.

Meanwhile, Jordan Weissmann argues that Apple shouldn’t have to negotiate with Comcast to provide better service:

In an ideal world, where the US had a respectably fast broadband infrastructure, these discussions wouldn’t have to happen at all. As you may recall, Netflix announced its own deal with Comcast last month to improve delivery of its streaming video – after which Netflix CEO Reed Hastings published a screed about the need for stronger net neutrality protections. But every time you see one of these agreements, keep in mind that the fundamental issue isn’t so much net neutrality – the idea that Internet service providers should treat all data equally, no matter where it originates—as it is the crippling lack of broadband competition in this country. Americans pay some of the highest prices for Internet access in the developed world; in return, they get some of the most mediocre service. That’s largely because consumers only have two or three providers in their geographic area, which doesn’t give Comcast or its peers a great deal of incentive to beef up their networks (or to lower prices).

(Chart from the BBC)