The Comcast Tax and Broadband Shell Game

Cable companies operate two distinct lines of business.

Traditionally they bundle and resell linear TV networks.  The cable company feeds these networks into our homes and provides the interface that lists the content for our selection.  The cable company pays each network a fee for each subscriber.  The consumer pays a monthly fee to the cable company.

The cable companies also provide high speed Internet access, known as broadband.  With this service, they do not pay any content providers for their channels nor do they provide a guide to the content that flows through the pipes.  They move the bits requested by the consumer as well as those bits she sends back out to the Internet.  And the consumer pays a monthly fee to the cable company.

One service allows you to navigate and view a predetermined, pre purchased bundle of linear channels. The other service gives you a pipe and access to an infinite array of content.

In its traditional business the cable company is the ultimate gatekeeper. It determines what you can see and what you will pay. 

With broadband, the gatekeeper role disappears.  Cable companies do not determine what you will watch nor do they charge you based on the content you watch.  

Some cable companies would like to change this.

Cable companies feel much more comfortable seeing the world through the lens of their traditional business.  They are working to reshape their broadband business so it looks more and more like their traditional business—a closed system, where they act as a gatekeeper and extract rent at every turn. 

See, for example, the comments made by Brian Roberts, the head of Comcast, at the recent Re/code conference.  As reported on GigaOm,

 “In a series of analogies, Roberts likened his company’s role to that of a postmaster, pointing out that Netflix pays hundreds of millions of dollars to mail DVDs to its customers but now expects to be able to deliver the same content over the Internet for free.”

His analogy is wrong.  Netflix does not want to distribute its bits for free.  He obfuscates the truth about how bits are paid for and how bits travel across the Internet.  He sows confusion while claiming to be clear.  Watch carefully as the shell gets moved.

Netflix pays money (a lot) to third parties in order to transport its bits over the Internet. (Just as it pays the postal service for DVD transport.) These bits are delivered via the Internet directly to the cable companies and other ISPs known as the last mile providers.  They in turn deliver the bits to their subscribers.

Mr. Roberts neglects to mention that broadband subscribers (you and I) pay up front for access to these bits. (Remember that monthly fee!)

Comcast is not satisfied with what we pay for broadband. It would like a little more.

As Mike Masnik puts it,

“What Roberts really wants to do is to get Netflix to pay a second time for Comcast’s customers’ bandwidth, even though they’re already paying for it.”

I believe this is called double dipping.

Mr. Roberts can double dip if he so chooses—but he should call it what it is.

Guess what happens when extra rent is extracted?

The end user pays extra.

Perhaps we should call it the Comcast tax.

UPDATE: John Oliver just did a brilliant and funny piece on his HBO show about net neutrality—it is a must see—here it is. (thanks to Sheri Candler)

About Chris Dorr

I consult with companies on digital media strategy and business development. Clients include Samsung, MTV Networks, Tribeca Film Festival, Shaw Media and Canadian Film Center. I created the Future of Film blog for Tribeca. I have worked in the movie business for Disney Studios, Universal Pictures, Scott Free and in the digital media business for Intertainer, Sony and Nokia. Contact me at chris@digitaldorr.com or follow me at @chrisdorr
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  • hostile_17

    What are that audience on? I want some.

  • MJB

    Cable companies are just as bad as the Broadcasters. The Broadcasters charge the advertisers to advertise on their broadcasts and then tell the cable (or sat providers) they need to pay again for the “right” to include something the consumer can get for free over the air… It is absurd! The cable companies are just pissed because they are not double dipping like the broadcasters…. but they want to!