The merger of Comcast with Time Warner Cable isn’t the main problem. The main problem is NOT will the merger adversely affect competition, will the merger harm the “virtuous cycle” of innovation, as Netflix puts it, or limit content quality to consumers. No. The main question that the public should be asking is: Who can handle the costs of increasing infrastructure the most efficiently?
For you see, the main problem that Netflix has with the merger is that they are afraid that the bigger Comcast would strong-arm Netflix into even more costly contracts to handle Netflix content over Comcast’s pipes. But what the public and the FCC has to realize is that at a given peak time over the Internet, Netflix accounts for a third of all data sent over the Internet (Huffington Post).
Netflix’s main point to the FCC, as stated in their letter, is that the FCC should essentially force Comcast to maintain unlimited Internet usage over its pipes for content providers like Netflix, Google, Yahoo, Facebook, to name a few, and for consumers, and NOT charge content providers extra for faster speeds and increased usage of less congested pipes.
However, if you stare at that request long enough, you’ll see that Netflix just doesn’t want to bare the extra costs that its users are placing on Comcast’s infrastructure. With Netflix’s users increasing usage, more infrastructure has to be built to handle the increasing usage, otherwise users get stuck with congested and buffering Netflix and Internet. Should Netflix’s FCC request go through, that would mean that Comcast bares the cost of increasing infrastructure to handle the increasing load. The costs would then get passed on Comcast users, such as the everyday consumer like me and you, but also to companies who rely on Comcast for their services, like small businesses. These small businesses would then have to either absorb the increase in costs or pass it on to their customers, people like me and you. So in that scenario where Comcast absorbs the cost, the people that end up paying the price are Comcast users like me and you.
However, should the FCC wise up and notice this, and allow Comcast and other ISP’s to charge for usage of fast lanes as a means to decongest their pipes, meaning, those that really want to use it will find the means to pay for it, will shift the costs of building the infrastructure to those that really benefit from the increase in infrastructure. For example, if Comcast is allowed to shift the costs of building the increased infrastructure to Netflix, because Netflix will be the only one essentially using those pipes and seeing as how Netflix users already account for an increasing amount of one third of the Internet, the costs would be going to those that are directly benefitting from the costs.
Comcast builds the increased pipes to handle Netflix users’ loads. The costs of building those pipes get sent to Netflix, who in turn shift those costs to Netflix users. So in the end, Netflix users end up paying for the pipes that they stand the most to benefit from.
In the first scenario, Comcast baring the costs isn’t the most efficient outcome because the costs are ultimately ending up being paid by everyone, including those that don’t have Netflix nor plan to use it. The second scenario is the most efficient answer, the costs of building the pipes to handle Netflix’s increasing loads get placed ultimately to Netflix users.
Jack the Dreamer