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Netflix Warns FCC Caps Are Being Used Anti-Competitively
Comcast's Treatment of Xfinity on 360 Content Rekindles Debate
by Karl Bode 02:56PM Thursday May 10 2012
Netflix, who once thought bandwidth caps were no big deal, not too long ago finally realized that they can indeed be used anti-competitively to put services that compete with an ISPs content at a competitive disadvantage. Since that time they've been heavily criticizing "cap and overage" ISP pricing models, arguing that they're in no way based on economic or network congestion realities, but are instead primarily used to drive already-expensive broadband prices up, and to drive Internet video competitors out of business.

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Though the chance of any real net neutrality consumer protections are essentially dead in the United States for now, the subject has seen renewed interest after it was revealed Comcast Xfinity content on the Xbox 360 doesn't count against their usage cap. The story has caused some companies like Sony to rather-belatedly realize the potential competitive issues caps raise for Internet video.

To try and hammer their point home, Netflix executives went to the FCC this week to put on a presentation dubbed "a Level Playing Field for Video." In it, Netflix expresses concern at the growing number of ISPs (like Comcast, Time Warner Cable and AT&T) who have imposed usage limitations on their users based on congestion or economic viability claims they've never bothered to prove. AT&T, for example, claimed they had to impose usage charges on both U-Verse and DSL users because of congestion, though evidence of said congestion has never been presented (or asked for by the press).

Netflix's presentation this week highlights how while Comcast's Xfinity Xbox 360 content, AT&T's U-Verse Xbox 360 content, and Time Warner Cable's iPad content all fail to count against the companies' usage caps, third-party services like MLB.tv, Hulu Plus, and Sony's Crackle have consumers watching their wallets. In Comcast's case, they've argued that they're simply using the Xbox 360 as a cable box, and that the traffic doesn't count against the cap just like traditional QAM television signals.

Granted, the very existence of caps (and especially overages) exists as a deterrent to the consumption of video, particularly in HD heavy households. The push toward caps and overages has always been about protecting TV revenues from Internet video, with congestion (which is not a problem on well-managed landline networks) used as a convenient bogeyman. The next revenue grab by carriers, as we mentioned this morning, is to try and charge these companies an additional toll if they want their content to be exempt from usage caps.

In short, you've got U.S. carriers imposing punitive and unnecessary new consumption pricing on a public that already pays more for bandwidth than most developed countries, with carriers then hoping to use that pricing to drive up competing content costs anti-competively. All of this is of course spawned by the level of stagnant competition in the U.S. broadband market, which leaves lumbering duopolies in a gatekeeper position regulated by apathetic politicians-for-hire. It remains rather interesting that it took many content companies half a decade to realize the rather obvious threat that network monopolists and caps and overages pose to their business models.