Beyond Comcast-Time Warner Cable: The Fragmentation of the American Internet

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Anant Raut, Apr 14, 2014

The fate of Comcast-Time Warner Cable is almost an afterthought for web content creators, who are facing a much more existential threat. The D.C. Circuit’s decision in Verizon v. F.C.C.┬áseemed to sound the death knell for net neutrality, validating “pipe” owners’ discretion to price discriminate the web content they carry. Unless the Federal Communications Commission (moved quickly to take regulatory action, warned the commentators, broadband providers such as Comcast and Verizon would extort a toll from high-volume content providers such as Google, Netflix, and ESPN to ensure that their content loaded just as smoothly as their competitors’, or, for an extra price, faster, essentially creating a protection racket under the guise of an economically efficient two-sided market.

Except the big content providers may not be as captive as we think. Over the years, hints have emerged that the most successful content providers have tried to reduce their dependency on the pipe owners: whether Netflix caching its content directly in the last mile through Open Connect; Google experimenting with running a lightning-fast fiber network; or Apple stitching together its own delivery network ahead of its rumored move into higher content offerings. Should the FCC fail to restore net neutrality rules, this may be the moment when the biggest content providers decide to disintermediate the pipe owners entirely and sell broadband service directly to consumers.

But a splintering of the neutral net into branded internets would only widen the digital divide in this country. Because of the capital costs of building and maintaining broadband architecture, the branded internets are likely to focus on dense, urban markets where the bulk of their users live. Left behind will be the rural, less affluent regions of the country that already have trouble getting more than one internet provider to compete for their business. If the FCC fails to reverse the D.C. Circuit’s decision, then the market will find a way to correct itself; but in a way that only benefits the most profitable segment of the consumer market.