Wednesday, April 23, 2008
JawJaw
It gets uncomfortable for a company to have a Federal regulator criticizing it repeatedly. That is what is happening to Comcast, the broadband and TV cable company. Comcast says that it has a right to control its delivery systems so heavy broadband traffic doesn't bring down the network for all. The regulator says it is Comcast's responsibility to carry all traffic without prejudice -- i.e. net neutrality.
So who is right and how does Comcast protect its reputation from further damage? The answer to the question is more complicated than it seems. For Comcast to be net neutral, it has to expand its network's capacity to handle huge bursts of data. That's expensive and someone has to pay for it. Either everyone pays for the expansion -- even light users -- or just those who are heavy users through volume pricing. Comcast has not moved toward volume pricing yet, but other internet service providers have. Increased cable rates or volume pricing will further erode Comcast's reputation with users who have alternatives, unless every other ISP takes the same approach at the same time. Meanwhile, the regulator goes around the country and criticizes it.
It is never comfortable being a "whipping boy," but that is what is happening here. It would easy if Comcast could make an agreement to expand capacity and get the regulator off its back, but what happens when insatiable demand for more capacity occurs again? Who pays for expansion the next time? Threats to reputation are never-ending.
From a long-term reputational point of view, it is probably best for Comcast to stand its ground to avoid further damage later. On the other hand, it if takes that decision, it will need the courage to tolerate the "jawjaw" of the Federal Communications Commission.
So who is right and how does Comcast protect its reputation from further damage? The answer to the question is more complicated than it seems. For Comcast to be net neutral, it has to expand its network's capacity to handle huge bursts of data. That's expensive and someone has to pay for it. Either everyone pays for the expansion -- even light users -- or just those who are heavy users through volume pricing. Comcast has not moved toward volume pricing yet, but other internet service providers have. Increased cable rates or volume pricing will further erode Comcast's reputation with users who have alternatives, unless every other ISP takes the same approach at the same time. Meanwhile, the regulator goes around the country and criticizes it.
It is never comfortable being a "whipping boy," but that is what is happening here. It would easy if Comcast could make an agreement to expand capacity and get the regulator off its back, but what happens when insatiable demand for more capacity occurs again? Who pays for expansion the next time? Threats to reputation are never-ending.
From a long-term reputational point of view, it is probably best for Comcast to stand its ground to avoid further damage later. On the other hand, it if takes that decision, it will need the courage to tolerate the "jawjaw" of the Federal Communications Commission.
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