Some truth about Comcast - WikiLeaks style

Thu Dec 16 06:05:39 UTC 2010

> From: JC Dill 
> Sent: Wednesday, December 15, 2010 9:13 PM
> Cc: nanog at nanog.org
> Subject: Re: Some truth about Comcast - WikiLeaks style
> 
> Sure, Comcast's customers are also paying Comcast.  But Comcast wants
> to
> get paid from the content provider.  I think they are betting that in
> the long run it's easier to make money from content providers (and
have
> the content providers charge customers or advertisers as necessary to
> make a profit) than to make money from the end consumer.  And I think
> they are right about this "easier" part.  I think that they will
> succeed
> at pressuring big content providers to play by Comcast's rules and
> shift
> the cost of running Comcast's network from consumers to content
> providers.
> 
> jc
> 

There are two different innovation paths according to who is paying.  If
the customer is paying, innovation is driven by the interest of the
customer.  If the provider is paying, innovation is driven by the
interest of the provider.

If the customer pays the cost of the transport, a provider with better
transport efficiency / quality ratio wins.  It spurs innovation where we
get better quality product with a better transport efficiency.  If there
are three competing content services in the market offering basically
the same quality product, the one with the better transport efficiency
is going to win customers.  Or in some cases the customer might choose
to sacrifice some quality for transport efficiency.  The market
eventually settles on what the customers in the aggregate decide is
their willingness to trade price for performance.   

If the provider pays the cost of the transport, a provider might
effectively subsidize the transport cost of a bloated content
distribution mechanism.  It won't make any difference to the last mile
delivery network either way.  Either way they get the same amount of
money.  If provider pays the freight, there might be some company with
an absolutely killer technology that can stream much higher quality
stuff with less bandwidth usage but if the customer doesn't see the
benefit, that in and of itself isn't enough to drive eyeballs to that
content.  If that content transport method did save the customer money,
the eyeballs would move in that direction.

Having the provider pay the cost stifles technological advancement.  It
facilitates a "deep pocket" established company creating a barrier of
adoption to a startup who might have a more efficient product but the
user doesn't get any direct benefit so they don't adopt it.  Having the
user pay gives an incentive to develop technologies that reduce the
network burden.  Having the provider pay distorts innovation.

In the end, having the end user pay the cost for the product they are
consuming results in better, faster, cheaper (yes, you can have all
three).  Externalizing those costs through subsidies by outside parties
throws things out of balance and drives innovation in a way that
benefits the provider, not the consumer.