Comcast's public WiFi plan raises a big question about its proposed Time Warner merger

By David Sirota , written on June 16, 2014

From The News Desk

As Comcast works to guarantee smooth regulatory sailing for its proposed merger with Time Warner Cable, the company is trying to swap its reputation as a heavy-handed monopolist for an image that's a bit warmer and fuzzier.

But that extreme makeover probably will not be helped by the company's recent decision to flip a switch and turn tens of thousands of home cable modems into public wifi hotspots - all without much notice to unsuspecting customers. Indeed, for all the legal issues about privacy and consumer rights this push for a nationwide public wifi network presents, some of the most immediate and politically problematic questions it raises relate to the core assumptions being made about the Comcast-TWC merger.

To understand how Comcast's public wifi program intersects with the politics of the merger, recall Comcast's high-profile dispute with Netflix over bandwidth.

As CNET has reported, "While Netflix wanted to connect to Comcast's network for free, the cable giant sought compensation for the heavy traffic that Netflix users generate, arguing that it costs the company a lot to deliver Internet video." In other words, in trying to avoid the Godzilla Monopolist image in advance of regulatory hearings about its TWC merger, Comcast has been insisting that in the Netflix affair, it wasn't simply leveraging its market share to unfairly extract profits from a content provider. Instead, the company has essentially claimed it is simply charging Netflix a necessary fee to compensate for the extra cost of using Comcast bandwidth.

While the Federal Communications Commission on Friday announced an investigation into all this, the core assumption about supply and demand is clear: Comcast is essentially claiming that its bandwidth is in such short supply that it must charge content providers like Netflix extra fees for access to that bandwidth. In this version of the story, Comcast isn't abusing its market share, it is merely making a responsible and necessary decision to charge providers for their use of a supposedly dwindling supply of bandwidth.

Yet, here's the rub: Comcast's public wifi project seems to contradict that fundamental supply-and-demand argument. As explained by ExtremeTech:

The more curious bit is Comcast’s assertion that this public hotspot won’t slow down your residential connection — i.e. if you’re paying for 150Mbps of download bandwidth through the Extreme 150 package, you will still get 150Mbps, even if you have five people creepily parked up outside leeching free WiFi. This leads to an interesting question: If Xfinity hotspot users aren’t using your 150Mbps of bandwidth, whose bandwidth are they using?

There are two options here. Comcast might just be lying about public users not impacting your own download speeds. The other option is that Xfinity WiFi Home Hotspot uses its own separate channel to the internet. This is entirely possible — DOCSIS 3.0 can accommodate around 1Gbps, so there’s plenty of free space. But how big is this separate channel? 50Mbps? 100Mbps? And if there’s lots of spare capacity, why is Comcast giving it to free WiFi users rather than the person who’s paying a lot of money for the connection? And isn’t Comcast usually complaining about its network being congested? At least, that’s the excuse it used to squeeze money from Netflix, and to lobby for paid internet fast lanes. So there's a disconnect here. In the Netflix affair, Comcast is saying it needs to charge more for the use of bandwidth because bandwidth is allegedly in short supply. Yet, Comcast is simultaneously suggesting that there is plenty of excess bandwidth to create a national public wifi service without degrading existing Internet service.

That brings us back to the debate over whether public officials should approve the Comcast-TWC merger. In that debate, part of Comcast's political challenge is to reassure Congress, federal regulators and state public utilities commissions that it will responsibly administer its monopoly position - specifically, the company has to try to show that it will work to judiciously charge for true necessities and that it will avoid leveraging its market share to unduly extract profits from content providers.

Yet how can Comcast do that when its public wifi program and the Netflix affairs together suggest that the company may already be doing precisely the opposite?