Starting this week, Comcast is running trials in three US local markets of a new method to manage traffic on its fiber broadband network. Comcast has recently come under fire for filtering and blocking P2P data on its network, causing both legal and illegal torrents to stop working or have their speeds reduced to a crawl. Comcast has responded to the criticism by publishing a new network management policy along with new tools to assist them in the task of managing bandwidth usage.
The new approach is protocol-agnostic and will apply to all traffic, rather than specifically targeting only P2P traffic. Comcast has set out to restrict usage to the very top percentile of users, rather than penalizing all users of a particular protocol. The approach will throttle both connection attempts and download speeds for the top consumers of bandwidth during times when the network is experiencing high load. The approach seems a lot fairer than targeting specific protocols, but it effectively results in a bandwidth cap for some Comcast users.
In an email to customers who belong to one of the three market areas about to enter the trial, Comcast claims that there should be no effect for the vast majority of users. Comcast cites a number of methods that are used to control or restrict network usage:
(i) identifying spam and preventing its delivery to customer e-mail accounts, (ii) detecting malicious Internet traffic and preventing the distribution of viruses or other harmful code or content, (iii) temporarily delaying peer-to-peer sessions (or sessions using other applications or protocols) that users of the Service may wish to establish during periods of high network congestion, (iv) limiting the number of peer-to-peer sessions users of the Service may establish, and (v) using other tools and techniques that Comcast may be required to implement in order to meet its goal of delivering the best possible broadband Internet experience to all of its customers.
Since the controls apply to the top percentile of users, it would ordinarily have an effect of gradually lowering what is considered ‘high’ usage, since it always applies to the top users regardless of what the actual usage is. Comcast says that they prevent this pattern from happening since restrictions are applied against the total network usage, so the top users should still expect maximum throughput at off-peak times. The reasons they are running the test is specifically to find out just how far this will reduce network load, and how effective it would be in dividing network capacity and access fairly across users. The company hasn’t specified what they consider ‘high’ network usage to be (eg. is it 40, 50, 60% of total network capacity) but they are likely to refine this process during the trial.
The Challenges Facing Comcast
There are many reasons why Comcast is attempting to reduce network usage, and why they attempted to block all P2P traffic. Comcast is facing stiff competition from DSL based providers, satellite television and downloaded content replacing Cable TV. With these pressures applied to the company, they must find ways to either increase revenues or cut costs in order to maintain growth. Comcast stock, as with other cable companies, has been volatile – with a 52-week low of $16 and a high of $30. While they have recorded strong revenue growth (25% between ’06 and ’07), net income remains flat as costs have increased.
The company has little room for growth in the US market, as currently 58% of households have some form of basic cable, and of those, approximately 70% utilize the cable connection for broadband. Cable connectivity seems to have reached a saturation point, as has the broadband adoption component – and the major cable companies have divided up the market and each dominate their own area. The cost of an average cable TV subscription has increased 77% in the past 12 years, and subscribers are on average only utilizing 12% of available channels because of forced bundling. The other potential growth paths include providing telephony to existing customers; layering on other online services (such as the recently-acquired plaxo, and recently-launched Fancast); and bundling TV, Internet and voice (the triple play) to users to achieve higher margins.
The issue with web downloads cutting into the Cable TV business is particularly interesting, as the effect on Comcast is that not only do they see lower cable TV demand, but at the same time higher demand on their broadband network as users download more of that same content using online sources. On one hand they are losing lucrative cable subscription revenue, but then on the other also paying for the bandwidth customers are using to download legal and illegal alternatives. It is easy to see why their knee-jerk reaction was to attempt to prevent all their broadband users from accessing P2P services, as they were not only trying to lower costs but also preserve their television business.
With a reported 70% of net traffic consisting of P2P, the ability to have that traffic disappear from their network would have been a big boost to Comcast. The P2P blocking didn’t work out, and it remains to be seen just how the new network management plan will affect overall usage. During the trials the company will certainly be adjusting the network so that they can reduce as much P2P traffic as possible while affecting as small a number of users as possible, all the while being able to claim that they aren’t directly targeting P2P.
Comcast is juggling a very fine balance here, being forced to reduce costs and preserve their core business while at the same time not wanting to drive users away to alternatives. They were the first cable company to target P2P, and they are now again the first cable company to develop a compromise solution through intelligent network management. There is almost no doubt that with whatever solution Comcast settles on, the other cable providers will undoubtedly follow suit. The effect this will have on web businesses and services is difficult to predict, but hopefully Comcast will find the right balance.