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Tech Edge

What You Need to Know About Comcast’s Deal to Bolster Netflix Service

February 24, 2014

Welcome to National Journal's Tech Edge, a morning tipsheet with the news you need in technology policy, featuring a round-up of the best coverage and exclusive tips for the day ahead. Got this by forward? Sign up at http://www.nationaljournal.com/tech-edge

By Alex Brown (@AlexBrownNJ), Laura Ryan (@NJLJRyan), Brendan Sasso (@BrendanSasso), and Dustin Volz (@dnvolz)

TODAY IN ONE PARAGRAPH: Netflix struck a deal Sunday to ensure its videos stream runs more smoothly for Comcast customers. The interconnection deal doesn't affect the "last mile" in the network to consumers' homes, so it wouldn't be covered by the FCC's net neutrality rules (which were thrown out anyway). But consumer groups are raising concerns, and the issue could come up as the FCC re-writes its net neutrality rules and scrutinizes Comcast's planned merger with Time Warner Cable.

 

TOP NEWS

WHY DOES IT MATTER?: The deal bypasses "middle-man" backbone providers like Cogent Communications, and gives Netflix direct access to Comcast's network. The companies didn't fully disclose the terms of the deal, so it's not clear how much Netflix is paying Comcast. But the important thing is that it's paying something. Just a few months ago, Netflix CEO Reed Hastings insisted that his company wouldn't have to pay broadband providers anything for direct connections to customers. Direct access is beneficial to both broadband providers and Netflix, he argued. But apparently Hastings caved as millions of Netflix's Comcast users experienced deteriorating video quality in recent weeks.

The amount of money exchanged in the deal was likely small, but it sets a new precedent for the relationships between Web companies and broadband providers. It also highlights Comcast's growing clout as the largest broadband provider in the country—a market power that would only grow with its planned purchase of Time Warner Cable. Will other broadband providers demand similar payments? Will these interconnection deals become like the Internet equivalent of expensive retransmission fights in the TV industry? Will regulators get involved? For now, the answers to those questions remain unclear.John Bergmayer, a staff attorney for Public Knowledge, criticized the secrecy of the arrangement. "No one on the outside knows what is happening in this market," he said. "However, it is clear that residential ISPs should be in the business of charging their users for access [to] the Internet, not of charging the rest of the Internet for access to their users."

HOUSE TO VOTE ON PHONE UNLOCKING: The House is expected to vote this week on H.R. 1123, Rep. Bob Goodlatte's cell-phone unlocking bill. The measure would overturn a Library of Congress decision that limited the ability of consumers to switch their phones to different cellular providers. But consumer group Public Knowledge has dropped its support, saying the new version of the bill "fails to address the flawed" copyright law and inappropriately excludes bulk unlocking.

RENEWED PUSH FOR PRIVACY BILL: Dozens of groups—including the ACLU, Public Knowledge, NAACP, Consumers Union, and the Center for Digital Democracy—will send a letter to President Obama Monday, urging him to draft a comprehensive consumer privacy bill. The White House announced a "privacy bill of rights" in 2012, but has done little since to push for legislation.

DROPBOX JOINS ANTI-NSA GROUP: The online storage site added its name to Reform Government Surveillance—a team already boasting such tech titans as Google, Facebook, and Yahoo—on Friday, marking the first addition to the coalition's ranks since it formed in December. The group was last seen throwing its support (albeit somewhat tepidly) behind the "Day We Fight Back" protest against NSA spying earlier this month, an event that also urged Congress to pass the USA Freedom Act.

BLACKBURN BILL WOULD BLOCK NET NEUTRALITY: GOP Rep. Marsha Blackburn introduced the Internet Freedom Act on Friday to block the FCC from writing new net neutrality rules.

INTELLECTUAL VENTURES FORMS PAC: The large patent holder filed the necessary paperwork with the FEC last week, spooking much of the patent reform community. Ventures is commonly trotted out by reform advocates as the boogeyman of patent trolling, a company that accrues enormous profit by asserting its patents against innovators. The timing of the PAC efforts is curious, as Ventures stayed relatively quiet last year when the House debated and ultimately passed the Innovation Act. The Senate Judiciary is working now to strike a compromise among numerous stakeholders, but an exact path forward remains elusive. (Julian Hattem, The Hill)

THE WEEK AHEAD

Monday: Commerce Secretary Penny Pritzker heads to Silicon Valley for a conversation with LinkedIn CEO Jeff Weiner and a visit to Facebook's headquarters. Education Secretary Arne Duncan and FTC Commissioner Julie Brill participate in a daylong event on student data privacy hosted by Common Sense Media.

Tuesday: The House may vote on an amended H.R. 1123, a cell-phone unlocking bill from Judiciary Chairman Bob Goodlatte that would upend a decision that bars users from opening their phones to other wireless networks. The Commerce Department and the National Telecommunications and Information Administration is holding a meeting to develop a privacy code of conduct for facial recognition technology at 5 p.m. The New American Foundation is hosting a panel discussion on the the economic impact of the NSA spying revelations at 4:00 p.m.

Wednesday: The Senate Judiciary Committee will hold a subcommittee hearing on competition in the wireless market at 10:00 a.m. Executives from Verizon and T-Mobile are expected to testify.

Thursday: NSA Director Keith Alexander will testify before the Senate Armed Services Committee during a hearing on the U.S. Strategic and Cyber Command's Defense Authorization Request for 2015 at 9:30 a.m. The New America Foundation will hold another event on E-Rate for the 21st Century at 10:00 a.m.

TOP LINES

APPLE, SAMSUNG FAIL TO SETTLE PATENT CASE: Apple and Samsung weren't able to resolve the most recent battle in their 3-year old patent dispute with a settlement, so they will face each other in court next month. (Yun-Hee Kim, WSJ)

ROSENWORCEL ON UNLICENSED SPECTRUM: Commissioner Jessica Rosenworcel discusses the looming unlicensed spectrum crunch and what the FCC can do about it in an article penned for Re/Code.

GOOGLE'S HIGH FIBER DIET: "Does the king of high-margin, low-overhead search and advertising really want to get into the heavy-lifting, highly regulated world of being a nationwide broadband provider?" (Roben Farzad, Businessweek)

DISH'S ERGEN BLASTS COMCAST MERGER: Dish Network Chairman Charlie Ergen is not a fan of the Comcast-Time Warner Cable Merger. "There is nothing that I can see that's positive about it for anybody in the video or broadband or content business." The comments follow similar remarks by DirecTV CEO Mike White. (Shalini Ramachandran, WSJ)

WOULD GOOGLE BUY VERIZON?: Steve Donohue offers an intriguing theory for why a Google-Verizon merger might not be so far-fetched. (FierceWireless)

STEVE JOBS ON YOUR MAIL: He's getting his own postage stamp in 2015, but the design is still under development. (Timothy Lee, WaPo)

NSA STILL SPYING ON GERMAN LEADERS: Agents aren't tapping Chancellor Angela Merkel's phone anymore, resorting instead to the lines of other top government officials, according to a German paper citing an NSA official stationed in the country. (Megan Geuss, Ars Technica)

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