Comcast 'Invents' Its Own Private Internet

Comcast (CMCSA) went public in 1983. Track its share price, and you’ll see that it tootled gently upward as the company expanded its cable television service around the country. Then, in 1997, the share price spiked. This was the year the company began testing a new product—the cable modem, which offered Internet access at a blazing 1.5 megabytes per second, then 50 times faster than dial-up. Comcast didn’t invent the Web. It didn’t invent the cable modem, either. Like other cable operators, it happened to own the right network at the right time.

That history is helpful to remember as the Department of Justice begins an antitrust probe into whether Comcast, Time Warner (TWC), and other cable providers are now trying to manipulate the way customers use the Internet—specifically, whether imposing caps on the amount of data people can download monthly discourages them from using Netflix (NFLX), Hulu, and other rival online video sites and steers them to the cable companies’ own video-on-demand services, which aren’t subject to the caps.

Comcast spokeswoman Jennifer Khoury declined to comment on the investigation. In a May 15 blog post, executive vice president Tony Werner explained how Comcast is offering video over its own “managed network” via Microsoft’s (MSFT) Xbox: “We provision a separate, additional bandwidth flow into the home for the use of this service—above and beyond, and distinct from, the bandwidth a customer has for his or her regular Internet access service.”

Comcast’s defense of this tiered system rests on a semantic distinction: that there’s a difference between watching a movie through Netflix, which exists on what the cable companies call the “public Internet,” and watching the same movie through a provider’s on-demand service, which they say is a private network. In pushing the phrase “public Internet,” Comcast and other Internet providers want customers to accept that they are the proprietors of separate, special Internets. You can see this in the way they’ve tried to rebrand the Web as a private product. Comcast refers to its Web access as “Xfinity.” AT&T (T) calls it “U-Verse.” Verizon (VZ) doesn’t sell Web access, either. It sells “FiOS.”

Of course, these are just fanciful names for … the Internet. “It’s a very slippery thing,” says Michael Calabrese, senior research fellow with the Open Technology Institute at the New America Foundation, a think tank. “It is one pipe—and they control the pipe.”

There’s a reason it’s not called the Comcasternet. The Internet beat out rival private networks because it grew faster and created more value. Comcast was perfectly free to build the Comcasternet, but it didn’t. That’s not an accident. Every network benefits when all networks interconnect. For cable companies to claim now that they did in fact build a private network and that it shouldn’t be subject to the same rules as the rest of the Internet is a tough sell.

It’s hard to blame them for trying. They’ve had luck with this line of reasoning before. In a 2005 Supreme Court case, Comcast, among other cable companies, maintained that the Federal Communications Commission couldn’t regulate them as “telecommunications services”—Internet access providers—because cable companies bundled their Internet access with what the FCC considered “information services,” such as Web hosting and e-mail addresses. The justices agreed, 6-3. But in a dissent, Antonin Scalia ridiculed the argument with a withering analogy. A pet store “may have a policy of selling puppies only with leashes, but any customer will say that it does offer puppies,” he wrote. “Because a leashed puppy is still a puppy.” Now, as then, the cable companies insist they’re not puppies, and they don’t want to be leashed.

The bottom line: The Department of Justice is investigating whether cable companies’ video-on-demand services cripple Hulu and other competitors.

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Bloomberg View: Keeping the Internet Safe From Rogue Regimes

As documented by Bloomberg News, U.S., European, and other companies are selling technologies that enable the repressive Iranian and Syrian regimes to disrupt and monitor the Internet and track down government critics.

On April 23, President Barack Obama issued an executive order giving the U.S. Treasury Secretary the power to sanction individuals and companies that provide goods or services that can be used for such purposes. Those with assets in the U.S. risk having them blocked; individuals without such assets can be barred from entering the country. Perhaps the greatest penalty is the reputational cost of being placed on a U.S. sanctions list.

Of course it’s good for citizens of these countries to have access to online communications. Western providers have been and should be helping to create those infrastructures. When it comes to add-ons, however, Iran and Syria are not like other places. Spam-filtering technology, for instance, can help keep mobile networks running faster, but in Syria it has also allowed government officials to block all messages including words such as “revolution,” “demonstration,” and “strike.” In these countries, the risks of such systems outweigh the benefits. Decent companies have no business selling, installing, or maintaining them.

Issuance of the president’s order alone is unlikely to make companies desist. The U.S. already had a rule barring federal agencies from doing business with companies that export to Iran any technology used to disrupt, monitor, or restrict the speech of Iranians. When the Government Accountability Office produced its report on such companies last June, it came up with none, though soon after journalists detailed several.

The glare of news media exposure has been enough for a couple of companies to pull out of their contracts in Iran and Syria. If the Department of Treasury were to pursue one or two remaining cases, it would pressure those companies that still provide questionable technologies.

To read Simon Johnson on the euro’s future and Al Hunt on Newt Gingrich's last hurrah, go to: Bloomberg.com/view.

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Comment Moderator, the Dirtiest Job on the Internet

Illustration by Christina Ung

By David Sax

In a cabana in Progreso, Mexico, overlooking the blue waters of the Gulf, Canadian Chuck Dueck cracks open his laptop and logs into the comment forums of several news websites. Over at cbc.ca, home to the Canadian Broadcasting Corp., an article on child obesity has drawn this gem, “It is VERY simple. People who are FAT eat too much. There were no fat Jews in Auschwitz—they did not have much food. Stop eating so much!” At npr.org, one comment is directed specifically at Dueck. “GO F- -K YOUR SELF A- -HOLE, You are making me hate this site!!! F-G!”

One by one, Dueck, a professional online moderator, deletes these comments, scolds the people behind them (either on the forum or over e-mail), and, if things really get out of hand—say, in the case of repeat offenders—bans their accounts. Over the course of each day he chips away at the cussing and swearing, the spammers, haters, and trolls, temporarily restoring civility to his corner of the Internet.

Since the first messages were posted on bulletin boards some three decades back, comments and free discussion between anonymous users have been a central part of the Internet’s appeal. Sites such as Gawker and the Huffington Post built their empires on page clicks driven by endless streams of commenters and flame wars. But what’s good for Gawker isn’t always great for established brands, and as companies have embraced the Web and eagerly interacted with their customers, they’ve often been overwhelmed by the response. A lethal combination of anonymity, opinion, and the safety of typing from a remote location all but guarantees that comment forums get out of hand, falling prey to the Hobbesian tirades of the Web’s most nasty, brutish, and vocal denizens—hence, the increasing need for moderators such as Dueck to intervene and sanitize sites’ comment boards.

Dueck works for ICUC Moderation, the brainchild of Winnipeg businessman Keith Bilous, which started out in 2002 as Captain Interactive, broadcasting text messages onto nightclub screens (after vetting the content). Today, ICUC employs over 200 moderators globally and was acquired in June by London’s Aegis Group (though Bilous, like all his employees, still works from home). The company claims $10 million in revenue last year, cleaning up the comments on the websites, Twitter feeds, and Facebook pages of blue-chip brands such as Chevron, Starbucks, and the Boston Globe. “Some Fridays you feel like you need to spend two hours in the shower because it’s so disgusting,” says Bilous.

“We see the dark underbelly of the world,” says Tamara Littleton, the CEO of London-based eModeration, a 160-person community management firm with $7 million in revenue whose clients include MTV, the Economist, and ESPN. The firm has doubled in size each year since it began in 2002 (also as a text-to-screen nightclub gimmick), and charges clients anywhere from $4,000 to $50,000 a month for moderation. “It used to be a lot about keeping things clean, safe, and legal for brands. All they wanted was people not to say horrible things,” says Littleton. “Now it’s about engagement…. Now you want to manage Facebook pages and Twitter accounts.” She notes that while the social networks don’t allow for anonymity in comments, they’ve increased her company’s workload tremendously, as consumers demand instant responses from brands online. Littleton cites an incident last year when Nestle PR people tried to stifle criticism from Greenpeace on their Facebook page, which was not professionally moderated. The event unleashed a torrent of comments and resulted in a PR disaster. In such cases, eModeration’s team might have defused the situation before it blew up.

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Dell Explores Acquisitions to Widen Lead in Internet Servers

May 31, 2011, 8:07 AM EDT By Mark Lee

May 31 (Bloomberg) -- Dell Inc. said it is exploring acquisitions to bolster its data center business, as the company aims to widen its lead in supplying computer servers that run the Web services of clients such as Google Inc. and Baidu Inc.

“We want to continue to bring innovation through acquisitions,” Amit Midha, head of Dell’s operations in the China and South Asia regions, said at a briefing in Hong Kong today. Dell is interested in buying “everything around data centers,” an area of business that is contributing half the company’s profit, he said.

Dell is gaining orders from Chinese Internet companies including Baidu, Tencent Holdings Ltd., and Alibaba Group Holding Ltd. for computer servers underpinning search-engine, online commerce, and social-networking services, Midha said. Round Rock, Texas-based Dell is parlaying its experience in supplying technology to Google and Facebook Inc. in the U.S. to win in China, the world’s biggest Internet market by users.

Dell has about 70 percent of the market for servers running the data centers of so-called cloud services in the U.S., and about 60 percent of the market in China, according to Midha.

Demand from data center operators helped Dell more than double net income last quarter to $945 million from $341 million, the company reported this month. Dell bought data- storage company Compellent Technologies for about $800 million in February.

Dell, the world’s second-biggest maker of personal computers, plans to double the number of service centers in China this year to 2,000, Midha said. The company will also expand its sales network in the Asian country, at present comprising of about 15,000 outlets, Midha said.

China recently became Dell’s biggest market outside the U.S., Midha said, without specifying when that happened.

Dell will start selling a larger version of its “Streak” tablet computer later this year in China, where the company currently offers a model with a screen measuring about 5 inches, Midha said. Dell also plans to offer more smartphones in the country, he said.

--Editors: Suresh Seshadri, Jim Silver.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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