All Things Digital

Those on-again, off-again talks between Sprint (S) and Clearwire (CLWR)? They’re on again. In fact, they’re so on that they’re already over. This morning the two companies announced a $14.5 billion multi-player joint venture backed by cable operators Comcast and Time Warner as well as Intel and Google.

The alliance will see the four cable and tech companies investing $3.2 billion in the nationwide wireless network that Sprint and Clearwire have been struggling–with profound unsuccess–to roll out. Comcast (CMCSA) will contribute $1.05 billion, Time Warner Cable (TWX) $500 million. Intel (INTC) will invest $1 billion, Google (GOOG) about $500 million. The new venture will be majority owned by Sprint, but it will take the Clearwire name and be run largely by Clearwire execs, among them cellular industry pioneer Craig McCaw.

For the cablecos, which have yet to settle on a clear wireless strategy, the deal is a quick and dirty way to establish the high-speed wireless network they need to compete with telcos like AT&T (T) and Verizon (VZ). For Sprint and Clearwire, it’s a chance to make their non-starter of a WiMax network viable and something happy to talk about when conversation turns to Sprint’s stock price, which has fallen nearly 60% over the past 12 months.

That said, the deal is not without its problems–top among them WiMax itself. As Craig Moffett, an analyst with Bernstein Research, explained in a note to clients earlier this year, the 2.5 GHz spectrum upon which Sprint and Clearwire are building their network isn’t nearly as good as the spectrum Verizon and AT&T just purchased in the FCC’s 700 MHz auction. “Serious questions remain about penetration through walls and windows,” Moffett explained. “Elsewhere in the world, operators have also raised questions about WiMax’s real-world bandwidth, latency and non-line-of-site coverage. How competitive the offering would be versus Verizon’s or AT&T’s planned LTE broadband service therefore remains to be seen.”

That it does–though there have been some indications that it may not be quite up to par. Speaking at an international WiMax conference in Bangkok in March, Garth Freeman, CEO of Buzz Broadband, Australia’s first WiMax operator, described the technology variously as a “disaster,” “miserable failure,” and a standard “mired in opportunistic hype.”

So will that prove true for Clearwire as well? We won’t know for some time. Building out a massive network like this will take some doing. “We’ll likely to see early trials in 2010, but a full-fledged build-out will take longer,” Clearwire CEO Benjamin Wolff said during a conference call this morning. “Building faster is a matter of logistics. The build plan we’ve laid out will be one of the largest and fastest build-outs ever done. We have the capability to do it, but it’s a massive undertaking.”

Comcast is apparently too busy drafting its “P2P Bill of Rights and Responsibilities” to bother attending the daylong hearing into its dubious “network management” practices. An odd decision for a company so intent on “clarifying” the practices ISPs should use to manage P2P applications running on their networks. But according to a company spokesperson, Comcast (CMCSA) “felt the issues specific to us were well covered at the first hearing, and the focus of this event should be broader than any individual company’s issues.”

Broader issues? Like reasonable network-management practices? The responsibility to deliver traffic fairly? Service disclosures? The sort of issues that might figure prominently in a “P2P Bill of Rights?”

Guess not.

Anyway, Comcast has already scrapped its policy of deliberately slowing some traffic flowing over BitTorrent and other P2P networks, so there’s really no need for Federal Communications Commission Chairman Kevin Martin to bust its chops anymore. As Mitch Bowling, Comcast’s senior vice president and general manger of its Internet service, told the New York Times, Comcast’s new policy is to slow traffic based on usage pattern, not application. “[Our new technique] will be based purely on individual consumption by consumers,” Bowling said. “Anything in addition to that is outside the scope of what our network management goal is.”

So the company plans to throttle traffic to the customers that use the most bandwidth. Hmmm. I wonder who those might be? The folks who use the Internet for email and Web browsing or those who use it for downloading digital media?

It’s quite a road-to-Damascus conversion Comcast (CMCSA) is having these days, isn’t it?

Back in February the cable company claimed it was perfectly reasonable for it to throttle or degrade the performance of peer-to-peer file-sharing services on its broadband network. But when Federal Communications Commission Chairman Kevin Martin suggested the agency was mulling action against it, Comcast had a moment of clarity. In March, it said it would work with BitTorrent to develop P2P-friendly network capacity-management techniques. And today it announced plans for an industry-wide effort to create a “P2P Bill of Rights and Responsibilities.”

The document–which is to be created with the help of other Internet service providers, P2P companies and content providers–would specify how ISPs should manage P2P applications running on their networks and how consumers should use them. Said Tony Werner, Comcast Cable’s Chief Technology Officer, “By having this framework in place, we will help P2P companies, ISPs and content owners find common ground to support consumers who want to use P2P applications to deliver legal content.”

And by announcing its plans to create this framework right before the FCC hearing on its P2P-throttling techniques to be held at Stanford (in Palo Alto, Calif.) Thursday, Comcast is hoping the agency won’t take action against it for violating its Net neutrality rules.

It’s a Comcastic day for BitTorrent. This morning the cable provider, under fire for degrading the performance of the peer-to-peer file-sharing service on its broadband network, announced plans to develop better ways to manage peer-to-peer traffic. To that end, Comcast (CMCSA) will work with BitTorrent to develop a network capacity-management technique that is protocol agnostic.

Said Tony Werner, Comcast’s chief technology officer, “This new architecture would enable many new and emerging applications and will be based upon an open, nondiscriminatory framework that could interface with or support multiple technologies. We believe that P2P technology has matured as an enabler for legal content distribution, so we need to have an architecture that can support it with techniques that work over all networks.”

Of course you do. You just didn’t realize it until FCC Chairman Kevin Martin pointed it out, right?

Anyway, like most such corporately altruistic pledges, this one has the potential to do more good than bad–or more bad than good. “… We must recognize that these are two commercial entities whose goals are, in the end, to make sure that their networks and technologies are as profitable as possible,” writes Public Knowledge’s Jef Pearlman. “One can conceive of a world where an ISP and an application developer band together to make a proprietary system in which sanctioned application data gets preferred treatment, the ISP gets greater control of the application running on your computer, and both companies are happy in the exact situation we want to prevent. Time will tell what this partnership actually means.”

The Federal Communications Commission isn’t buying Comcast’s (CMCSA) argument that throttling or degrading the performance of the peer-to-peer file-sharing service BitTorrent on its broadband network is a necessary traffic-management technique.

Speaking at the Stanford Law School Center for Internet and Society, FCC Chairman Kevin Martin said he’s considering taking action against the cable operator for violating the agency’s network-neutrality principles. Seems Martin was troubled by Comcast’s dissembling around the BitTorrent issue, not to mention its efforts to pack an FCC hearing on Net neutrality with its own employees.

“A hallmark of what should be seen as a reasonable business practice is certainly whether or not the people engaging in that practice are willing to describe it publicly,” said Martin, adding that the incident offered the commission a good opportunity to establish a precedent for future cases of this kind. “I have said in the past the commission is ready, willing and able to take action on individual complaints,” he said. “I think that is what we are going to end up doing, and I think that will end up setting an important precedent going forward: that we are willing to address individual complaints when they come in.”

We compete with Comcast with delivery of content over the Internet. What we have here is a horse race and in this contest, Comcast owns the race track, in fact, the only track in town. They also own a horse. We are being told they are only slowing down our horse by a few seconds.”

–Gilles BianRosa, CEO of video provider Vuze

The network-management hearing at Harvard University this morning is turning out to be something of a comcastrophe for Comcast (CMCSA). Called before the Federal Communications Commission today to explain why it has been “throttling” or limiting BitTorrent traffic on its network, Comcast was criticized out of the gate for the practice.

Seems some folks don’t buy the company’s claim that throttling is necessary to prevent file-sharing traffic from consuming too much bandwidth. And others–specifically, advocates of Net neutrality–feel it’s outright discriminatory. “The Internet is as much mine and yours as it is Verizon’s and AT&T’s and Comcast’s,” said U.S. Rep. Edward Markey (D-Mass.) in his opening remarks to the commission. “The commission should be wary of the need of a significant network management position. Perhaps if we had competition, this wouldn’t be such an issue.”Such intercession into a user’s access to the Internet should not result in … the transformation of BitTorrent into BitTrickle. That’s a problematic result … whether it is purposeful or purely circumstantial.”

Comcast, for its part, insists results like those described by Markey aren’t problematic at all, but necessary. The company must “shape” file-sharing traffic to ease the strain on its network. “Independent research has shown that it takes as few as 15 active BitTorrent users uploading content in a particular geographic area to create congestion sufficient to degrade the experience of the hundreds of other users in that area,” David L. Cohen, an executive vice president of Comcast, explained in written testimony. “Bandwidth-intensive activities not only degrade other less-intense uses, but also significantly interfere with thousands of Internet companies’ businesses. Far from managing our network in a discriminatory way to benefit our own offerings–other than managing our network to make our high-speed Internet service faster and better–our limited network-management practices ensure that everyone else’s applications and services, even those that may compete with our services and use P2P protocols, work.”

Well, Comcast founder Ralph Roberts has at least one thing in common with Apple CEO Steve Jobs: an annual salary of $1. Bowing to shareholder criticism, the bandwidth-throttling cable company is slashing Roberts’s pay from $1.85 million to a buck and has amended his compensation package so that he will no longer be eligible for bonuses or stock options. Comcast also scrapped a clause in its proxy statement that had allowed for Roberts’s beneficiaries to receive his salary for five years after his death.

The moves come at a time of growing institutional shareholder dissatisfaction with Comcast (CMCSA). The cable operator’s shares are down nearly 40% in the past year and off by 25% since it gave disappointing 2007 financial guidance in the fall. Suffice it to say, the company’s shareholders are not happy. In a Jan. 14 letter to Comcast, investment firm Chieftain Capital Management accused management of strategic missteps and called CEO Brian (son of Ralph) Roberts’s stewardship of the company over the past decade a Comcastrophe. “The management of this company and supervision by its board have been a ‘Comcastrophe’ for shareholders over the past decade,” Chieftain wrote. “We want and deserve the best CEO Comcast’s board of directors can find–and, based on his record, Brian Roberts is not it.”

Will the concessions Comcast has made to its shareholders silence calls for Roberts’s head? Perhaps. It’s tough to shout epithets at management when the company’s just posted a better-than-expected 54% jump in fourth-quarter net income and announced plans for its first dividend in nearly a decade.