Net neutrality

Comcast-TWC merger might help the cause of net neutrality

February 13, 2014: 1:04 PM ET

In the wake of a court ruling striking down net neutrality rules, a merger might give regulators an opportunity to resurrect enforcement of the principle that keeps all Internet traffic equal.

140117135012-net-neutrality-620xaFORTUNE -- There are so many potential problems with Comcast's (CMCSA) proposed acquisition of Time Warner Cable (TWC) that getting the deal past antitrust regulators, were that to happen, would rank as a major accomplishment. But one of the biggest ongoing concerns of people worried about industry concentration -- the erosion of net neutrality rules -- might actually be eased by the deal. At least for a few years.

That's because Comcast, as part of the deal it made with the government allowing it to acquire NBCUniversal in 2010, has pledged to maintain net neutrality. The acquisition of Time Warner Cable, if approved, would presumably expand that agreement to all of Time Warner Cable's customers.

Net neutrality is a fairly simple concept that gets a bit complicated in the details. Essentially, it means that Internet service providers can't discriminate among various sources of network traffic. For example, Comcast can't slow down traffic from Netflix (NFLX) (or force it to pay for adequate speeds) while favoring video traffic from NBC. A complete abandonment of net neutrality would change the nature of how the Internet works by putting power over the distribution of content in the hands of Internet service providers -- which for most people means the big cable companies that often hold local monopolies on broadband Internet service.

MORE: What the Comcast-Time Warner Cable deal says about the future of media

A U.S. Appeals court last month struck down the Federal Communications Commission's net neutrality rules, striking fear in the hearts of both Internet users and companies -- like Netflix and Google (GOOG) -- that depend on equal access to the Internet.

The consent decree allowing the Comcast-NBCU merger requires the company to maintain net neutrality rules until January 2018. It seems likely that Comcast will offer to extend that agreement to Time Warner Cable customers, or that the government would demand that it do so. It's also possible that a new agreement with the government allowing the merger could extend the time the company would have to hew to neutrality rules, or even make them permanent. Together, Comcast and Time Warner Cable serve about a third of all U.S. Internet customers.

In the meantime, regulators will likely be scrutinizing more immediately troubling aspects of the merger, such as the unprecedented power the combined companies would have in the market for television programming.

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