These 2 Charts From Comcast Show Why Net Neutrality Is Vital

This chart shows that Comcast is slowly losing pay-TV customers while it's gaining a significant number of broadband subscribers.

This chart shows that Comcast is slowly losing pay-TV customers while it’s gaining a significant number of broadband subscribers.

Comcast released its quarterly earnings report and the timing couldn’t be better, with the FCC set to vote on Chairman Tom Wheeler’s net neutrality proposal later this week.

In the above chart from Comcast [PDF], the company breaks down the year-over-year changes in its various cable/broadband/phone offerings.

Right there in the top line, you can see that Comcast only added a net 6,000 new pay-TV subscribers during the most recent quarter, down from a slightly better gain of 46,000 the same quarter in 2013.

And overall for 2014, Comcast lost 194,000 pay-TV customers. Even with rate increases and new fees, revenue from pay-TV customers was virtually flat, but it’s still by far Comcast’s largest money-maker, bringing in $20.783 billion last year.

While Comcast has virtually the same number of pay-TV and broadband customers, it brings in nearly twice as much money from pay-TV subscribers.

While Comcast has virtually the same number of pay-TV and broadband customers, it brings in nearly twice as much money from pay-TV subscribers.

At the same time as its pay-TV audience is slowly shrinking, Comcast’s broadband business is booming, with 1.28 million net customers added in 2014, bringing the company’s Internet subscribers almost equal with its cable subscribers. At this rate, within a year Comcast will have more broadband customers than it will have pay-TV subscribers. Additionally, while cable revenue was flat, Internet revenue was up nearly 10% over the previous year.

So how does this all tie into net neutrality?

Comcast’s biggest revenue generator is sinking. It can continue to raise rates to counter subscriber losses, but that will eventually only drive away more customers who can get comparable video content online. And while Comcast’s broadband business is on the rise, it brings in less per customer than pay-TV.

The company — and other cable providers — can’t afford to let big-ticket pay-TV customers flee and go broadband only. But they’re not going to drop their rates because there’s no competition and broadcasters are constantly demanding more money from pay-TV providers to carry their channels.

So that leaves Comcast, et al, little option but to squeeze the online competition. They would love to simply be able to tell customers “No, you can’t access Netflix,” or to slow Netflix and other streaming services down so much consumers aren’t tempted to cut the cord.

But what ISPs really want to do — and it’s why Verizon sued to gut the original 2010 net neutrality rules — is to create “fast lanes” for content companies willing to pay. So rather than tell consumers they can’t get quality access to streaming services, the ISPs could go to Netflix, YouTube, Amazon, Apple, and others and say “Hey, if you pay us a lot of money we’ll make sure your products reach customers.”

Of course, this is a cost that will just be passed on to consumers who are already paying their ISPs to make sure that content gets delivered at advertised speeds.

A final way for ISPs to make their products look better than the online competition is to give preferred treatment to their own content.

The 2010 neutrality rules — which Comcast, as a condition of its merger with NBC, has promised to abide by through 2018 — forbade blocking, throttling, or prioritizing content. In early 2014, a federal appeals court sided with Verizon and gutted those rules, finding that the FCC didn’t have authority to regulate broadband because of the way it had previously been defined by the Commission.

And so Wheeler’s proposal seeks to reinstate those rules by reclassifying broadband as the vital piece of infrastructure it has become in the last decade.

Scaremongering opponents of neutrality claim it will hurt innovation or create government-run networks. But they gloss over the fact that neutrality rules existed for four years during which telecom and broadband companies spent an unprecedented amount of money developing new technologies.

And reclassification does not in any way turn broadband over to the government; nor will there be any new taxes because the Internet Tax Freedom Act bans state and local taxes on broadband access, regardless of the FCC’s classification of the service.

Net neutrality is about nothing more than keeping Comcast, Verizon and the rest of them from extorting money from consumers and content providers just because they control the Internet off-ramps.