Apple, Comcast Working on Set-Top Box Deal: Report

Apple reportedly wants to pay Comcast for a service that would side-step net neutrality restrictions and ensure top-notch streaming video. 

Apple is in talks with Comcast, the nation's largest cable provider, about teaming up on a streaming-television project.

According to a March 23 report from the Wall Street Journal, Apple is interested in paying Comcast to ensure that Apple content on Comcast cables "bypasses congestion on the Web" and users of the Apple set-top box receive excellent service.

The Journal goes on to report:

"Apple's intention is to allow users to stream live and on-demand TV programming and digital-video recording store in the ‘cloud,' effectively taking the place of a traditional cable set-top box.

"Apple would benefit from a cable-company partner because it wants the new TV service's traffic to be separated from public Internet traffic over the 'last mile'—the portion of a cable operator's pipes that connect to customers' homes, the people familiar with the matter say. That stretch of the Internet tends to get clogged when too many users in a region try to access too much bandwidth at the same time."

Sources say the pair are far from reaching a deal, and there are still a number of details to work out. These include what Apple's relationship would be with Comcast's customers, whether Apple would control all customer data and how the monthly subscription profits for the service would be divided.

The distinction of separating Apple's traffic from other traffic is critical to the deal.

The Journal's sources say Apple is asking for a "separate 'flow'"—seemingly, its own road running along the congested highway—and not the prioritization of its Internet traffic over others', which would be a violation of the net neutrality regulations that Comcast agreed to as part of its acquisition of NBCUniversal in 2011 (and which expire in 2018).

While the distinction may put Apple on the right side of the law, it will be interesting to see how it fares in the public opinion, as net neutrality is increasingly, and hotly, debated.

Netflix CEO Reed Hastings blogged March 20 about the importance of strong net neutrality policies to making sure the Internet "remains humanity's most important platform for progress."

Hastings, as he admits, has good reason to take a firm stance on the topic. When Netflix—whose service competes with Apple TV and whatever else Apple has planned—is accessed through Internet service providers (ISPs) that practice "strong net neutrality," the quality of Netflix's streaming services is "outstanding," wrote Hastings.

On other ISPs, customers can face frustrating high buffering rates. When Netflix pays up, though, capacity is opened up and service improves. Comcast is one of the companies that squeezed Netflix into paying.

"If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future," wrote Hastings.

Public advocacy group Free Press has called Comcast "public enemy number one" when it comes to the open Internet, insisting that the latter shouldn't have an expiration date (the 2018 end date for Comcast's deal with NBCUniversal), and has petitioned the Federal Communications Commission (FCC) to block the merger between Comcast and Time Warner Cable.

The net neutrality debate also gained attention in January when a U.S. Court of Appeals ruled in favor of Verizon and overturned the FCC's rules requiring that all Internet traffic be treated equally.

The ruling hinged around phrasing; the FCC has leverage over "common carriers," but broadband providers are not classified as such and so are out of the FCC's jurisdiction.

Former FCC Commissioner Michael Copps called for a speedy corrective action before the ruling becomes "a sorry memorial to the corporate abrogation of free speech."

Comcast has been working on its own Internet-connected set-top box, code-named X1, the Journal report added.

Amazon, too, is said to be working on a set-top box to help promote its video offerings and particularly its original content. It's expected that the Amazon device will be a dongle, like Google's Chromecast—a device that happens to be an Amazon top seller.

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