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Comment by rayiner | Hacker News Reader

To play devil's advocate, what it means is that Comcast has the better business model. After all, that's why Apple and Samsung dominate the cellular industry. iApps running on iOS running on an iPhone using an Apple A7 offers the ability to optimize the user experience and integrate the layers that vendors doing things piecemeal can't match.

If Netflix et al want to survive, they have to evolve from being mere middlemen, funneling someone else's content through someone else's pipes.

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> To play devil's advocate, what it means is that Comcast has the better business model. After all, that's why Apple and Samsung dominate the cellular industry.

That is devil's idiot. I can choose between 4 different cell carriers and dozens of smartphone makers. Many people only have one option if they want >10Mbps internet.

Fortunately I get to choose between Optimum and FiOS. Optimum gives me 60/25 for the basic rate to keep me from switching to FiOS.

I was addressing chimeracoder's point about vertical integration. There might be tons of Android manufactures peddling phones, but Apple and Samsung are eating up all the profits because they are verticicaly integrated. That's the major play Comcast is making.

I wouldn't be surprised to see this coming soon to wireless. Imagine movie caching servers integrated into the backhaul network instead of going over the public internet. The improvement in QoS would make being a Netflix type entity untenable.

He wasn't making a point about vertical integration, but rather about monopoly power. Perdue and Tyson are vertically integrated. They own feed mills, hatcheries, grow farms, packing plants, and distribution. No one cares because you can always just pick the package of chicken that costs $3.29 instead of $3.59.

I also don't see how Samsung is vertically integrated. They don't make the OS, the App store, or have content/DRM. They have in-house manufacturing, but Apple doesn't. The two companies are vertically integrated in totally different ways, thus vertical integration is a weak argument for their success.

See his second paragraph about owning NBC.

That was also about monopoly power. If NBC were an independent entity, they would license their back catalogue to the highest bidder. Given that NBC is owned by a cable company, the strategy changes. The current dynamic for NBC is, if we license to Netflix, then some people will cut the cord, lowering Comcast/TWC cable revenue. The bigger Comcast is, the less likely NBC is willing to license content to Netflix. If NBC were independent, they would maximize their own revenue, but because they are owned by Comcast, NBC's decisions are to optimize profits for the combined company which is likely not in the interest of consumers.

This is the case regulators should make for putting conditions on the merger. Comcast should be forced to divest from NBC/Universal and agree not to acquire additional content. That would create a significant benefit for consumers.

That describes a vertical monopoly, which is not prohibited. If Apple hadn't acquired PA Semi, they would be selling their products on the open market to the highest bidder, etc. Same situation.

Netflix already serve their content from servers colo'd at ISPs. Big FreeBSD boxes.

http://www.networkworld.com/community/blog/netflix-goes-edge...

Google has threatened to go nuclear over net neutrality and open up their dark fiber network should things get ugly. Google has more fiber than most any one single company in the us and could be a legitimate threat should comwarner try to call their bluff. I have a feeling google would win that fight

I would love to see Google enter that fight instead of trying to regulate their competition away. Not because I'm that anti regulation, but because I don't appreciate the irony of Silicon Valley always bitching about regulation, but then demanding that the government create an artificial reality where owning the pipes doesn't give you a natural competitive advantage.

Would you appreciate it if one supermarket bought all the food and then price gouged you 100 dollars for meat?

I don't see how a monopoly helps anyone but the corporation, and even then just in dollars today. Strangling the entire market doesn't help anyone in the long run.

Actually, they wouldn't arbitrarily price their products that way. Companies engage in a little thing called price discrimination. The only difference in a monopoly is that you are the sole price leader. That doesn't mean you can arbitrarily set the price high. Most cable companies have monopolies thru license in municipalities.

>That doesn't mean you can arbitrarily set the price high.

You can if you corner the market and the good is required like food is.

You'll get your stores raided if you control and gouge something like food and water though, possibly ending with a head in a grocery cart. Police might even help.

Cable has a bit more leeway with the crowd I'd imagine, though there'd still definitely be consequences. Just not as dramatic consequences. I'd hope people protest gouged cable prices peacefully.

Just try. But first, you'll want a refresher on the French Revolution, letting the starving "eat cake" and the amazing effectiveness of guillotines.

Somehow that doesn't work this way. In israel monopolies and price gouging of food is pretty common(not 100X, but maybe 2x), and i haven't seen no violent acts.

I'm not denying the antitrust concern of the union. I'm pointing out the hipocrisy of certain generally anti-regulation Silicon Valley companies trying to use antitrust law to preserve the viability of their role as middlemen. At the end of the day, Netflix's business model is inherently fragile. Amazon is somewhat better positioned, because they at least provide the upstream infrastructure. I think they know they need to play the last mile game, just as they're exploring doing on the physical goods side with drones and special deals with USPS.

I wonder if torrent/p2p would be a viable business model for Netflix. Think about it : they have a massive install base inside comcast where they can run programs and on most such programs they can run code, and store data.

Solution seems obvious.

P2P isn't a good architecture for something like that. You pull data from a leaf node, through the core network, back to another leaf node, traversing the relatively slow last mile coax part of the network twice. Meanwhile, a relatively small number of movies and shows will dominate the demand, which Comcast can easily cache near the edges of its network. There is a reason Netflix is vying to get equipment in those spots.

note that Netflix runs on Amazon

I know. That's why Amazon is better positioned. They at least own the upstream infrastructure. Netflix is utterly dependent on three other industries, but is itself pretty easily replaceable. The had a first mover advantage in getting favorable content licensing deals before anyone thought it would matter, but that's fading fast as those deals are renegotiated. And its value add is totally fungible. People care about the content and will happily use another provider if they have the content. Netflix' foray into original content is an existential move.

Except it's not really that dependent on Amazon - there are nearly perfect substitutes for every AWS service.

Comcast is different because it already operates as a monopoly in many areas, and it's trying to change the rules so that it can leverage that monopoly, to the detriment of everyone but themselves, and there's not really anything that anyone but the regulators can do about it.

Comcast has a huge advantage owning the pipes into my house, but they squander it. Rather than provide services, they become highway robbers on their own toll road. Comcast could have been netflix, akamai and so much more years ago. So tell me how they don't have advantage?

> Comcast could have been netflix Netflix offers incredible value. Don't you think it's irrational for Comcast to offer up this value at the expense of their own profits when they are not being threatened? They are going to milk it for as long as they can.

Milking it is not a rational choice, expected but not rational. Comcast should have make the Roku, but due to a fixation on the analog cable infrastructure they did not. The amount of analog bandwidth they devote on their networks to digital traffic is a ridiculously small percentage of their capacity.

Comcast should have created the caching infrastructure that Akamai did. Comcast should have implemented cloud backup services. They have the capability to have 50+ Mbps from the customer to their datacenters. This is freak'n huge.

Why didn't comcast create a colo system so that providers could get as close as possible to the customer?

No, Comcast will go down with the Titanic with all of their riches. They have squandered more than they have protected.

If utility natural monopolies weren't regulated they wouldn't exist because local governments wouldn't allow them to dig up roads to put in their infrastructure.

This would be fun to watch unfold.

Citation?

There is no use for Google to participate in long-haul wholesale. There is a lot of supply there. The real issue is last mile, where consumers have no choice.

>There is a lot of supply there.

But the rules just changed. It remains to be seen what those guys will do. But I agree that the last-mile competition, or lack of it is far more important.

That's what Google Fiber is, which is (slowly) rolling out to multiple cities.

Really? The last time I checked, the cost for fiber optic back-haul was ridiculous! I need to get some new quotes within the next few months, though- we shall see.

Why precisely does Netflix need to "evolve"? I like Netflix just fine as it is, thank you very much. The totality of current online businesses are using "someone else's pipes", so framing that as a criticism strikes me as distinctly hollow.

I would say it needs to "adapt" to harsher market conditions created by these mergers, net neutrality gone, etc.

Online businesses by and large use other people's pipes and that inherently makes them all vulnerable. Its like apps on iOS. Apple will always capture most of the value created by the ecosystem as a while, because they control the platform. App developers have little leverage. Its not profitable to be a sharecropper, but that's what online businesses largely are. Regulating and commoditizing the communications infrastructure into "dumb pipes" (I.e. net neutrality) is the only around that. Its regulation that picks winners and losers by telling an entire industry that they have to produce a commodity product so that online businesses can be protected from a flaw intrinsic to their business model.

Comcast is relying on last mile monopoly. Samsung/Apple have alternatives.

Sure. Having a government backed monopoly is usually the better business model.

Except people often have no choice about which ISP they can use, whereas people have at least some choices in the mobile phone space.

This, I believe, is why Netflix is producing original content. Outside the US they license it to traditional networks as well (I've seen adverts for House of Cards recently through Sky here in Germany).

>To play devil's advocate, what it means is that Comcast has the better business model. After all, that's why Apple and Samsung dominate the cellular industry.

what?? Does Apple or samsung have any control on how much carriers charge?

By your logic, ATT wireless, verizon wireless, and other cell carriers have to make their own cell phone and not just be a middlemen that funnel someone else's content on someone else's smartphone.

Apple is an integration house. The screen and the A7 are actually fabricated by Samsung. They would have a tough time going it alone.

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